This German startup wants to be your bank (without being a bank)

BERLIN -- “That is f*cking clever,” said Ben Floyd, 33, as we sat in a trendy cafe in Berlin’s Mitte district. Floyd, who runs a digital agency in London, was showing me some features of N26, the mobile application he now uses as his bank in Germany.

As he took me through the process of doing a money transfer, he realized that the numbers on the pinpad changed position every time he was asked to enter them, making it virtually impossible for any onlookers to guess his pin.

“These kinds of unexpected pleasures are what really make the experience so cool,” he said.

It’s not the kind of enthusiasm you’d normally associate with banking, but when you compare it with the bureaucratic experience of traditional banks in Germany, N26 is lightyears ahead. Floyd’s wife, Caroline, was transferred to Berlin a few weeks ago, and, according to Floyd, the process of setting up a bank account at one of Germany’s biggest banks was “a nightmare."

"It took three or four weeks, and then her card didn’t even work," he said.

Original image has been replaced. Credit: Mashable

Original image has been replaced. Credit: Mashable

Instead, Caroline decided to try N26, a mobile bank that, since launching in 2014, has become the fastest growing bank in Europe, boasting some 200,000 customers.

The process of setting up an account was so easy that Floyd, who will be commuting between London and Berlin, decided to try it out too.

“I signed up on Sunday night in London, and by the time I got to Berlin on Wednesday, my card was waiting in the postbox,” he said.

This kind of seamless experience is exactly what N26 co-founder and CEO Valentin Stalf set out to achieve when he started the company three years ago. At the time, Stalf was working at an investment bank in Switzerland, but said he wanted to do “something vision driven, something that could actually disrupt the financial system.”

Original image has been replaced. Credit: Mashable

So in 2013, Stalf moved to Berlin and joined the city’s rapidly growing group of tech entrepreneurs. His original vision for the application was as a prepaid card for teenagers, which their parents could monitor and top-up through the app. Once they launched, however, Stalf and his team realized that, increasingly, adults themselves were using the application and the card as a kind of mobile bank.

In 2014, Stalf decided to change tack and transform the company into a mobile banking application geared toward adults who have grown up in a digital age.

“We wanted to create a complete mobile and paperless experience,” he said.

Mobile apps have become an increasingly important part of banking. Payments via apps in the UK climbed to 54 percent in 2015, with a combined value of £347 million ($457.8 million), according to the Guardian.

Still, Stalf said he wanted to set himself apart from traditional banks by being mobile first. “We were constantly asking ‘How does it look?’ and ‘How does it work?’”

According to Stalf, setting up an account using their app takes just eight minutes. Customers download the app and enter their details (name, email address etc.). The customer’s identity is verified through a video call in which the user displays their passport or other ID, and, after providing a shipping address, a MasterCard debit card is shipped within three or four days.

Everything then occurs through the mobile application: Checking your balance, transferring money, blocking or cancelling your card, ordering a new card -- it all happens in the app. Every transaction also gives the user real-time push notifications. You still, of course, need cold hard cash: N26 lets you withdraw and deposit money from any ATM, as well as numerous retail stores across Germany.

The only drawback of the application is that, after the first five monthly ATM withdrawals, getting cash out means a 2 euro fee. Still, says customer Floyd, the cost is worth it: “I love the ease of it, the notifications when I spend things, the super clean user experience.”

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For Stalf, developing this seamless user journey proved straightforward compared to finding a bank that would back their back-end financial services. “We phoned 20 banks with our idea -- 18 didn’t pick up the phone, two did, and one of them is now our financial partner,” said Stalf.

Soon, however, having a financial partner won’t be an issue: In July, N26 received official recognition as a licensed bank from the European Central Bank, allowing the company to operate as its own bank independently -- minus the bureaucracy of actual bank branches.

N26 is now available in Germany, Austria, France, Greece, Ireland, Italy, Slovakia and Spain. Stalf has 150 employees working in the company’s Berlin office, which, somewhat ominously, used to house a Stasi department responsible for monitoring people’s phone calls during the Cold War:

With an application that has access to so much personal financial information, there are inevitably questions over privacy and security. Stalf admits that privacy is always an issue, especially in Germany, but he is adamant that, by making banking more user-friendly and transparent, “the customer experience is more trustworthy. We’re explaining the benefit of storing data.”

The company has grown rapidly, but Stalf said N26 is just getting started. They’ve launched a feature allowing users to develop an investment portfolio, and are planning to provide insurance services and increase consumer credit limits.

As for the future of banking itself, Stalf said companies like N26 are just scratching the surface. “The banks of the future will look completely different,” he said. “Bankers will disappear, technology people will be the bankers of tomorrow.”