Peter Thiel’s Favorite Neobank – N26 – Receives Another $100 Million Investment
Initially reported by CNBC on May 5, 2020, Germany-based neobank N26 is another FinTech investment success in the midst of global economic turmoil. Despite the recent heated rhetoric toward China, both Chinese and American investors joined forces to secure the additional $100 million funding.
N26 as the Latest Peter Thiel Project
In the last couple of years, we have seen an accelerated investment in banking services befitting the modern digital age. While some poured their hopes exclusively into decentralized systems facilitated by cryptocurrencies, entrepreneurs with a more realistic and practical outlook diligently worked on elevating banking in parallel to traditional banks.
One such entrepreneur is Peter Thiel with his Valar Ventures. Together with Valentin Stalf and Maximilian Tayenthal, he co-founded the N26 neobank in 2013.
Deriving its name from a 26-sided Rubik’s Cube, N26 receives the latest $100 million investment as a continuation of last year’s Series D investment round. To date, N26 has managed to raise an impressive $770 million.
Thiel has a reputation as an exceptional pioneer of the FinTech sector. Not only did he co-found N26, but also Paypal, and launched his own Palantir Technologies, a big data company that continues to aid President Donald Trump in numerous ways.
N26 as the Vanguard of FinTech Banking
With such connections at the highest places, N26 is positioning itself as one of the top neobanks in the FinTech sector. Headquartered in Germany, N26 already operates in the entire Eurozone, US, and has plans to spread its operations to Brazil — a country already seeing increased FinTech adoption. N26 only suffered a blow when Brexit was finalized, forcing them to leave the UK after just 18 months due to not having a local banking license.
Within the US, N26 managed to accrue 250,000 customers since July 2019. Competing against other neobanks such as Revolut, Starling, and Monzo, N26 prides itself in speedy financial services, intuitive mobile app banking, and waiving any additional foreign exchange fees if the spending is done abroad. Currently, N26’s biggest neobank challenger is Chime, with its 5 million customers in the US alone. A number that N26 can only claim globally.
As a neobank not originated in the US, N26 encounters obstacles not present for its competitors. First, it doesn’t have a federal bank charter, so it had to partner with Axos Bank. Second, its launch in the US faltered due to initial limitations on ATM withdrawals. As of yet, N26 doesn’t dabble in credit cards or lending but focuses on user conveniences in the form of shared accounts, early salaries, feeless transactions, continuous country expansion for Google Pay, and in-store purchases.
Challenges for Neobanks
Anyone familiar with marketing, as it relates to human psychology, would come across a data point that most customers are not prone to change. When it comes to financial services, this is especially applicable. As a result, all the aforementioned neobanks face the same challenge – getting people to switch their primary accounts from the established banking behemoths such as Fidelity Investments or TD Ameritrade.
Case in point, N26’s other direct competitor, Monzo, recently reported that only 30% of its customers use Monzo as a primary banking account. Based on this data, we can surmise that neobanking is still in a transitional stage, serving as auxiliary financial services for the younger demographic that primarily uses smartphones as their go-to platform.
Have you already made a free account with neobanks like Revolut, Monzo, Chime, Starling, or N26? Would you feel confident in making a permanent transition to such mobile banking? We want to know what you think in the comments section below.
Image courtesy of City AM.