Fintech/Interview/

‘N26 isn’t for everyone’: CEO Valentin Stalf addresses neobank’s culture struggles

In a rare interview, the N26 CEO and cofounder addressed the $9bn German fintech’s plan to deal with its internal blind spots, as well as its struggles with compliance

By Amy O'Brien

Despite compliance headaches and struggles with retention, the CEO of one of Europe’s largest neobanks says it’s still hiring amid the tech downturn, with plans to foray into crypto within weeks.

“I think we now have quite a strong C-level team, but getting there obviously means you have people churning on the way,” N26’s CEO and cofounder Valentin Stalf told Sifted, in response to a question about the digital bank’s higher than average employee churn.

“That’s part of the game, and N26 is not for everyone.” 

The comments — made in an interview with Sifted at Money 2020 in Amsterdam — mark a departure from N26’s previously chilly approach to the press. Stalf has rarely spoken to the media on record, and declined requests for interview on Sifted’s recent reporting.

As one of Germany’s most hyped tech companies, media coverage is something N26 can’t escape. Part of the early European neobank crew, N26 has 7m customers and a $9bn valuation — a larger market cap than Germany’s second-biggest listed bank, Commerzbank. 

But in the past couple of years, the once high-flying digital bank has pulled out of the US and UK, and come under fire from regulators over its struggles with anti-money laundering rules. 

Global expansion on hold 

Stalf said the company plans to increase staff to around 1,700 by the end of this year, from 1,500 now. It’s a hiring plan that sets it apart from many fintechs that are getting leaner right now — and he was upfront about N26’s plans to poach people that are laid off elsewhere. 

“It’s a huge opportunity for us now that a lot of bigger tech companies are cutting headcount as it frees up a lot of great talent,” Stalf said.  

Rather than focusing on boots on the ground in further geographies, however, these hires will be concentrated across N26’s existing eight offices. The bank has made high-profile retreats from both the UK and US markets in recent years. 

For now, Stalf said N26 plans to go deeper into Europe by fending off its neobank competitors and launching new products, before a second attempt at global expansion once the bank has “reached 15-20% market share in Europe”, up from single digits at the moment. 

Crypto trading

The product that N26 thinks its customers want and it hasn’t given them yet? Investments and savings. Currently N26 can put their money in different savings pots but they’re not paid interest, and the fintech offers them no way to invest in equities or crypto. 

So, as crypto stocks plummet to record-breaking lows, N26 is following in its rival Revolut’s footsteps and launching a crypto trading platform —– which Stalf says the fintech will bring to market “in the next couple of weeks”. 

As the global crypto market cap is down to a twelve-month low, does Stalf worry for N26 customers’ security? 

“I see crypto as just another asset class. If you trade crypto on our platform, you don’t have access to the blockchain — so there’s not much you can do in terms of criminal activity,” he said.

“I think it’s a good time to launch while the crypto market has lost so much, to make sure that customers pick up the education around how you can lose money — in a way they would have missed over the last couple of years.” 

Addressing the exodus

N26 has seen a slew of high-profile departures in the last two years, including one which left the digital bank with no full-time women at the C-suite level, and it ranks among the worst neobanks in Europe for women in management positions. 

Stalf acknowledged that the bank “can still do better” and “need[s] to work on bringing in more female leaders”.

He said the bank was working to put more effort into recruiting, doing bias training and changing how it writes job descriptions.  

Regarding the broader culture at the company, Stalf blamed a hiring freeze during Covid for the “mood not being too good”, but said that the company had now taken steps to improve employee sentiment.

When asked what these were, he cited one change: giving all employees access to an employee stock option plan to give them a share in the company’s success as part of its Series E raise last October. Previously only around 70% of the company had options. 

Compliance headaches

The neobank has also ramped up compliance efforts after facing a fine in Germany and even a new client ban in Italy from regulators over “shortcomings” in its anti-money laundering (AML) systems. 

Asked whether AML and compliance was a blind spot for the company, Stalf said the bank “should have invested more into education of the regulator and communicating better in some of the regulatory surroundings”.

“We had a banking licence for five years before having any discussion with the regulator,” he said. “And then from my perspective, a couple of crises happened with Wirecard and Greensill and suddenly the regulator paid more attention to new business models.” 

But N26’s increased attention to compliance has also caused some headaches. In April, more than 100 N26 customers were left unable to access their money after the bank over-reached with anti-fraud measures. At the time, N26 posted a statement on LinkedIn apologising and said: “Each new approach to address financial crime online may not always be perfect.”

“The learning… is instead of closing accounts, you need to find different ways to verify customers”

Pressed on whether April’s unnecessary account closures were collateral from the bank’s efforts to clamp down on bad fraud accounts, Stalf admitted that the bank needed to improve its KYC (Know Your Customer) processes. 

“I think the learning from the crisis that we had a couple of months ago is really instead of closing accounts, you need to find different ways to verify customers,” he said.

Nevertheless, Stalf played down the numbers of people affected, and seemed to suggest only around five of the 100 account closures were actually false positives.

“Of course it’s super shitty if you’re one of those five that have a cancelled account — but by now we’ve already given them the option to reopen their accounts with a simple click within the app.”

Amy O’Brien is a reporter at Sifted. She tweets from @Amy_EOBrien and writes our fintech newsletter — you can sign up here

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