N26 Growth Accelerates as Losses Widen Amid Bafin Scrutiny
- Published: 11th October 2022
N26, the German online bank, saw its losses widen in 2021 as the company increased its investments in growth and compliance.
In a report, the German company said that its net revenue surged by 67% to 120.6 million euros in 2021. the firm made 72.1 million euros in the previous year. This growth was driven by its subscription, high-interest rates, and more customer engagement.
The firm’s losses widened to 172.4 million euros. As a result, the company made the strategic decision to refocus on its German and European businesses by exiting the US and UK markets. Brazil is one of its biggest international markets.
Therefore, analysts believe that the company’s business will see higher revenues in 2022 because of the substantial rate hikes. The European Central Bank (ECB) has implemented several large rate hikes in a bid to contain the soaring inflation.
The biggest challenge for N26 is that it has been in the spotlight by regulators. In 2021, Bafin ruled that the company should limit its growth because of risk management challenges. This means that it can only offer a maximum of 50k customers per month.
Challenger banks struggling
N26 is not the only fintech company to stumble this year. Nu Holdings, the Brazilian digital bank backed by Warren Buffett has seen its stock crash by more than 50% this year. It now has a market cap of over $19 billion.
Meanwhile, Klarna, which was the most valuable startup in Europe, raised money at a $7 billion valuation. At its peak, it had a market cap of over $45 billion. Ally Financial, a publicly traded online bank, has lost over 40% of its value.
N26 is one of the most well-funded European companies. It has raised over $1.7 billion at a valuation of almost $10 billion.
Crispus Nyaga is a full-time financial analyst and trader with more than 7 years in the industry. He has been fortunate to work for several fintech companies, mostly from Europe, Asia, and North America. His work is published in leading platforms like Seeking Alpha, Invezz, rkdream.com InvestingCube, Capital.com, and Marketwatch. Crispus operates from a private office in Nairobi.