N26’s latest results show time is running out for the bank to fix itself

Increasingly up against smaller national players solving local problems and Revolut’s better developed, more aggressive approach, N26 finds itself in a banking no-man’s land that it will find difficult to escape, says GlobalData, a leading data and analytics company.

Katherine Long, Banking Analyst at GlobalData, comments: “Though N26 has recently reached seven million customers, its latest set of results should be no cause for celebration. Net losses for the bank in 2019/2020 were €110m ($135.3m), up 50% from €73m ($90m) in 2018/2019 and significantly higher than €32m ($40m) the year before.

“Of the bank’s major mistakes, the biggest has been to pursue an undifferentiated strategy towards multiple different markets. Its mile wide, inch deep approach has failed to take as many customers as Revolut’s more tailored proposition, while competition in more crowded markets, such as the UK, has forced out N26 altogether.”

Research from GlobalData’s report, ‘Beyond the Hype: Insight into Digital Challenger Banks’ has shown that the bank’s previous attempts to combat this problem by differentiating itself has merely created a messy combination of product and features. This includes personal loans being available in only Germany and France, transparent cards that customers are sometimes afraid to show off for security reasons and an instant payments tool that does not work with non-N26 customers. This has resulted in an overall proposition that typically offers less value than its main rival, Revolut, who itself out-manoeuvred N26 on almost every level.

Additionally, having made the similar mistakes as UK challenger Monzo and ex-bank Xinja regarding not focusing on a range of essential revenue generating products, N26’s new strategy towards ‘increasing the bandwidth of banking revenue streams’ is needed now more than ever.

Long adds: “N26 appears to be doubling down with a more aggressive expansion, wanting to add more products and services to customers, as well as offering accounts in the Americas. In particular, the bank is likely to try to tap into the lucrative US interchange fee market by offering credit cards to customers as digital bank Chime does. These new revenue streams matter for the bank as N26’s distributor model makes the propensity to generate revenue either from overdrafts or marketplace loans painfully small.

“However, with increasing global competition for new customers, N26 needs to take a more tailored approach to new markets that generates meaningful sources of revenue. Failure to do so will leave it stuck in its current no-man’s land position and vulnerable to being targeted by rivals up on more sustainable ground.”

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