Fintech N26 pulls out of US as it abandons global ambitions

Online bank N26 is pulling out of the US, an abrupt reversal of strategy for the once high-flying fintech now under fire from German regulators.

The Berlin-based lender, which was valued at €7.8bn last month, said the decision would allow it to “sharpen its focus on its European business”.

Although N26 only had a fledgling operation in the US, the market was key to its global ambitions and its exit follows a decision early last year to quit the UK.

The bank, which counts Peter Thiel’s Valar Ventures and Li Ka-shing’s Horizons Ventures among its backers, said that its 500,000 customers in the US could use their accounts until the middle of January.

The retreat comes a week after Germany’s financial watchdog BaFin imposed a draconian cap on N26’s growth, banning the bank from taking on more than 50,000 new customers a month until it had put in place “a proper business organisation” and addressed “risks to the institution’s operational resilience”.

The restriction follows a public rebuke from BaFin in May for poor anti-money laundering controls and a €4.25m fine for the late filing of suspicious activity reports. In an unprecedented move, BaFin has mandated two special commissioners to oversee the bank’s efforts to fix the problems.

Pulling out of the US was a “painful” decision, according to a person familiar with the matter, but was an acknowledgment that the investment and management time required was leaving N26 too stretched.

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Leaving the US is unrelated to the caps on customer growth BaFin imposed in Europe, where N26 will for now only be able to accept less than a third of the customers each month that it has been. The regulator’s ban did not extend to N26’s US operations, according to a person familiar with the matter.

Following its US exit, the online bank will operate in 24 European countries, where it has about 7m clients. The fintech said on Thursday that it would focus on “strengthening its core business operations in Europe” and was considering expanding further into eastern Europe.

However, abandoning the US underlines how N26 has had to rein in global its ambitions. Chief executive Valentin Stalf told the Financial Times in 2019 that “our goal is ultimately to do for finance what Spotify did for music and Uber did for mobility”.

N26 did not have its own banking licence in the US but was using a local lender, Axos Bank. In August, the fintech said it was “proud of everything we’ve accomplished” in the US and announced that it would switch to another local banking partner.