N26 Faces Scrutiny Over Internal Controls and Governance


N26, Germany’s most valuable fintech, has come under scrutiny in recent months due to its failed acquisition of Dutch online broker Bux for €200m in shares. Although some have placed the blame on N26’s co-founder and co-CEO, Valentin Stalf, for attempting to exploit Bux’s appetite for a deal, others argue that N26’s concerns over Bux’s revenue generated from controversial contract-for-difference trading, which exposed retail investors to large losses, led to the breakdown of the deal. The controversy has highlighted concerns about N26’s strategic planning, leadership, and governance, particularly at a time when fintechs face rising interest rates.

N26’s sleek smartphone app has attracted many clients who are willing to pay up to €16.90 a month for premium services, including a metal credit card and travel insurance. The bank operates in 24 countries across Europe, with its goal being to woo young professionals in the hope that they will buy more products as they get richer, challenging established retail giants such as Deutsche Bank, BNP Paribas, and Santander. N26 counts Peter Thiel’s Valar Ventures and Li Ka-shing’s Horizons Ventures among its investors who have vouched for it with nearly $1.8bn, including $900m during its last funding round in October 2021, when it was valued at $9bn.

Despite its award-winning app, N26 has struggled to offer some relatively basic products, such as equities trading, and one year after the ECB started to hike rates, N26 does not have the technology in place to pay interest on overnight deposits. The bank said in a statement that it will launch interest-bearing savings this quarter, and an N26 trading product will go live within the next 12 months. Insiders argue that the delays are not a long-term setback as the latest retail trading boom won’t be the last one, and N26 clients are highly loyal. It also started offering crypto trading earlier this year.

N26 abruptly exited the UK and the US in 2020 and 2021 and missed its own targets, saying in its latest available annual report that in 2021 it “performed below plan.” Max Tayenthal admitted in early 2022 that it had expanded too quickly. More recently, Allianz has been offering its roughly 5% stake for sale at a valuation of $3bn.

The company’s scale of ambition means that growing pains were inevitable, but some say they have been exacerbated by poor governance and decisions made by the founders. In February 2022, six senior executives accused Stalf and Tayenthal of “behavioural problems,” including establishing a “culture of fear and blaming.” Another claimed Stalf had a habit of “constantly overriding other people’s decisions.” “He built N26 from scratch, but he does not understand that his role has to change,” this person said, pointing to the size and complexity of N26. Three of the six executives who signed the memo stating their complaints have left over the past year, with a fourth having announced their intention to depart as well. N26 has said that the departures have been for “very different reasons.”

N26 also faced criticism from its employees, who claimed that the bank was not doing enough to protect them from the stresses of the job. The employees alleged that the bank did not provide them with adequate support, training, or resources to cope with the demands of their roles, leading to burnout and high turnover rates. Some employees also claimed that N26’s management was unresponsive to their concerns and failed to address their grievances.

In response to these claims, N26 launched an employee support program in 2020, offering mental health resources, coaching, and training to its staff. The bank also said it had implemented measures to improve communication and transparency with employees and had created a dedicated team to address workplace issues. However, some current and former employees remain critical of N26’s approach, arguing that the bank needs to do more to address the root causes of burnout and stress.

Despite these challenges, N26 continues to grow rapidly, attracting new customers and expanding its product offerings. The bank has raised over $800 million in funding to date and boasts over 7 million customers across Europe and the US. In 2020, N26 launched its premium Metal card in the US, offering cashback rewards, travel insurance, and other perks to customers who pay a monthly fee. The bank also expanded its product range to include investment and insurance products, as well as a business banking offering.

Looking ahead, N26 faces several key challenges as it seeks to maintain its rapid growth and expand its customer base. The bank will need to continue to invest in its technology infrastructure to ensure that it can scale up to meet the needs of its growing user base. It will also need to navigate a complex and rapidly evolving regulatory landscape, as new rules and regulations are introduced to govern the fast-changing fintech sector.

At the same time, N26 will need to address the governance and employee issues that have plagued the bank in recent years. The bank will need to demonstrate that it has put in place robust governance structures and processes that can prevent future compliance and regulatory breaches. It will also need to ensure that it provides its employees with a supportive and healthy work environment that enables them to deliver the high levels of service and innovation that N26 is known for.

The concerns raised about N26’s internal controls and governance highlight the challenges facing the digital banking sector as it continues to disrupt traditional banking models. While digital banks offer many benefits to customers, it is important that they are held to the same standards as traditional banks in terms of regulatory oversight and governance.

Despite everything, n26 is still hiring in Berlin.

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