N26 introduces penalty interest on balances over €50,000

The Berlin-based neobank N26 plans the introduction of a penalty interest of 0.5% on credit balances over $59,000 (€50,000). That is the result of a corresponding change in the list of prices and services as of 19.10.2020. Recently, the homepage of the billion-dollar-fintech company also contains a corresponding note: “For deposits over $59,000 (€50,000), a custodian fee of 0.5% p.a. may apply.”

However, the penalty interest is only to apply to new customers – not to existing customers. An N26 spokesperson confirmed the introduction but pointed out that the premium accounts named “Metal” would be excluded from the new fee. The fee should take effect from November.

Read more details about the custodian fee that N26 will introduce and find the most important business headlines with our companion app Born2Invest.

Why did N26 introduce such a fee?

The measure comes as a surprise because up to now the branchless direct banks such as the German ING, the DKB or the Consorsbank have tended to hold back with punitive interest rate measures – unlike classic branch banks such as Deutsche Bank, Commerzbank or Sparkassen and Volksbanken. 

Moreover, even compared to such banks, the limit of $59,000 (€50,000) seems to be chosen rather aggressively: Custodian fees in Germany are only usually from $118,000 (€100,000) (Comdirect starts at $295,000 (€250,000). According to an evaluation of the consumer portal Biallo, only 23 institutes in this country had a threshold of $59,000 (€50,000) or below, from which they charge penalty interest.

N26 did not want to give any further details about the motives on request of Finanz-Szene.de. According to enterprise-near circles there are to be however above all two reasons for the surprising measures:

Also N26 must bear ever higher deposit volumes – deposits, for which the Fintech company has hardly used, since it hardly operates classical credit business. This development comes as a surprise when viewed from the outside. 

That is because N26 was previously considered a typical secondary bank to which customers entrust comparatively little money. Has this really changed? It’s hard to say. After all, it is undisputed that the build-up of demand deposits at German banks has accelerated again since the Corona crisis. In Q2 alone, assets in the form of cash and demand deposits of German private households rose by $88.6 billion (€75 billion) – or just under $1.18 billion (€1 billion) per day, according to Bundesbank data.

In addition, according to Finanz-Szene.de information, N26 plans to offer a call money account with a positive interest rate from November onwards. It should help to get the unwanted funds out of the balance sheet. Penalty interest is considered a proven means of maneuvering customer funds from the current account into exactly such products, and a small commission bonus would be added. It is unclear whether the neobank offers the new product on its own or with a partner. It would be conceivable to expand the cooperation with Raisin (“Weltsparen”), which has been running since 2017.

According to the last published annual report, N26 had “liabilities to customers” of $1.26 million (€1,07 million) at the end of 2018. Since the bank was talking about 2.3 million customers at the beginning of 2019, this results in an average balance of around $555 (€470) per customer or account for the period at that time.

__

(Featured image by Pixabay via Pexels)

DISCLAIMER: This article was written by a third party contributor and does not reflect the opinion of Born2Invest, its management, staff or its associates. Please review our disclaimer for more information.

This article may include forward-looking statements. These forward-looking statements generally are identified by the words “believe,” “project,” “estimate,” “become,” “plan,” “will,” and similar expressions. These forward-looking statements involve known and unknown risks as well as uncertainties, including those discussed in the following cautionary statements and elsewhere in this article and on this site. Although the Company may believe that its expectations are based on reasonable assumptions, the actual results that the Company may achieve may differ materially from any forward-looking statements, which reflect the opinions of the management of the Company only as of the date hereof. Additionally, please make sure to read these important disclosures.

First published in finanz-szene.de, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

Although we made reasonable efforts to provide accurate translations, some parts may be incorrect. Born2Invest assumes no responsibility for errors, omissions or ambiguities in the translations provided on this website. Any person or entity relying on translated content does so at their own risk. Born2Invest is not responsible for losses caused by such reliance on the accuracy or reliability of translated information. If you wish to report an error or inaccuracy in the translation, we encourage you to contact us.