After Wirecard scandalGerman financial watchdog BaFin has began taking a closer look at young fintech startups that desired to grow at a fast pace – higher to be protected than sorry.
Especially, N26a banking startup based in Berlin that he founded a whole bunch of tens of millions of euros and quickly became a unicorn, it has had a complicated relationship with BaFin for several years. The regulator imposed a cap on recent registrations as a sanction aimed at forcing the startup to enhance its anti-money laundering processes.
This week, N26 announced that BaFin will lift the growth cap from June 1, 2024. The cap was originally set in 2021 at 50,000 recent customers per 30 days. At the end of 2023, it was barely increased to 60,000 customers per 30 days.
Last week, as a part of the end of this surveillance period, BaFin fined N26 9.2 million euros (about $10 million at today’s exchange rates) for shortcomings in reporting suspicious activities that occurred in 2022. N26 expected this penalty because it waived provisions in its 2022 financial statements. According to the company, as of 2022 also invested €100 million to enhance its compliance team and processes.
“We welcome the confidence of our regulators and will continue our close exchanges in the future. In recent years, we have managed to make significant progress in preventing and combating money laundering and financial crimes,” N26 co-founder and CEO Valentin Stalf said in a statement.
As this restriction severely hampered N26’s growth, the company adjusted its technique to focus on its existing customers. In Spain and Germany, N26 offers savings accounts. In some markets, users may obtain a loan of as much as €25,000 through the app.
The company has also added cryptocurrency and stock trading in partnership with Bitpanda and Upvest, respectively. You may even enroll for insurance products from inside the app. All of those additions are intended to extend average revenue per user.
In 2023, N26 recorded a lack of €100 million, but the situation is expected to enhance this yr due to higher rates of interest, recent revenue streams and the removal of the registration cap. The company said it expects to attain “monthly profitability” at some point in the second half of 2024.