Since the end of the various confinements, the return of activity and household consumption has not benefited N26. The German neobank’s revenues have only increased by 50% between 2020 and 2021, while from one year to the next, bank cards have regained their Olympic form with an entire economy and businesses reopening. N26 has not benefited from all this as its number of users has hardly changed. It would seem that many, curious to open a free account, do not really use N26 anymore.
Of its 8 million customers, only 3.7 million generate revenue. In comparison, two years ago, they were 3.1 million to be profitable, thanks in particular to the paid accounts to which they subscribed. From 3.1 to 3.7 million paying customers in two years, we have seen much more dizzying, especially for a fintech that was aiming for tens of millions of customers before long. N26’s model and situation seem to be stagnating the company. In any case, this is what emerges from a press release published today.
N26 is not profitable and widens its losses
The evolution of the number of customers is not the only problem. In the accounts, the neobank widens its losses. They were 151 million euros in 2020, they increased to 172 million euros in 2021. Without being profitable, N26 is therefore dependent on investors to be able to find capital to continue investing and to try to raise the bar. It is not for nothing that the management of the neobank is already talking about an IPO. Such an operation could also be useful for raising funds. The most representative example is that of Deezer on the Paris Stock Exchange.
To explain its losses, N26 says it needed to invest with “structural expenses”, particularly on the “regulatory aspects” side, but the low cash flow from its model cannot be dismissed. of the main reasons. Namely that for all free accounts at N26, the neobank must cross its fingers so that customers use their credit card (so that it receives income through interchange rates). But this requires that customers do not forget their N26 card at the bottom of their wallet, and continue to fund their account.
Making the account a “main account”, in other words an account where the customer would pay his salary and use the card for the majority of his expenses, is a real problem for the neobank model. That’s why Revolut, the direct competitor of N26, has made sure to offer the same services as a traditional bank so that customers do not have to make concessions to open a Revolut account and use it as their account. major. The neobank will soon offer savings, credit, and certainly overdraft authority as well.
The barriers that have slowed down N26
A chart published by Statistics gives an idea of the gap that is widening between Revolut and N26. The British neobank, which is the most searched on Google this year, is approaching 20 million customers worldwide. In France, according to its latest figures, 2 million people have opened an account. Its sources of income are also more diversified, in particular thanks to the investments in the stock market and cryptocurrencies available from the application. While Revolut invested in its product, N26 was losing money on its deployment, again failed. As a reminder, the company had settled in the United States, to finally abandon the project and lead to the closure of 500,000 accounts.
The problems then followed in Europe with the German regulator. Due to poor management of protections against money laundering and terrorist financing, N26 was forced to pay a heavy fine followed by a restriction of its rate of monthly customer acquisition to only 70,000 per month (at this time , N26 claimed 170,000 new customers). Barriers that are very difficult to manage for a company seeking hypergrowth and which had sold such ambitions to its investors.
Faced with the constraint, the neobank became stricter in monitoring suspicious activities. With few means, overflows quickly arrived. In France, N26 is facing legal action from many disgruntled customers who had their accounts closed overnight without notice or communication from customer service.
“Governance structures, regulatory compliance framework and online fraud prevention are all areas in which N26 is investing heavily”, can we read in the press release of the establishment which seeks to take care of its image with the approach of a potential IPO. In France, it is said to be already profitable. But as we had already noticed at N26, the information published often denotes the reality of the company, which is experiencing one of the highest turnovers in Europe and which has continued to exist thanks to external investments for 9 years now.
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