German app-only bank N26 has launched in the U.K. and is eyeing another expansion to the U.S. in the first quarter of 2019.



The Berlin-based firm, which is backed by Chinese tech giant Tencent, German insurer Allianz and PayPal co-founder Peter Thiel, said on Thursday that its services are now available in Britain, on a limited basis.

Initially, a select number of “early adopters” will be given access to the app in the U.K. More than 50,000 people who have signed up to a waiting list for the U.K. launch will be on-boarded on a phased basis, and a broader launch is planned for next month.

N26 offers a mobile banking app and a Mastercard debit card, operates without a single physical branch and doesn’t charge fees on transactions. However, it said a fee of 1.7 percent will be charged on cash machine withdrawals for U.K. users when traveling abroad with its standard account.


It has a number of products on its platform, including a basic current account, a premium account called N26 Black, overdrafts, savings and loans. But features beyond the basic account won’t be offered to U.K. users until after the launch, N26 said.

The company has been around since 2013, making it one of the oldest so-called digital “challenger banks” trying to compete with bigger lenders.

US expansion

The company expects to expand into the U.S. in the first quarter of 2019. Although it has a banking license recognized in Europe, N26 isn’t authorized in the same way by regulators in the States. So it is partnering with an American lender — which hasn’t yet been disclosed — in order to enter the country.

The U.S. expansion was originally planned to take place before the end of this year, but Chief Executive Valentin Stalf said he is “happy” with the new time-frame.



“I think it’s always — if you look at products’ release cycles and so on — it’s very hard to predict,” he told CNBC in an interview. “I think currently we’re very confident to do that in Q1.”

But amid all the growth in the fintech industry, many players are struggling to turn their big ideas and competitive pricing into profit. Virtually none of the digital challenger banks make more money than they lose. Even rival firm Revolut, which broke even for the first time last December, said last month it posted a £14.8 million ($19.3 million) annual loss in 2017.

Stalf, 33, said N26 could break even by the second quarter of 2019 as it has reached a point where it can soon become a profitable company.

“For us I can say, if we want to break even, we can do that in Q2 next year,” he said. “It depends on how much we can put into growth.”

IPO could happen in three to five years

N26′s business model is more “advanced” than other rivals,” Stalf said. And, for him, its growth can only continue to accelerate.



“We see this big opportunity of taking our business to 50 million — maybe 100 million — customers over the next five to 10 years,” he told CNBC. He said N26 is signing up 5,000 to 6,000 customers every day.

The company disclosed Thursday that it now has 1.5 million people signed up to the platform, a 50 percent increase in the last four months. The U.K. is the 18th market the fintech upstart’s app is available in.

Stalf said the firm also wants to launch an initial public offering (IPO), and said there was a possibility a stock market listing could happen in the next “three to five years.”

“An IPO is definitely something we would like to do. I think it’s too early now to say when it is going to be. But we are preparing our company in a way that we can do it,” he said. Several European firms have gone public this year, including Dutch payments start-up Adyen, Swedish music streaming service Spotify and British peer-to-peer lender Funding Circle.



Earlier this year, the company raised $160 million in a funding round led by Tencent, which owns the social network WeChat and its accompanying payment service WeChat Pay, and Allianz. It has raised a total of almost $213 million so far, but has not disclosed a valuation figure. That injection of capital was seen as a “confirmation” of the firm’s success, Stalf said, and set the stage for an eventual float.

One of its aims is to turn banking into more of a marketplace, where it adds more products from competitors to its platform. This approach is similar to that taken by British rivals Monzo and Starling.

What sets it apart from those competitors, according to Stalf, is the N26 app’s slick design and simple user interface. The company’s chief said that its app was recently featured by U.S tech titan Apple on its German website while promoting the new iPhone models.

Building a ‘global bank’

The digital banking challenger’s arrival in Britain comes at a trying time for the country’s relationship with the rest of Europe.

Politicians in both Westminster and Brussels have been engaged in tense negotiations about their future ties over trade, security and more as the U.K. prepares to withdraw from the European Union in March 2019.

Both sides are trying to secure a deal that will see at least some alignment between Britain and the EU continuing beyond Brexit, but an overhanging risk that the two sever ties without an agreement remains worrying for businesses.

Asked whether N26′s expansion to the U.K. was timed with Brexit in mind, Stalf said: “I think that wasn’t really related to the Brexit, and if you look at our rollout, we’ve been to Germany, Austria, then we rolled out to all the euro markets in Europe, and now we’re rolling out to the first multi-currency market in the U.K.”



He added that N26 was looking to broaden its footprint to other European countries that do not use the euro, like Sweden and Denmark, before it enters the U.S.

And N26 is a bank with global ambitions, its chief said, adding it could enter markets beyond Europe and the U.S. “in the next maybe 12 to 24 months.”

“I think the U.K. is the next step, but I think what we think is really about building a global bank the world loves to use which is really kind of our mission.”

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