After two and a half years of stringent regulations, the Berlin-based neobank N26 can now resume unrestricted growth. The Federal Financial Supervisory Authority (BaFin) has lifted the growth cap imposed in the summer of 2021, which had limited the fintech to a maximum of 60,000 new customers per month. This decision marks a significant turning point for N26, as announced by the company on Tuesday in Berlin.
N26 founder Valentin Stalf expressed his delight over BaFin’s decision. “The last two and a half years have been painful for our growth, so this is a major milestone for us,” Stalf said. He also emphasized the constructive cooperation with the supervisory authority, which the company intends to continue in the future.
Regulations Hampered Growth
BaFin imposed strict regulations on N26 in 2021 because the fintech had grown too quickly in its early years while taking insufficient measures against money laundering and terrorist financing. The regulatory authority initially assigned a special commissioner to the company, later imposing a multi-million euro fine and a cap on new customers, initially set at 50,000 per month and increased to 60,000 in December 2023.
These restrictions significantly burdened N26. According to Stalf, although the company nearly reached the allowed number of new customers, it could not effectively invest in marketing efforts. This allowed competitors like Trade Republic and Scalable to grow rapidly with provocative advertising campaigns, while N26 fell behind in public perception. Additionally, N26 was slow to respond to key market trends, only introducing features for cryptocurrency and stock trading early last year and this year. A delayed high-interest offer further hampered growth.
Significant Investments in Risk Management
The issues with the financial supervisory authority also took a financial toll on N26. The fintech reported investing over 100 million euros in risk management over the past two years. The company focused heavily on AI-based systems designed to analyze a customer’s fraud risk even before they open an account.
The effectiveness of these security measures will become evident in the coming months. A large-scale marketing campaign could serve as a stress test, as the fintech can now potentially attract 60,000 or more new customers.
Future Plans and Profitability
Despite the high demand for N26’s offerings, Valentin Stalf has not yet outlined specific marketing measures. Instead, the company plans to gradually approach more extensive marketing strategies. “Our focus is primarily on becoming profitable for the first time in the second half of the year,” Stalf emphasized. The fintech does not intend to compromise on this goal, aiming for profits that include marketing costs on a monthly basis.
With the lifting of growth restrictions, N26 now faces both the challenge and the opportunity to regain lost ground and reposition itself in a highly competitive market. The coming months will reveal how successfully the company can seize this opportunity.