Financial Regulator Removes Growth Brake at N26

The Berlin-based neobank N26 can once again grow without limits – at least in theory. A restriction imposed by the Federal Financial Supervisory Authority (Bafin) of a maximum of 60,000 new customers per month will be completely lifted from June. The billion-dollar fintech company announced this in Berlin on Tuesday.

N26 founder Valentin Stalf was pleased with the decision. “The last two and a half years have been painful for our growth, so this is a major milestone for us,” said Stalf. He also spoke of a “close and good exchange” with the authority, which the company wants to continue in the future.

Requirements delayed important products

Because N26 grew too quickly in the early years and at the same time did too little to combat money laundering and terrorist financing, BaFin ordered extensive control measures in the summer of 2021. First, the authority sent a special representative to the fintech company, later followed by a fine in the millions and a new customer cap. This was initially 50,000 new customers per month. In December 2023, the limit was raised to 60,000.

According to the N26 boss, the company came close to reaching the number, but the fintech company was unable to invest meaningfully in marketing. While competitors such as Trade Republic or Scalable grew strongly with sometimes provocative advertising campaigns, N26 fell behind in public perception. At the same time, the neobank reacted late to important trends. N26 only introduced functions for trading in cryptocurrencies or stocks at the beginning of last year and this year. A high-interest offer that was also launched late is also likely to have hampered growth.

N26 spent more than 100 million euros

The disputes with the financial regulator put additional strain on the fintech – also financially. According to its own statements, the neobank has invested more than 100 million euros in its risk management over the past two years. One focus was on systems based on artificial intelligence, as N26 announced. These are intended to analyze a customer’s risk of fraud, for example, before they even open an account with the bank.

The next few months will show how effective the security measures are. A large-scale marketing campaign would certainly be a good stress test, and the fintech is now open to taking on 60,000 or significantly more new customers

N26 boss Valentin Stalf did not want to announce any such measures on Tuesday. Although there is enough demand for N26’s offerings, the company initially wants to approach marketing gradually. “Our main focus is on becoming profitable for the first time in the second half of the year,” said Stalf. The fintech does not want to make any compromises in this regard. The profits are to be realized on a monthly basis – and include marketing costs.

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(Featured image by Robert Keane via Unsplash)

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

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