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

The N26 co-founder admits that the German online bank was quick to go global too quickly and missed the cryptocurrency boom, as it struggles to justify its status as one of Europe’s most valued fintechs.

The Berlin-based group, which counts Peter Thiel’s Valar Ventures and Li Ka-shing among its backers, is part of a wave of European online lenders established over the last decade to shake up the region’s banking system.

Yet nearly a decade since its founding, N26 is shutting down its US operations after leaving the UK in early 2020. While the group offers checking accounts to seven million customers in 24 countries, its rapid expansion Geography left him with empty feet in the development of other services. such as cryptocurrencies or catering to the retail boom in stock trading.

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

Tayenthal acknowledged that in recent months the bank had realized that “we were spreading very little,” adding that there are “so many things we can work on instead of putting flags in new markets.”

N26 plans to launch a cryptocurrency trading business this year and a stock brokerage after that, Tayenthal said. “We really want to expand our product universe and we have to.”

Although N26 was valued at 7.8 billion euros last year, when it raised another 780 million euros, rival fintech Revolut was valued at more than triple.

The once high-flying fintech has also come under fire from German financial regulator BaFin for a number of shortcomings, including poor controls against money laundering.

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 “an adequate business organization and [mitigated] risks to the operational resilience of the entity ”, in particular,“ deficiencies in risk management with respect to IT management and outsourcing ”.

In a rare move, BaFin appointed two special representatives to keep track of the improvements to N26 on his behalf.

Tayenthal said the BaFin cap is “a massive restriction” for a bank that was financed by “growth investors” and saw itself as a fast-growing company. N26 acquired an average of 170,000 new clients a month last year.

“There is a lot of trust [among the investors] in our capacity so that these growth restrictions are eliminated again ”, insisted, and trusts that the limit will be able to be lifted completely at the end of the summer. “We have a plan. We understand what needs to be done and we can execute [that],” he said.

Although N26 has already “massively” increased its capabilities to fight financial crime over the past year, “certain aspects” of compliance and internal processes still need to be improved, Tayenthal acknowledged.

He also emphasized that the bank’s investors were aware of the impending BaFin restriction ahead of last fall’s record funding round, which put the N26 valuation on par with Commerzbank, Germany’s second-largest publicly traded lender with 541,000 million euros in assets.

The co-CEO is confident the group will be ready to go public by the end of the year, but said that was just one of several options and not a necessary one.

“The question is always: What is the right time? Want to go public when you still have a lot of money in your accounts? “From last year’s fundraiser, he asked.

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