Bafin Wants to Lift Growth Restrictions for N26

The smartphone bank N26 will soon be able to take on as many new customers as it wants. The financial regulator Bafin plans to soon lift a growth limit that has been in place for the Berlin-based institute for two and a half years, as several people familiar with the matter told Handelsblatt. For the billion-dollar fintech company, this is a liberating move.

The financial regulator believes that the fintech has grown too quickly for many years and has not developed its processes and controls accordingly. Due to deficiencies in risk management, among other things, the authority therefore ordered in November 2021 that N26 may only accept 50,000 new customers per month. In December 2023, the new customer limit was then raised to 60,000 .

N26 has now corrected most of the deficiencies and has also developed positively in other ways, according to financial circles. The founders Valentin Stalf and Maximilian Tayenthal have now understood the importance of good control systems and compliance with rules for the development of fintech. That’s why it’s now time for the restrictions to be lifted.

Bafin and N26 did not want to comment on the impending lifting of the growth ban. However, the financial regulator announced on Tuesday another penalty against the fintech for past failures.

Because N26 “systematically submitted suspected money laundering reports late” in 2022, the bank had to pay a fine of 9.2 million euros, explained Bafin.

Credit institutions are obliged to report to the Financial Intelligence Unit (FIU) if they suspect that a transaction could be related to money laundering or terrorist financing. N26 apparently did not do this in a timely manner in the past.

N26 apparently already expected a corresponding punishment. “The company has already made a corresponding provision in relation to the fine in 2022, the fine imposed is below the amount of the provision,” explained the institute.

N26 has invested 80 million euros in personnel and technology

The smartphone bank says it has “implemented numerous measures to improve reporting processes and invested more than 80 million euros in personnel and technical infrastructure,” it continued.

N26 is one of the most valuable German fintechs. In the last financing round in 2021, it was valued at 7.7 billion euros.4,25Million EurosN26 had to pay a fine in 2021 because of the same problems.

Bafin most recently punished the bank in June 2021 for the same problems. At that time, these were late reports of suspected money laundering from 2019 and 2020. The fintech had to pay a fine of 4.25 million euros at the time.

N26 aims to become profitable on a monthly basis in the second half of this year. For the past financial year, the company expected a loss of around 100 million euros; more recent figures are not yet known. In 2022, the fintech posted a loss of 213.4 million euros, with gross revenues of 236.3 million euros. According to expectations, revenues should have increased by almost 27 percent to over 300 million euros last year.

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(Featured image by Blake Wisz via Unsplash)

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First published in Handelsblatt. A third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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