N26: a pioneer of the mobile banking industry in Europe

N26 is a German digital bank with over 5 million customers in 25 countries that provides all its services through the mobile app. Since the company was founded in 2013, it has totally raised close to $800 million at a valuation of $3.5 billion. AIN.TECH tells the story of the highest valued and most well-funded German fintech.

Bank for teenagers

N26 originated from fintech startup Papayer, which was founded in 2013 in Vienna by the entrepreneur Valentin Stalf, who built various businesses for German startup incubator Rocket Internet, and law PhD student of the University of Vienna Maximilian Tayenthal. Papayer’s product was intended to be a prepaid credit card for teenagers and the app that must have allowed parents to manage their kids’ expenses.

N26 co-founders: Valentin Stalf and Maximilian Tayenthal

The startup received a Pre-Seed investment after an early pitch at Axel Springer’s Plug & Play accelerator program in the amount of €25,000, and later $2 million Seed funding. The proceeds were used for the further development of the initial version of the bank’s app. But, the founders discovered that the parents were more engaged with their product than teenagers, using the app for tasks such as budget monitoring and peer-to-peer money transfers. 

So they changed the model and the name, and in 2014, NUMBER26 was born. Stalf and Tayenthal moved their office from Vienna to Berlin and formed a cooperation with Wirecard to offer the MasterCard for their adult customers. After the launch of NUMBER26 mobile-first bank app at the end of January 2015 in Germany and Austria, it became instantly popular gaining 8,500 banking clients with more than 15,000 on the waiting list. 

Such features as opening an account within only 8 minutes, individual security settings including the opportunity to block or unblock your card at a click, convenient financial management tools and push notifications for every transaction made it attractive for customers and promising for investors. That same year, the US investor Peter Thiel’s VC fund Valar Ventures led a $10.6 million Series A round the digital bank closed for its growth and expansion.

N26, a bank with #nobullshit

In 2016, the company again rebranded into N26 to make it more appealing to its rising international customer base, as they entered French, Greek, Irish, Italian, Slovakian and Spanish markets. That same year, they got their own banking licence, becoming the first European mobile bank. It allowed N26 to build its own financing products, such as savings accounts, investment products, credit offerings, insurance contracts and to enter Belgium, Estonia, Finland, Latvia, Lithuania, Luxembourg, Netherlands, Portugal and Slovenia.

Operating as a fully-featured bank in 17 countries with over 850,000 customers, N26 was, as TechCrunch characterised it, “a well-designed native app – it’s like drinking a glass of ice water in hell.” So the new investors appeared quickly. In May 2018, the digital bank raised $160 million Series C funding from Allianz X, the digital investment unit of Allianz Group, and Tencent, a leading provider of internet value-added services in China. The proceeds were used toward N26’s overall growth strategy and international expansion, particularly into the US and UK.

In parallel, N26 started its #nobullshit marketing campaign. The idea was to show how simple it can be to control customers’ own finances from only the smartphone, without any need to visit bank branches.

#nobullshit campaign of N26 at the Airport Berlin Tegel TXL, 2018

In July 2019, a few months after the fintech secured $300 million and launched its challenger bank in the USA, it closed a $170 million Series D round from existing investors including Insight Venture Partners, GIC – Singapore’s sovereign wealth fund, Tencent, Allianz X, Peter Thiel’s Valar Ventures, Earlybird Venture Capital and Greyhound Capital. This round pushed N26’s valuation to $3.5 billion. 

That year was eventful for N26. Besides entering the American market, fintech also opened a new TechHub in Vienna, launched its new premium product N26 You, and introduced Shared Spaces, flexible sub-accounts designed to make banking even more social, easy and shareable, and surpassed the 5 million customer mark. 

“In these turbulent times, digital banking is no longer a thing of the future, but a part of everyday reality. With 5 million customers today, N26 is just at the beginning of their journey to transform the face of banking globally,” James Fitzgerald from Valar Ventures maintained after the fintech for the second time extended its Series D round to $570 million in May 2020.