German neobank N26 is set to make its US debut

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German neobank N26 is launching its checking account and debit card in the US, allowing the 100,000 people on its waitlist to sign up and access its beta product, which it plans to roll out in full later this summer. The firm's US launch is in partnership with Axos bank.

N26 user growth

N26 is betting it can repeat its European success in the US, and early demand suggests that its chances are solid. N26 launched in 2015 and has since grown rapidly: It recently reached the 3.5 million user milestone, marking a 40% increase from February of this year and is adding 10,000 users a day. The firm handles €2 billion ($2.3 billion) in monthly transactions across 24 European markets. N26's 100,000-person US waitlist indicates healthy demand for the product.

N26 accounts come with several differentiators that could position it for growth in the US - particularly its personal finance management (PFM) features and lack of fees.

  • PFM features could be N26's strongest differentiator in the US, as consumers are hungry for such tools.The N26 mobile app automatically categorizes each transaction, allows customers to set daily spending limits, and lock and unlock their cards. Customers can also open "Spaces," sub-accounts to reach their financial goals by dropping money in and out of them. Integrating PFM tools could allow N26 to stand out, as they're somewhat rare but highly in-demand: 44% of mobile banking users who responded to Business Insider Intelligence's Mobile Banking Competitive Edge study (Enterprise only) said the ability to set spending limits for a credit or debit card would "very" or "extremely" valuable.
  • And its lack of fees could be a big draw. The US account will have many of the European features, including no minimum account balance, and no monthly or foreign transaction fees. Throughout the summer N26 will offer incentives like two free ATM withdrawals per month before eventually introducing a premium account. N26 could capitalize on the shutdown of low- and no-fee accounts at major banks, like Bank of America, to grow its base.

But there are several hurdles the neobank will likely face as it launches in a new market.

  • Gaining consumer trust could prove to be a challenge for N26. As more fintech startups emerge to challenge legacy banks, incumbents are finding an advantage in the form of high levels of consumer trust. "Customers trust legacy banks to keep their money safe, but they're slightly unsure of fintechs keeping their money safe," Amelia Nicholls, chief of staff at RBS' digital standalone bank Bo told CNBC. Trust could ultimately be a hurdle for N26 to grapple with as it enters the US, although it's managed to bypass that barrier in Europe, which could be a positive sign for the bank's US trajectory.
  • The US is becoming more crowded with both US- and Europe-based neobanks.Popular UK-based neobank Monzo recently expanded into the US, after earning a valuation of $2.5 billionfollowing a June funding round. Meanwhile, there are homegrown competitors in the US like Varo Money or Chime, the latter of which launched earlier this year and just reached 4 million users. As the market crowds with more domestic competitors popping up and more European-based neobanks moving into the US, N26 will need to build out its value proposition beyond PFM, such as with advanced money movement or security capabilities.

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