Number26, German Banking Start-Up, Expands Across Europe
Would you trust a start-up to look after your money?
That’s the question a new generation of banking-focused tech companies is asking potential customers, as they hope to steal people away from traditional banks.
The latest fledging company to try its luck in this crowded market is Number26, a Berlin-based start-up whose backers include Peter Thiel’s Valar Ventures and Axel Springer, the German publisher.
On Thursday, Number26 announced it had expanded its mobile-only banking service to six European countries, including France and Spain, adding to its current offerings in Germany and Austria, where the company has a combined 80,000 users.
“All these markets have one thing in common,” said Valentin Stalf, 30, the start-up’s co-founder. “They are some of the most-outdated banking markets in the world.”
Like financial start-ups such as GoBank and Moven in the United States, which have focused on providing services through smartphone applications and often do not have banking branches, Number26 has targeted younger customers who have grown up surfing the web and do not have decades-long ties with traditional banks.
Number26 uses tools such as providing push notifications on smartphones when banking transactions are completed, guaranteeing free cash withdrawals anywhere in the world and teaming with retailers in Germany to let customers withdraw and deposit cash. A similar service will be introduced next year in the company’s new markets.
To comply with Europe’s tough banking rules, the start-up has also teamed with a traditional financial service provider, Wirecard Bank, so that customers’ deposits are protected, up to a limit.
“We see ourselves as a Europe-wide company,” said Mr. Stalf, who plans to roll out more sophisticated banking services, like overdraft facilities and savings products, next year. “For 18- to 35-year-olds, it’s normal to do everything on their mobiles.”
Still, banking experts say it has proved difficult for these banking start-ups to win over skeptical customers, who, despite widespread anger aimed at traditional banks, have yet to move over in big numbers to these often unproven tech companies.
That reluctance is particularly apparent in Europe, where traditional banks like Barclays of Britain and Deutsche Bank of Germany have weathered scandals to remain people’s primary banking options.
In Britain, 7.9 percent of individuals switched their bank accounts to new start-ups and other traditional players last year, up just slightly from 7.2 percent in 2013, according to industry statistics.
Tech start-ups also face growing competition from traditional banks that are slowly waking up to the threat from fledging companies. Last year, BBVA, the Spanish bank with a reputation for tech innovation, bought Simple, the American banking start-up, for $177 million, in part to harvest the company’s technology.
And last week, BBVA signed a similar deal in the United Kingdom, acquiring roughly a one-third stake in local mobile-only Atom Bank that valued the start-up at $228 million.
These responses, combined with new financial services from tech companies like Alphabet’s Google and Apple, could prove the undoing of banking-focused start-ups that might not have the deep pockets to keep pace with the traditional banking industry and new offerings from Silicon Valley’s elite.
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