German neobank N26 continues to burn money. It wants to stick to its course in Switzerland, according to its top European executive.
Valentin Stalf, founder and co-chief executive of N26, is looking ahead. At what is currently Germany's most highly valued fintech, he sees profits within reach by the end of the year, he recently told Germany's «Handelsblatt» (behind paywall, in German). So far, however, Neobank, which is also active in Switzerland, has continued to burn money.
After a crashing net loss of 217 million euros ($263 million) in 2019, the startup, which is primarily active in the payment and card business, reporting another loss, this time of 110 million euros, last year.
«Very satisfied» in Switzerland
That earned Neobank plenty of criticism. The data and analysis firm Global Data, for example, concluded in a commentary that N26 was running out of time in its attempt to align itself profitably. Naturally, the fintech sees things differently. N26 points to 2019 as an «investment year», the halved loss of 2020 – and the 7 million customers it now claims to have reached.
Georg Hauer, responsible at neobank for the German-speaking markets and thus also Switzerland, wants to stick to the course taken in this country. As he explained in an interview with finews.com, the company is very satisfied with the business development in Switzerland so far. In addition to its existing euro account, the fintech launched N26 Smart, its first premium account in Switzerland, last November. «The launch,» said Hauer, «was very successful.» The share of N26 Smart users among new customers is higher in Switzerland than in any of N26's other markets, he said.
Challengers Facing a Turnaround
The strategy of offering new products primarily to expats and frequent travelers has not changed, he said. «In 2021, we want to bring some important and successful products as well as functions that we already have in other countries to Switzerland,» the Neobank manager said.
In fact, the neobanks in Europe, which until now have been fully focused on attack, seem to be on the verge of a turnaround. They are facing increasing competition from other fintechs and now also from established banks. In Switzerland, for example, big bank Credit Suisse launched its banking app CSX last fall; Basellandschaftliche Kantonalbank announced a sustainable digital bank, and local fintech Yapeal expanded its offering at the beginning of the year.
Withdrawal from the U.K...
In the UK, where most of the neobanks in Europe are to be found and which is, therefore, to be regarded as a pioneer market, this development is already underway. The number one European neobank, Revolut, is very actively seeking a banking license there, with the obvious intention of entering the higher-margin credit business.
At its British competitor Starling, meanwhile, an established fund house, Fidelity International, wants to get on board – and at Monzo, founder Tom Blomfield recently threw in the towel. This, while the U.S. bank Goldman Sachs and J.P. Morgan want to offer digital banking services to the British.
N26, for its part, withdrew from the UK last year – the push in the Kingdom cost Neobank 27 million euros, as has only now become known. For Global Data analysts, this is an object lesson in how risky it can be to penetrate already saturated banking markets with many old and new counterparts.
...Expansion in the U.S.
Nevertheless, N26 will continue to focus on growth and new markets in 2021. The focus is on expansion in the U.S., while the Germans were able to acquire a banking license in Brazil. The product range is also to be broadened. High customer numbers alone, as is also apparent here, will hardly win the race.
Moreover, with their high growth, the neobanks are increasingly attracting the attention of regulators. According to media reports, the German Federal Financial Supervisory Authority (Bafin), for example, wants to increasingly scrutinize fintechs and neobanks. This means that there are also signs of a turnaround at the regulatory level.
