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N26 launches share and ETF trading to complement its banking offering

A banking startup based in Berlin N26 introduces a new feature for trading stocks and ETFs starting with Austria as the first market. This product launch marks a renewed focus on the startup’s core markets with a larger portfolio of banking products in those countries.

Like many challenger banks, N26 started with a simple product — an account you can use to send and receive money and a card you can manage in real time via a mobile app. And the company was able to convince millions of customers to open an account because it simply did better than regular banks (banking apps usually aren’t that good).

Over time, the company expanded into more markets and began adding more products. After a few years large rounds of financing and several hiring attempts, and like many other tech companies, the company is shifting its focus to efficiency and profitability.

After opening offices in the US or Brazil, N26 decided to change direction and focus exclusively on Europe — specifically Germany, France, Spain and Italy.

There’s another reason why the N26 doesn’t want to be too thin. The German financial regulator BaFin began to closely monitor the operations of N26 as early as 2021. And BaFin still enforces a limit on the number of client applications. N26 can only accept 60,000 new clients per month.

«I hope we’ll get out of any restrictions in the next few quarters, but it’s very hard to predict,» Valentin Stalf, co-founder and CEO of N26, told me.

As a result, N26 has strengthened its anti-money laundering controls to comply with regulators. At the same time, the company was trying to improve its margins and find new sources of revenue for its existing customer base.

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After loans and savings, N26 adds stock trading

Adding stock and ETF trading is part of this strategy to increase average revenue per user. N26 partners with Upvest for this feature. Users will be able to withdraw and drop money from their main N26 account to this new trading space.

After that, they can choose how much money they want to invest in a particular ETF or stock. N26 supports fractional shares, meaning users can buy a fraction of an Apple or Netflix share for as little as €1. And when it’s time to sell, users can choose to reinvest what they got from that transaction or receive the money immediately back into their main N26 account.

N26 charges €0.90 per trade, and premium users will soon get a handful of free trades per month, depending on their subscription plan. Ideally, stock trading will drive premium subscriptions because the margins on these subscriptions are very good.

This will be a slow rollout as trading will only be available in Austria at first. It will also be limited to 100 ETFs with stocks coming later. But the company says it will be available in Germany «in the coming months.» Other European countries will follow suit.

N26 recently opened savings accounts in Spain and Germany with a current interest rate of 2.6%. Users can also get a loan of up to 25,000 euros from the application. In some markets, it also offers N26 crypto trading directly in the application.

In other words, the N26 is slowly turning into a complete bank with all the features you would expect from a bank. With stock trading, N26 competes with trading apps like Trade Republic. But the main advantage of N26 is that everything is gathered in one application.

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The company currently has more than 4.2 million clients. It has EUR 8 billion in assets under management and processes more than EUR 110 million in transactions annually.

The company sent me some (unaudited) financial data on the performance of N26 in 2023. And the startup significantly increased its revenues in 2023 with more than 300 million euros from interchange fees, subscription income, credit products and interest income from customer deposits.

But the company still had a loss of 100 million euros in 2023. This is much better than in 2022, as N26 reported a loss of 213 million euros that year. But there is still work to be done to achieve profitability.

«By the end of last year, we were almost at a monthly level,» Stalf said. “So now we’re getting on with this. During the second half of the year, I think we will be profitable on a monthly basis as a complete company.»

Image credits: N26

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