Germany’s financial watchdog BaFin started to pay more attention to young fintech companies that wanted to grow quickly after the Wirecard scandal. Ultimately, it’s crucial to prioritize safety over regret.
N26, a Berlin-based banking startup that raised hundreds of millions of euros and quickly became a “unicorn,” has had a rough time with BaFin over the past few years. The regulator put a limit on new signups as a punishment to get the startup to improve how it fights money laundering.
Since this week, N26 has said that BaFin will lift the growth limit on June 1, 2024. In 2021, they set that number at 50,000 new customers per month. By the end of 2023, the number had increased slightly to 60,000 new customers per month.
As part of the end of this review time last week, BaFin fined N26 €9.2 million, which is about $10 million today, for failing to report suspicious behaviour that happened in 2022. When it set aside money in its 2022 financial accounts, N26 planned for this fine. The company also says that since 2022, it has spent €100 million to improve its compliance team and systems.
“It makes us happy that our regulators trust us, and we will keep in touch in the future.” “We have made a lot of progress in the last few years in stopping and fighting money laundering and other financial crimes,” N26 co-founder and CEO Valentin Stalf said in a statement.
Because this limit made it very hard for N26 to grow, the company changed its strategy to focus on the people it already had. N26 has bank accounts in Spain and Germany. In some places, the app can also help people get loans of up to €25,000.
Together with Bitpanda and Upvest, the company has also traded in crypto and stocks. You can even use the app to sign up for insurance. These changes aim to increase the average income per person.
In 2023, N26 said it lost €100 million. With higher interest rates, new revenue streams, and a lifted signup cap, things should improve this year. Someone predicted that the business would achieve “monthly profitability” in the second half of 2024.
