After the Wirecard ScandalGermany’s financial regulator BaFin began taking a closer look at new fintech startups that wanted to grow at a fast pace — better to be safe than sorry.
Specifically, N26a Berlin-based banking startup he created hundreds of millions of euros and quickly became a unicorn, has had a complicated relationship with BaFin in recent years. The regulator imposed a cap on new registrations as a sanction to force the startup to improve its anti-money laundering procedures.
This week, N26 announced that BaFin is to lift the growth cap starting June 1, 2024. The cap was originally set in 2021 at 50,000 new customers per month. At the end of 2023, it increased slightly to 60,000 customers per month.
Last week, as part of the completion of this supervisory period, BaFin fine N26 €9.2 million (about $10 million at today’s exchange rate) for deficiencies in reporting suspicious activity that occurred in 2022. N26 expected this fine as it set aside provisions in its financial statements for 2022. According to the company, has also invested €100 million to improve its compliance team and processes from 2022.
“We are pleased for the trust of our regulators and will continue our close exchange in the future. In recent years, we have been able to make significant progress in preventing and combating money laundering and financial crime,” said N26 co-founder and CEO Valentin Stalf.
As this limitation severely hampered N26’s growth, the company adjusted its strategy to focus on its existing customers. In Spain and Germany, N26 offers savings accounts. In some markets, users can also get a loan of up to €25,000 from the app.
The company has also added crypto and stock trading, partnering with Bitpanda and Upvest, respectively. You can even subscribe to insurance products from the app. All of these additions are designed to increase average revenue per user.
In 2023, N26 reported a €100m loss, but things should be better this year thanks to higher interest rates, new revenue streams and the end of the subscription cap. The company said it expects to reach “monthly profitability” sometime in the second half of 2024.
