Fintech N26 claims that regulatory action has resulted in ‘billions’ of lost growth opportunities.

German fintech N26 is finally seeing the light at the end of the tunnel as regulatory restrictions are lifted, allowing the online-only bank to resume its growth trajectory. Co-founder Valentin Stalf revealed to the Financial Times that years of regulatory action against N26 for its poor anti-money laundering controls have cost the business billions of euros.

The financial regulator BaFin had imposed a cap on N26’s new client sign-ups in 2021, limiting them to 50,000 a month, significantly lower than the 170,000 monthly average at the time. This cap has gradually been increased and will be completely removed from June, according to N26. The regulator recently fined the bank €9.2 million for late filing of suspicious activity reports in 2022, adding to a previous fine of €4.25 million in 2021.

Stalf acknowledged that the direct costs of the regulatory saga amounted to €100 million, including fines and investments in control functions and monitoring systems. However, he emphasized that the indirect costs were much higher, impacting the company’s valuation and growth potential.

Despite the setbacks, Stalf expressed optimism about N26’s future, highlighting the strong demand for its digital banking services and the potential for profitability. The business, which has 8 million customers across 24 European countries, is on track to become profitable in the second half of this year, with plans to increase revenues by up to 35%.

As N26 looks towards an IPO, Stalf emphasized the lessons learned from the regulatory challenges, stating that the experience would be valuable for the company’s future growth and development.