Berlin-based digital financial institution N26 is pulling out of the UK, blaming the nation’s determination to go away the European Union final month.
The monetary startup, which has raised $670m up to now, mentioned on Tuesday that it’ll “be unable to function within the UK with our EU banking licence so we will probably be leaving the UK and shutting all accounts” in April.
On the face of it, the transfer is a high-profile casualty of Brexit and can add to fears concerning the transfer to go away the political bloc hurting London’s tech and startup ecosystem.
However trade specialists have instantly began to query if Brexit was the principle cause for the transfer, or if weak efficiency was additionally in charge amid powerful competitors within the UK digital banking market.
Firstly, N26 knew the Brexit was coming. It launched in Britain in October 2018, over two years after the Brexit vote and 6 months earlier than the UK was initially scheduled to go away the EU. Final October, it even reassured customers in a since-deleted weblog that they’d “not expertise any adjustments… whatever the 31 October end result.”
Furthermore, knowledge compiled by Sifted in December recommended N26 was struggling to catch up within the UK, after increasing out of Germany.
Regardless of having over 5m prospects globally, amongst British fintechs, N26 ranked far behind its native friends like Monzo and Revolut by month-to-month lively customers (MAUs), coming in 19th place.
Whereas N26’s late arrival within the UK went some strategy to explaining its smaller consumer base, obtain knowledge in December ranked N26’s app in 16th place for the fintechs; a metric which in the end contradicted its “high-growth” narrative.
Sarah Kocianski, head of analysis at fintech consultancy 11:FS, mentioned on Twitter following the N26 announcement: “No-one within the trade is de facto shocked by this. Why hassle getting, and sustaining a license (together with regulatory capital) in a market the place you face stiff competitors, when you may go many different locations the place you don’t?”
The publish mortem
N26 doubtless struggled to distinguish itself from its friends in an already heavily-populated digital market.
“Why ought to I financial institution with N26 versus one other one? That’s the query that we have to reply, very clearly. That’s my largest problem,” Will Sorby, N26’s UK basic supervisor, admitted to Sifted final yr. Their technique appeared to be a piece in progress.
N26’s user-experience scores additionally put it behind its three UK friends, creeping under 4* on common.
It’s additionally doable UK prospects had much less urge for food to pay for N26’s Premium providing than their German neighbours. For context, 30-35% of N26’s prospects worldwide are Premium customers, however the agency declined, when approached in December, to reveal what share of its UK userbase have been paying for his or her accounts and producing income.
On listening to the information, one senior government at a competitor digital financial institution informed Sifted:
“When you go all out for progress with out understanding methods to be worthwhile you danger operating out of money. What it is advisable to purpose for is sustainable progress,” they mentioned.
Nonetheless, simply two months in the past, N26 remained resolute that it was in a robust place.
“Having solely set out within the UK simply over a yr in the past we’re nonetheless solely at the start of our mission to deliver a greater, extra personalised banking expertise to UK prospects,” Will Sorby, N26’s UK basic supervisor, informed Sifted on the finish of final yr.
Right this moment, the agency claimed geo-political instability was the rationale it was reducing quick its UK plans.
“With the UK having left the EU, we’ll sooner or later be unable to function within the UK with our EU banking licence, so we will probably be leaving the UK and shutting all accounts. We’ve made cautious plans to assist prospects, and are sorry to have to go away,” it commented on Twitter.
The UK isn’t the N26’s solely high-risk worldwide endeavour. N26 has additionally expanded into the US, the place it’s seeing extra spectacular progress.