It could have been a symbolic day. The smartphone bank N26 had secured 900 million dollars a few weeks ago and was thus worth nine billion dollars, more than Commerzbank, one of the most important banks in Germany. The whole thing could have stood for the massive upheaval in the banking sector: old versus new, founded in 1870 versus founded in 2013, a company with legacy against an agile young start-up with digital expertise. The past versus the hope for the future. It is only now becoming increasingly clear that the image of the high-flyer of the German banking sector is no longer sustainable and that long-cherished hopes are increasingly turning into problems for fintech.
One of those hopes was the conquest of the United States. With a population of 300 million, the country has one of the most important and largest banking markets in the world. But now nothing will come of it. N26 leaves the market after only two years. She closes the 500,000 overseas accounts, people have to withdraw the money. N26 officially justifies this decision with the fact that they prefer to focus on Europe and dominate here. UNITED STATES? Not that important, that’s the tenor.
In fact, the failure in the US is a major setback for the smartphone bank founded in 2013. They started there two years ago with a lot of tam-tam and a major advertising campaign. It was said at the time that the decision was made in favor of the market because there was so much customer interest. And in fact, N26 was able to win many new customers at the beginning. In the first five months alone it should have been 250,000, according to the company.
But before things really started, the problems came. The then US boss Nicolas Kopp left the fintech after just one year to found a start-up himself. That dampened growth. After a good start, a year and a half later, the company had a total of 500,000 customers in the United States. It did not succeed in asserting itself in the highly competitive market.
Annoying for the founders Maximilian Tayenthal and Valentin Stalf: It is already the second failed expansion in a short time. Last year, N26 withdrew from Great Britain, which they had also wanted to conquer beforehand. Allegedly, the company from Berlin had invested a double-digit million amount in entering the market. At that time, N26 named Brexit as the reason for the withdrawal.
But the problems don’t stop with the failed expansion plans. N26 has had to grapple with the financial supervisory authority Bafin for a few months. The supervisory authority had warned several times since 2019 that N26 had to make improvements, especially when it came to money laundering. When the bank failed to comply adequately, the Bafin lost patience and fined the fintech a million dollar fine. To do this, she limited the start-up’s growth. The bank is allowed to accept a maximum of 50,000 new customers per month in Europe. This should serve the “elimination of deficiencies, especially in risk management”. In May, the supervisory authority also sent a special commissioner to prevent money laundering, a measure that is rarely taken.
Despite such tough specifications, there is no way around further growth for N26 if the company wanted to do justice to the billions in valuation. Accordingly, the founders Stalf and Tayenthal want to move on to new markets after the two failed expansions. Eastern Europe and Brazil are on the agenda. The South American country has more than 200 million inhabitants, many of whom have a smartphone, but comparatively few have a bank account.