Berlin start-up N26; A bench to fall in love with?

Valentin Stalf was just 28 years old when he decided to attack the old-established and powerful financial industry. In February 2013, the Austrian, together with Maximilian Tayenthal, founded the first smartphone-optimized bank: N26. The claim: Banking should not be annoying, they have to go fast - worldwide. In 2015, the launch with checking account and Mastercard followed. In July 2016, Bafin and ECB granted the start-up the full banking license.

This Thursday, it looks as though the two Berlin start-up founders are taking a significant step toward their goal of building a global digital German bank. Because the start-up has risen to the exclusive circle of unicorns. This is what we call young companies valued by investors with more than a billion dollars. After investors bought a share of eleven percent for 300 million, the value of the entire company can be extrapolated to 2.7 billion dollars. For comparison, investors rate the Berlin start-up higher than the third-largest listed bank in this country, the Wiesbaden Aareal Bank, which has been offering real estate financing for almost a century. On top of that, thanks to the new round of financing, N26 is the most valuable financial technology company, in short Fintech, Europe.

It is not surprising that international investors pump millions into the still young company. Because N26 is one of the few apps from Germany, the large, international appeal. "If a start-up from Germany currently has the potential to revolutionize banking worldwide, then it is N26," wrote Frank Thelen, a well-known Internet pioneer and investor from the TV show "The Cave of the Lions," recently in the "Handelsblatt ". Founder Stalf recognized at an early stage that the stale financial industry has to adapt to our present time and needs.

Start-up wants to become the global market leader

In fact, the smartphone has long been our daily companion, but still many people go to a bank branch to make a transfer. It seems that N26 has managed what classic financial institutions struggled with: the app is intuitive, easy to use and much fancier than the competition. N26 does not use a costly branch network and does not have an outdated IT infrastructure. This makes the checking account much cheaper than the classic banks. According to N26, the bank costs a customer just one-sixth of what traditional banks spend.

The digital bank claims to radically tailor its account model to the needs of a young, digital-affine target audience. Currently, she advertises to customers with a large poster campaign in main stations, the bank's slogan: "The first bank you'll love."

But consumer advocates fear that the company's rapid growth could have come at the expense of security. Several months ago, several "Business Week" testers found that N26 customers could open an incorrect pass account without the bank noticing. Financial supervisor Bafin therefore contacted the bank, as accounts under a false name are often used by criminals to launder or illegally transfer money.

Also dealing with the customer, N26 had already taken criticism. In 2016, for example, the bank caused a sensation when it quit the accounts of hundreds of clients - allegedly because they had withdrawn their money at the machine too often.

But it seems as if these stories have not hurt the bank so far: More than one million customers N26 has now in Germany. And this year alone N26 boss Stalf wants to double the number of customers. Also globally, the company wants to become the market leader in mobile banking. N26 is already active in 24 countries, soon followed by the USA, Australia and Brazil.

But in the long run, expansion and many customers alone are not enough to satisfy investors and justify the billions in valuation. Because like every bank N26 has to make money. And there it still hangs. The digital bank is currently picking up money on card transactions, offering paid premium accounts, and wanting to conveniently sell customers other financial products, such as funds and insurance, through the app.

This year, the company wants to be profitable. If everything goes smoothly, then the preparations for an IPO could begin.