N26 got it wrong on global expansion and crypto, co-founder says

The co-founder of N26 admits that the German online bank has quickly gone global and lost the crypto boom, as it struggles to justify its place as one of Europe’s most valuable fintech companies.

The Berlin-based group, which has Valar Ventures from Peter Thiel and Li Ka-shing among its backers, is one of a wave of European online lenders that have been established over the past decade to transform the region’s banking system.

However, in the nearly decade since its founding, N26 is shutting down its US operations after its exit from the UK in early 2020. And while the group offers current accounts to seven million customers in 24 countries, its rapid geographic expansion has left it steady in developing Other services, such as cryptocurrency or catering to the retail boom in stock trading.

“Should we build trading and cryptocurrency instead of launching it in the US? In hindsight, it might have been a smart idea,” N26 co-founder and CEO Max Tainthal told the Financial Times in an interview.

Tainthal acknowledged that the bank has realized in recent months that we have “deployed ourselves too thinly”, adding that there are “a lot of things we can work on instead of tagging us in new markets”.

Tainthal said N26 plans to launch a cryptocurrency trading business this year and a stockbroker after that. “We really want to expand our product world and we have to.”

Although N26 was valued at €7.8 billion last year, when it raised an additional €780 million, rival fintech company Revolut has been valued at more than three times its value.

The once-flying fintech has been criticized by German financial regulator BaFin for a host of shortcomings, including weak anti-money laundering controls.

As a result, BaFin decreed that N26 could only accept 50,000 new customers per month. According to BaFin, the restriction can only be fully lifted when N26 has “a proper business organization and [mitigated] Risks on the operational flexibility of the organization”, in particular “the deficiencies in risk management in relation to information technology and outsourcing management”.

In a rare move, BaFin has appointed special representatives to track improvements in N26 on its behalf.

Tainthal said the BaFin ceiling is a “tremendous limitation” for the bank, which has been funded by “growth investors” and considers itself a fast-growing company. N26 received an average of 170,000 new customers per month last year.

“There is a lot of confidence [among the investors] It is in our ability to remove these growth constraints again,” he insisted, and he is confident that the cap can be fully raised by late summer. “We have a plan. We have an understanding of what needs to be done and we are able to do it [that],” He said.

Although N26 has already “significantly” increased its financial crime-fighting capabilities over the past year, “certain aspects” of compliance and internal processes still need to be further improved, Tainthal acknowledged.

He also stressed that the bank’s investors were aware of the looming restrictions from BaFin ahead of last fall’s record funding round, which put the N26 valuation on par with Commerzbank, Germany’s second-largest lender with €541 billion in assets.

The co-CEO is confident the group will be ready for a stock market listing by the end of the year, but said this was just one of several options and not a necessary one.

“The question is always: What is the correct point in time? Do you want to go public while you still have a lot of money in the accounts?” of fundraising last year, he asked.