People of the week: Max and Valentin make nine billion

Tuesday, October 26, 2021

People of the week
Max and Valentin just make nine billion

By Wolfram Weimer

Two Austrians set up a digital smartphone bank with N26. It is now valued at nine billion dollars and even surpasses Commerzbank. Who are the young men behind Germany’s most successful fintech that makes conventional banks look so old?

At Commerzbank’s Frankfurt headquarters, you had to take a deep breath this week. The second largest German bank with its 48,000 employees has been overtaken by a Berlin startup. The smartphone bank N26 is now valued at $ 9 billion after a successful financing round. The Berliners have become the most valuable fintech in Germany – and just as valuable as the 151-year-old Commerzbank. But while at Commerzbank downsizing and branch closings are on the agenda, N26 reports an average of 2,000 new customers every day. There are already more than seven million – and none of them has ever been to a branch. Because there is no such thing. N26 is a purely digital smartphone bank – easy to use, digital, and largely free of charge. Click and app instead of switches and paperwork. Every customer is used, and accounts can also be opened on Saturday nights. Business is booming. In major German cities there are now advertising posters for N26 with the slogan: “Not your grandpa’s bank”.

While the Frankfurt gentlemen in pinstripes raise their eyebrows in amazement, the Berlin founding boys can hardly save themselves from investor inquiries. The funders involved in N26 include the insurance company Allianz, the Singapore sovereign wealth fund GIC, the Chinese internet giant Tencent, Earlybird and the US investor Peter Thiel. US private equity firm Dragoneer Investment Group (a $ 20 billion fund based in San Francisco), Third Point Ventures (a $ 17 billion hedge fund based in New York) and Coatue Management (a $ 50 billion investment firm based on Wall Street) are also now on the Berliners got on. In short: The really big money suddenly relies on N26.

But who do the big capitalists trust with their money? “Max and Valentin” is what they call themselves on the Neo-Bank homepage. It’s about two Austrians, Valentin Stalf and Max Tayenthal, in their mid-thirties, who look as if two smart friends from Vienna have just opened a new fine restaurant in Prenzlauer Berg. In truth, they are on their way to becoming the new Elon Musks of the German financial industry.

It started with pocket money

The two started in 2013 in a Viennese living room with the idea of ​​developing an app into which parents can load credit for their children in order to manage their expenses. “Papayer” they called the digital pocket money. “When the product was in the test phase, more and more testers came to us who didn’t want to use the product for their children but for themselves. The teenage product was the beginning and showed us the way to a bigger idea.” , reports Stalf, who, after studying economics in St. Gallen, studied at Rocket Internet as “Entrepreneur in Residence”, an incubator and investor for online startups. There he was involved in the development of several companies in the mobile payment services industry, including Payleven and Paymill. “At Rocket you learn not to be afraid: You want to set up a bank? Just do it.” So he did.

Valentin Stalf looks like the soccer goalkeeper Loris Karius and is described by employees as a man who can spell the word self-confidence in capitals. In his résumé he writes that he has “the vision of creating a bank that corresponds to the lifestyle of the 21st century”. His official goal is: “We want to build the world’s first digital bank.” He founded N26 “to set new standards in an industry that remains inaccessible to many people and does not work”.

BaFin has already imposed a fine

That all sounds pretty thickly American – and arouses suspicion, especially in the dramatically overregulated German banking system. Should we really take this young man with long blond hair who wants to build a “billionaire company” and revolutionize banks seriously? Why are business figures not published? What are the losses? How many of the 7 million customers pay anything at all? Is it all serious?

The banking supervisory authority BaFin has been complaining about deficits in the fight against fraud and compliance violations for two years. The boys are probably “a little carefree on the way,” say the banking supervisors. Hackers discover security gaps in the app. The competition whispers angrily that N26 is a gigantic money laundering machine. In fact, BaFin imposed a fine of 4.25 million euros in June for late filing of suspicious transaction reports and inadequate money laundering controls. Since May, a special officer has even been monitoring whether N26 is improving compliance as promised. The supervisory authority has now been promised to better examine the mass account openings and to grow over the next few months in Europe with a maximum of 50,000 to 70,000 new customers per month. N26 tries to be serious and comes to terms with the overseers. A money laundering officer is appointed and a new compliance management system is set up.

Investors and customers don’t seem to be bothered by the problem. The money is currently pouring in on both sides. Now, in addition to the 1500, another 1000 employees are to be hired in the areas of technology, product management and digital security. At the same time, the bank is also targeting its IPO. “With the investors we got on board, we are also taking a very important step towards going public in the coming years,” announced Stalf. If he succeeds in going public, he will probably overtake Deutsche Bank as well. After all, it’s already 151 years old.