N26: Racing for DIfferentiation
🥁 Introducing the latest addition to our series of reports on Neo-banks:
N26, founded in 2013 within Rocket Internet incubator in Berlin, prides itself on being the first fully digital bank which kick-started the Neo-bank trend. From the beginning, founders Valentin Stalf and Maximilian Tayenthal shared a goal to make customers’ personal banking experience functional, enjoyable and beautifully designed, with a focus on providing a minimalist mobile application and debit card.
N26 follows a mixed strategy when entering new markets, however it has always remained focused on providing improved and more efficient banking services to its customers. Within just 10 months of launching in 2015, N26 applied for a banking licence with the European Central Bank, which the company then received in July 2016. This is unique to N26’s journey to becoming a bank, as competitors Monzo and Revolut established themselves first and foremost as FinTechs, only later obtaining a banking licence in order to scale.
The Bank focused heavily on international expansion as a key growth strategy. Despite this, the road to expansion has not been without its hurdles, and the consequences of Brexit and the change this had on the N26’s regulatory context resulted in its departure from the UK after just 18 months. Similarly, N26 lasted two and a half years in the US before closing 500,000 accounts.
Regardless of this, our report finds that N26’s business model inspires confidence in investors, as it is able to continue to raise funds in spite of the pandemic and the obstacles it faced expanding to overseas markets. Only time will tell whether the company shows recklessness or resilience when it comes to internationalisation, as it attempts to resolve a temporary ban from onboarding Italian customers and simultaneously launches in Brazil.
Given that N26 has given little to no indication of its financial standing over the 2021 financial year*, the team at C-Innovation has sifted through recent N26 blog entries, as well as those dating back to January 2016, previous financial Statements published at the Bundesanzeiger, press releases and media commentary from reputable sources such as Forbes, Business Insider and the Financial Times, to name a few.
This report is aimed at FinTech businesses, enthusiasts and corporate banks looking for actionable takeaways which address N26’s growth strategies, including its expansion overseas as well as the roll-out of innovative features such as ‘N26 Installments’, CASH26 and MoneyBeam.
We also look at revenue diversification, product development, partnerships, and funding, frequently drawing parallels between N26 and its market competitors.
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For additional information on our report’s contents, please visit our website for the N26 blog.
Summary of Report Contents
N26’s Breaking Milestones
Team & Investors
Early Strategy & Initial results
Approach to marketing & Partnerships
Expansion & Infrastructure
Business Model Overview & Evolution
Diversification of Products
Total Revenue, Costs & Operating Loss
Revenue by Business Line & Revenue Breakdown by Location
Number of customers & The Competitive Landscape
Market share and Remittance costs
User Experience Compared
Number of Features Added & Features Compared
Business Banking Approach
Challenges of Internationalisation
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*Despite German law stipulating that credit institutions and/or institutions providing financial services must publish their annual accounts once a year, N26 seems to be at least one year late in doing so (for reasons unknown to us). Hence, we have been restricted when analysing the company’s performance during and after the global pandemic, which we know has had significant impact on other players such as Revolut and Monzo.