German Fintech

Coming to America

Expiration date? Security code? Source: N26

No branches. No tellers. And more than 500,000 European customers. Virtual Berlin bank N26 now wants to take its smartphone banking model to the US – and probably the UK. The lender, the brainchild of entrepreneurs Valentin Stalf and Maximilian Tayenthal, will base its US operations in New York and is working with an unidentified local banking partner to appease regulators until it can get its own US license.

“The US is an interesting market for N26 that creates major opportunities,” Mr. Stalf, also the company’s CEO, said. “Everywhere in the world, customers are open for a new banking experience. User behavior among millennials has moved strongly toward mobile.” The bank launched in Europe in 2015, working together with little-known commercial financial services biz Wirecard, before gaining its own German license in mid-2016. It offers no-fee credit cards, debit cards and the ability to get cash free at any ATM.

In the U.S., N26 will go up against Portland, Ore.-based Simple, which was bought in early 2014 by Bilbao-headquartered BBVA for $117 million. In addition to N26-like online banking, Simple also offers automated budgeting tools as well as the ability to integrate external accounts.

Club Mate drink? Check! Macbook? Check! Maximilian, left, and Valentin, right, you must have launched a Berlin start-up! Source: N26

N26, short for Number26, is a welcome presence in over-banked Germany. Customers still often face stiff fees because of the German penchant for stashing away cash at an inefficient, municipally backed network of lenders known as Sparkassen, or savings banks. The fees have made successes out of discount online banking products from established players such as Dutch ING and Commerzbank’s Comdirect, even if traditionalists fear their technology-heavy approach.

As with other startups, N26 has had its growing pains. Last year, it suddenly ended its services to several hundreds of customers, because many of them were using N26’s free ATM services too often and its credit card too little. N26, like most banks, earns a small commission when a client buys something with its credit card, but it has to pay €1.50 to €2.00 when a customer uses an ATM. Many consumers were not amused when N26 booted them out and the cancelations sparked outrage on social media.

The PR disaster, however, did not stop N26 from growing from around 160,000 customers last year to half a million currently in 17 European countries. It could even add the UK, scheduled to leave the EU March 2019, as a new market. On its website, N26 is advertising for a UK general manager, who is supposed to oversee “the market entry of N26 in the UK.” CEO Mr. Stalf: “We want to wait and see how the Brexit negotiations develop.”

N26 has lured over $55 million in venture capital from the likes of Hong Kong billionaire Li Ka-Shing, via his Horizons Ventures, as well as Battery Ventures, Valar Ventures, Earlybird Venture Capital and Redalpine Ventures.

The bank launched as purely a checking account but has gradually expanded its products, primarily by cooperating with other fintechs. These services bring in revenue.

Customers since May have been able to save in interest-bearing accounts via a cooperation with Weltsparen, which opens the door to other European countries with higher interest rates than Germany. N26 also expanded its credit activities through a cooperation with Auxmoney, which simplifies credit applications, especially for the self-employed, freelancers and students. And it cooperates with Vaamo for investment advice and Transferwise for international transfers.

N26 also earns money when a customer overdraws his or her account, charging a steep interest rate of around 9 percent. In this respect, it’s just like any other brick-and-mortar bank.

Katharina Schneider covers financial markets for Handelsblatt. This piece was adapted for Handelsblatt Global by Andrew Bulkeley. To contact the authors:, 

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