Technology giant Tencent Holdings Ltd has expanded its presence in Europe with an investment in German startup N26.

The Berlin-based app-only bank raised $160 million in a Series C round of funding led by Tencent and German insurer Allianz along with some of N26's existing investors.

N26, which is building a retail bank from scratch, has attracted 850,000 customers and raised $215 million in total. Other investors in the firm include Horizons Ventures founded by Hong Kong tycoon Li Ka-shing and Valar Ventures founded by Peter Thiel－the co-founder of PayPal.

The investment is the largest equity financing round in the fintech industry in Germany to date.

Valentin Stalf, chief executive officer and co-founder of N26, said the funds would be used for the company's overall growth strategy and international expansion, particularly into the United States and the United Kingdom. At the same time, the company will also use artificial intelligence for its retail banking business to make it smarter and more personalized.

N26 was set up in 2013 and rolled out its first product in January 2015. It aims to have 5 million customers by the end of 2020. So far, it has processed over 9 billion euros ($11 billion) in terms of transaction volume, with a projected volume of more than 13 billion euros in 2018. Its main businesses include foreign exchange, savings, insurance and credit.

In October last year, N26 announced its plan to enter the US market by opening the first account by mid-2018. One month later, it revealed its plan to enter the UK market, which is scheduled to take place in the first half of this year.

Lin Haifeng, managing partner of Tencent Investment, said that they have seen increasing demand for digital banking products and services in the European markets. The UK especially has witnessed a boom in app-only digital banking startups recently, represented by Monzo, Atom and Startling Bank.

Tencent became the technology company with the highest market value in China in May last year. Its market cap has since soared to over $300 billion. By the end of 2017, it became the world's fifth largest tech company, next to Apple, Google, Microsoft and Amazon.

Tencent has been dedicated to overseas investment over the past few years. On Tuesday night, it announced a strategic agreement with French game developer Ubisoft to operate, publish and promote several of the latter's most successful titles on PCs and mobiles in China.

According to Beijing-based internet industry information provider ITJUZI, Tencent was the most aggressive outbound investor in China last year in terms of investment volume. Of the top 10 overseas investment cases in 2017, four of them came from Tencent, mainly focusing on the areas of transportation and e-commerce.