N26: What's next for digital banking?

Writer Laura Campan

Tech entrepreneurs, cash-rich venture capitalists, hungry to find the next unicorn, and international delegations met in Lisbon last week for a new Web Summit’s edition. 

Undoubtedly the perfect opportunity to dive into neobanking and understand how it is closing the gap with traditional banking models alongside Wall Street Journal Finance Reporter Patricia Kowsmann and N26 Co-Founder and Co-CEO Maximilian Tayenthal.

Patricia Kowsmann started the ball rolling with the war in Ukraine and the inflation it naturally triggered. If we can easily imagine the impact it has on the IPO market and fundraising, how about neobanks? 

For N26 Co-Founder and Co-CEO Maximilian Tayenthal, being independent from external funding is key. “From the outside, we looked smarter than we actually are – probably because we closed our 900 million-dollar series e-funding round in November last year, literally a couple of days before the decline of the market. So, we are well funded.”

But how about profitability? Considering that neobanks like N26 invest their clients’ money – in Governments’ bonds for instance – and that interest rates are higher, in theory, they should start remunerating depositors.

For most digital banks, it has long been about closing funding rounds and burning the money in expansion, by getting more clients, more products and bigger teams – but the tide seems to have turned according to Maximilian  Tayenthal. “We want to become more profitable, which doesn’t mean we won’t raise additional capital but we will invest it in high-return investments, as well as reinvesting all the cashflow we get to improve our products.”

But considering the current geopolitical and economic situation, how to convince investors FinTech may be the most beautiful bride and thus seize new fundraising opportunities ?

According to Maximilian Tayenthal, it is cyclical. “When we first started in 2013, no one was interested in FinTech – investors would rather go for e-commerce and social platforms” before becoming a trendy and attractive ecosystem for investors. “Then, came the craziness of the last couple of years and now the markets are super tight.” 

But despite all these fluctuations, Maximilian Tayenthal remains confident: “There will probably be consolidation. We have never seen more inbound than what we receive at the moment.”

To be part of this consolidation, competition is key. To fulfill its hundred million customers’ ambition, N26 is thinking of how it could “get four million customers from Spuerkeess for instance, or three million from BNP – among others. For FinTechs, there is definitely a lot of room to grow.”

When it comes to acquisition targets, N26 is currently working on expanding its products’ range, like crypto trading (recently launched in Austria) and anything that could drive innovation quicker. “Crypto was a long-requested feature. But although interests went a bit down, we believe that for most of our customers, a way to reach a certain level of wealth is to invest. Crypto is the first asset category we are offering and, for some of them, could be part of a well diversified investment portfolio.”

The last word was obviously on a potential IPO – where is N26 standing? Although the company is ready to go public, Maximilian would rather “wait until the market is ready before considering an IPO”.

Credits: Web Summit Lisbon