“We want to be like N26”

More than once I have come across CEOs of small-sized banks, who tell me they want their bank to be like N26. Although these statements were made in the context of digital banking software, the CEOs were not just implying that they wish to have a mobile app that is like N26’s app. They actually consider N26 to be a model bank.

Let’s dig a bit deeper.

A simple bank account, coupled with some extra insurance, if you pay a monthly fee (see https://n26.com/en-eu/plans and https://n26.com/en-eu/plans-business). Nice perks:

  • You don’t pay conversion fees when you transact in other currencies.
  • The travel insurance of the metal plan is nice, if you travel often.

That’s it.

So when you say that you want your bank to be like N26, do you mean letting go of all your other banking products (loans, credit cards, other types of accounts, investments, private banking services, etc.)? I guess not.

This is the most important question, as the bottom line for any business is to make money. N26’s strategy is to go for growth, so they:

  • Have been operating for 6 years.
  • Have received about €800m of funding.
  • Have been consistently posting bigger losses in every year, including €110m in 2020.

This is not so good.

Source: https://n26.com/en-eu/press/press-release/n26-2019-2020-results-and-company-outlook. Actually N26 have made it very hard to find their annual statements online; this does not inspire confidence.

You know what they say “It is difficult to make predictions, especially about the future”.

N26 had a great advantage back in 2015, when they implemented an excellent fully digital customer onboarding process. It was a great deal back then, as it allowed you to open a bank account remotely. In terms of the actual banking products, I don’t see any big differentiator apart from the two perks I mention above. Furthermore it seems that their main focus is on younger people, who typically are not as well-off, so I don’t expect the average account balance to be substantial. Actually, we see here https://craft.co/n26/metrics that on 2018 they had €1bil in assets, with 2m customers, leading to an average account balance of just €500. Even if the actual figure is 4 times larger than that, it is still too low. Coupled with the negative Euro interest rates, paints a not so bright future.

Time will tell.

Don’t get me wrong. I do like N26: the attempt, the technology, the ease of use. I just don’t see the extra business value that will make me use them as my primary bank.

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