N26 is leaving the UK: is it really about Brexit?

In something of a volte-face the Berlin-based digital-only bank N26 says it will leave the UK and its 200,000 customers owing to the UK’s own decision to leave the European Union at the end of 2020.

Regardless of the reasoning, the move is a huge blow for its customers and a big surprise for everyone else following the fintech boom in the UK and across Europe. N26 is well funded. Its last funding round hit $170m and it makes no secret of its growth-over-profits strategy. So what is going on? 

The firm also launched into Brexit-Britain in 2018, less than 18 months ago, and five months before the UK was originally due to leave. Its CEO and co-founder Valentin Stalf said at the time as to why they had launched in the country: “The UK is one of the most digitally advanced countries in the world.”

More recently it even sought to reassure its customers (in October) in the run up to last year’s election that it would hold strong in the UK in a blog post that has now been deleted.

In the post, of which AltFi has seen a cached copy, N26 said: 

“While we can’t predict what the 31 October will bring, we want to reassure you that we’ve got measures in place to ensure it’s as painless as possible in terms of your N26 account, no matter what the outcome. The good news is that you, as a N26 customer in the UK, will not experience any changes to the way you can use your account - regardless of the 31 October outcome.”

It went further later on saying:

“Should there be an extension, or an agreed deal, your account will continue unchanged.If the UK leaves the EU without a deal, the only material change that will impact you, is that your money would be protected by the Financial Services Compensation Scheme (FSCS) here in the UK, rather than by the equivalent scheme run by BaFin (the German financial regulator).” 

Lastly, it finished by adding: 

“While these are unsettling times, they will not distract us from our number one priority: delivering a Mobile Bank the world (and our UK customers!) love to use.”

AltFi caught up with Will Sorby, N26’s UK managing director, last August. Sorby said that growth was going well with its latest numbers around 200,000 users and high active engagement of its app - the firm’s chosen metric - on a daily basis. 

Numbers don’t appear to have ticked up much over the past year, especially compared to rivals such as Monzo and Starling Bank who have signed up hundreds of thousands of customers each over this period.

N26 says that it will not be able to passport via its German banking license into the UK and that all other options were too costly but many experts have questioned whether the UK’s digital banking market has become too crowded and competitive.