Banking startup based in Berlin N26 is launching a new stock and ETF trading feature starting with Austria as the first market. This product launch marks a renewed focus on the startup’s core markets with a larger portfolio of banking products in those countries.
Like many challenger banks, N26 started with a simple product — an account you could use to send and receive money and a card you could manage in real time from a mobile app. And the company managed to convince millions of customers to open an account because it simply worked better than regular banks (banking apps usually aren’t that good).
Over time, the company expanded into more markets and began adding more products. After several years of huge funding rounds and several hiring sprees, and like many other tech companies, the company is turning its attention to efficiency and profitability.
After opening offices in the US and Brazil, N26 decided to reverse course and focus exclusively on Europe — more specifically Germany, France, Spain and Italy.
There’s another reason why the N26 doesn’t want to spread itself too thin. German financial regulator BaFin began looking more closely at N26’s activities in 2021. And BaFin still imposes a cap on customer registrations today. N26 can only accept 60,000 new customers per month.
“I hope we’ll get out of any kind of restrictions in the next couple of quarters, but it’s very hard to predict,” N26 co-founder and CEO Valentin Stalf told me.
As a result, N26 is strengthening its anti-money laundering controls to better comply with regulators. At the same time, the company is trying to improve its profit margins and find new sources of revenue for its existing customer base.
After credit and savings, N26 adds stock transactions
The addition of stocks and ETF trading is part of this strategy to increase average revenue per user. N26 is partnering with Upvest for this feature. Users will be able to withdraw and deposit funds from their main N26 account to this new trading venue.
After that, they can choose how much money they want to invest in a particular ETF or stock. N26 supports fractional shares, meaning users can buy a fraction of an Apple or Netflix share for as little as 1 euro. And when it’s time to sell, users can either decide to reinvest what they got from that transaction or get the money right back to their main N26 account.
N26 charges €0.90 per transaction and premium customers will soon receive a handful of free transactions per month depending on their subscription plan. Ideally, stock trading will boost premium subscriptions as the margins are very good on these subscriptions.
This will be a slow rollout as trading will only be available in Austria at first. It will also be limited to 100 ETFs with stocks coming later. But the company says it will be available in Germany “in the coming months.” Other European countries will follow.
N26 recently launched savings accounts in Spain and Germany with an interest rate of 2.6% currently. Customers can also get a loan of up to €25,000 from the app. In some markets, N26 also offers crypto trading directly in the app.
In other words, N26 is slowly turning into a full bank with all the features you would expect from a bank. With stock trading, N26 competes with trading apps like Commercial Republic. But the main advantage of N26 is that everything is bundled in one app.
The company currently has more than 8 million customers (including 4.2 million revenue-related customers). It has EUR 8 billion in assets under management and handles a transaction volume of over EUR 110 billion annually.
The company sent me some (unaudited) financials about N26’s performance in 2023. And the startup has significantly increased its revenue in 2023 with more than €300 million coming from interbank fees, subscription revenue, credit products and revenue from interest on customer deposits.
But the company still had a loss of €100 million in 2023. This is much better than 2022 as N26 reported a loss of €213 million that year. But there is still some work to be done to reach profitability.
“By the end of last year, we were almost already on a monthly basis,” Stalf said. “So we’re continuing this now. In the second half of the year, I believe we will be profitable on a monthly basis as a complete company.”
Image Credits: N26
