Spanish banking major BBVA has announced plans to invest $300m in digital bank Neon to expand its retail banking operations in Brazil.

Through the investment, BBVA will acquire a 21.7% stake in Neon, building on the 8% stake it had acquired through its venture capital fund Propel in 2018.

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BBVA’s investment in Neon is part of its strategy to foray into new markets by investing in digital platforms.

Neon seeks to become an alternative to traditional Brazilian banks. Its offerings include free checking accounts, debit and credit cards, payroll loans and specialised products for small businesses.

Neon had raised $423m since its inception in 2016 and before BBVA’s investment through financing rounds.

It counts General Altlantic, Vulcan, BlackRock, Paypal and Banco Votorantim as its backers.

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BBVA chairman Carlos Torres Vila said: “The commitment to innovation is part of BBVA’s DNA, and digital is opening new ways for us to grow in very attractive markets.

“Neon’s value proposition connects with the financial needs of Brazilians serving as a platform to continue to grow rapidly in a market with great potential.”

Neon founder Pedro Conrade said: “BBVA’s investment and global expertise will allow Neon to offer loans in a more simple, sustainable and inclusive way. We want to reach more Brazilians, contributing to reducing inequalities and making a difference in their lives. Neon will continue to grow rapidly, while delivering on its purpose.”

BBVA’s other investments include Atom Bank in the UK and Solarisbank in Germany.

In October 2021, BBVA launched a digital retail banking arm in Italy as part of its expansion plans.