European mobile bank startup N26 has attracted 250,000 users in the United States since it launched last summer, and now the German-originating fintech is honing in on its ultimate goal: To disrupt traditional banking irrevocably. And, indeed, it is fast becoming the age of “neobanking”, with venture capitalists pouring $2.9 billion into digital banks in the first nine months of 2019.
It’s gathered pace much faster in Europe than in the U.S., where the top five banks control nearly 50% of banking assets, and where lack of regulation, privacy issues and banking system complexity have made it more difficult for the mobile bank to take charge.
According to a 2018 study from Cornerstone Advisors, only 3% of Millennials have their primary checking account at a digital bank. That percentage drops to 1.5% of Gen Xers, and 0.8% of Baby Boomers
But it’s a development that traditional banking will not be able to resist much longer.
McKinsey estimates there are 5,000 startups worldwide offering new and traditional financial services, up from 2,000 in 2017. In all, in its “New picture of finance” McKinsey estimates that by 2025 up to 40% of banks’ collective revenue could be jeopardized by digital banks.
And these disruptive banking startups are doing quite a lot to lure in new customers. N26’ competitors in the U.S. include Chime, Simple and Ally--and they all offer newcomers two-day advances on their pay when they use direct deposit or transfer funds through P2P technology.
The banking app also offers security features that include the ability to set a spending limit, to lock lost or stolen cards and to turn international charges on or off.
In the early stages after its U.S. launch, N26 was criticized for limitations of free ATM withdrawals. But it was also quite to respond. Since then, it’s expanded free ATM withdrawals under a deal with interbank network Allpoint.
However, back home, N26 has been involved in much larger controversies, including an incident last year in which a customer reported 80,000 euros stolen from his account and could not reach customer service for days. Also, in 2018, it was reported that consumers were able to open bank accounts with N26 using fake passports. The company said it resolved all issues with Germany’s banking regulator, Bafin.
Related: How The Trade War Ceasefire Will Impact The Energy Industry
N26 currently has 3.5 million customers in Europe and raised more than $300 million last year, valuing the company at $3.5 billion.
The mobile bank now ranks among the most valuable German startups. It’s also among the Top 10 most valuable fintech companies in the world.
Customers currently hold $1.2 billion in N26 accounts overall while the company has processed $22 billion in transaction volume since its creation.
Investors include everyone from the highly controversial Peter Thiel’s Valar Ventures to Chinese tech giant Tencent and Singaporean sovereign wealth fund GIC, among others.
Thiel, the co-founder of PayPal, has made early-stage investments in numerous startups either personally or through the Founders Fund. Some of them include Facebook, Spotify, SpaceX, Palantir Technologies…
Most recently, Thiel grabbed headlines when Founders Fund announced it would host a three-day event called Hereticon this coming May in New Orleans, a “safe space for people who don’t feel safe in safe places” and a conference “for people banned from other conferences”.
The organizers believe that these apparent ‘intellectual’ troublemakers are essential to mankind’s progress.
Thiel clearly believes in the ‘heresy’ of disrupting traditional banking, and he’s more than willing to put his money where his mouth is.
By Anes Alic for SafeHaven.com
More Top Reads From Safehaven.com:
- Are Cryptocurrencies Funding Terrorism?
- U.S. Moves To Bar Iranians From Investor Visas
- JPMorgan Urges Investors To Buy The Coronavirus Dip