Against all odds: the trials of getting our banking license

I will never forget the 8th of April, 2015. On that day, we closed our USD 10 million Series A funding round at N26. But there was something else, something crucial, that happened on that day. Based on the proven product-market fit, our founders Max and Valentin decided to apply for a full European banking license.

We knew that in order to rethink and sustainably change an industry, it would be essential to have control over a larger part of the value chain. It was clear that the license would be key to keep fuelling innovation—it would enable us to develop and implement state-of-the-art technologies, launch new products for our customers quickly, and be more flexible towards internationalization. So, when Max and Valentin asked me if I wanted to take over leading the project to obtain this license, I could not have been more excited and quickly agreed to embark on this challenge to help build a bank.

We weren’t even 20 employees, working from our first office in Berlin Mitte (Unter den Linden), which by then had become too small for us already. Only a handful of banking licenses were granted in Germany in the last ten years—so, as you could imagine, nobody in our team had been involved in applying for one. After getting a first overview of what was required to successfully master the project, it was clear that we had to establish a team of experienced experts, who would build and run the bank. Markus Gunter, the former CEO of one of the largest direct banks in Germany, was the first to join the team as Managing Director of the (to-be) bank.

Together with him and a small team of experts and consultants, we drafted the licensing application and handed it in after a first introductory meeting with the German regulator BaFin. The application was around three folders thick and I will never forget the countdown before handing it in. Those last days were characterized by painstaking proofreading, lasting until late in the night. Each document had to be printed, sorted and organized very carefully. We prepared multiple versions to be sent to different German regulators.

After handing in the application, we received multiple in-depth questions, which had to be clarified in written form and in-person meetings. We were very happy to satisfy all German regulators and excited about the next step in the process: our application was forwarded to the European Central Bank for a final check.

Back then, we were already signing up 10.000 new clients a month, the business was growing rapidly, and we were eager to get the license as fast as possible. We were ready to take every opportunity that was presented to us to fast-track the process. Most notably, I remember a call we got from the ECB on a late Friday afternoon.

If we wanted to speed things up, we’d have to hand in written answers to several questions by the following Monday morning. Together with a couple of colleagues, we worked through the whole weekend and, astonishingly, a few days later we received the banking license. It arrived first in an e-mail as a PDF, signed by Mario Draghi, the president of the ECB.

This was on July 18th, 2016. That day still represents one of our key turning points in N26’s history.

Looking back, the project reflects a story told by so many startups who have achieved something big. Initially, all you hear from third parties is that you can’t do it and why you will fail. Everyone tells you how complex it is and actively tries to discourage you from pursuing it. But, while you have to be open to all constructive feedback, some things are better ignored. A project’s success largely depends on its drivers.

In the last two years, the banking license has helped us grow to 1 million customers across Europe by enabling us to do business in 17 markets and to rapidly iterate and improve our product offering.

Alex Weber, Head of International Markets

You can find more insights on N26’s banking license in a video talk with Markus and Alex.