App-only bank N26 has become the second billion-dollar European banking startup to face questions over compliance.
German business daily Handelsblatt reported on Monday that BaFin, Germany’s financial regulator, identified “numerous” shortcomings at Berlin-headquartered N26 related to staffing levels, outsourcing, and engineering. The news follows separate inquiries by UK regulators into Revolut, a rival banking app headquartered in London. App-only banks have attracted huge amounts of capital in recent years, with both N26 and Revolut reaching so-called “unicorn” status — a valuation at over $1bn. Much of the investment hype has focused on the break-neck growth of these startups. Launched in 2013, N26 has rapidly expanded across Europe and now has over 2.5 million customers. BaFin’s criticism centred around the fact that processes and staffing levels at N26 had not kept up with its growth, according to Handelsblatt.