News

May 28, 2024

N26 growth limits lifted by German financial regulator

In 2021, the German neobank was restricted to onboarding 50k new customers each month

German financial regulator BaFin is lifting the growth restriction it placed on neobank N26 over concerns around money laundering and financial crime — leaving it free to onboard an unlimited number of new customers from June onwards.

The limits, which have been in place for two and a half years, have stalled the Berlin-based bank’s growth and led it to spend over €100m on compliance over the last two years.

The growth cap was imposed by BaFin in September 2021 — along with a €4.25m fine — for N26’s failure to install effective money-laundering controls. At first, the bank’s growth was limited to 50k new customers a month and later loosened to 60k customers a month in December 2023. Before the growth cap, N26 was onboarding 170k new customers per month. On Tuesday last week, BaFin announced a further €9.2m fine for N26 failing to report suspicious activity in 2022.

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In a statement today, N26 CEO Valentin Stalf said: “We are pleased about the trust of our regulators and will continue our close exchange in the future. In recent years, we have been able to make significant progress in preventing and combating money laundering and financial crime.”

Tackling financial crime

In 2022, N26’s losses increased by 24% to €213.4m in part due to spending on regulatory compliance, the bank said at the time.

Measures it has implemented to combat money laundering and financial crime include intelligence-based models that analyse the fraud potential of individual customers before they open an account and self-learning transaction monitoring systems that protect the company's customers by detecting suspicious activity.

In an interview with Sifted earlier this year, Stalf said that the growth cap taught him that you can’t cut corners when it comes to working with national regulators.

“If you want to see something positive about the restrictions we have, we now have a really proactive relationship with the regulator,” Stalf said at the time. 

“And I think going forward as a leader in European fintech and neobanking, we just need to accept that we need to be fulfilling regulation 200%.”

Looking forward 

N26 halved its losses to €100m in 2023, according to company figures. It is yet to release detailed financial results for last year but has said it expects gross revenue to have climbed 30% to €300m due to increased account usage and customer activity.

In January this year, N26 launched its long-awaited stocks and ETFs trading product in Austria and rolled it out to Germany last month.

The company expects to reach monthly profitability in the second half of 2024.

Miriam Partington

Miriam Partington is a reporter at Sifted. She covers the DACH region and the future of work, and coauthors Startup Life , a weekly newsletter on what it takes to build a startup. Follow her on X and LinkedIn