"Millions of people swear by N26 or Trade Republic. But what
can you really do better than conventional banks? An analysis.
They are the most popular fintechs in Germany: The
smartphone bank N26 and the Neobroker Trade Republic. Both have millions of
customers, are worth billions and are preparing to displace the top dogs. N26
is currently worth around 8 billion euros, traditional Commerzbank around 9 billion euros.
At first glance, the fintechs offer less than the established competition. Why
do so many people still choose them instead of relying on the tried and tested
house banks?
Neither N26 nor Trade Republic have reinvented banking,
although they appear to have. But that's not a problem. Because many climbers
who have grown up in recent years have only thought through a process with
their business model and have not reinvented the wheel. So there were search
engines before Google, but the Californians delivered the best results.
Facebook wasn't the first social network either, but it was still the most
attractive.
Banking rethought
Even Apple didn't invent computers or mobile phones, but
transformed them from gray work devices into style icons suitable for everyday
use through better handling and a fresh design. Market success does not
necessarily require a revolutionary product or business model. You can
outperform the competition by perfecting and digitizing the familiar.
This is where N26 and Trade Republic come in. They see
online banking not as an extension of the branch, but as something completely
new. You thought about the processes right from the start: What would banking
look like today if it had only been made for mobile phones?
However, this approach also reveals a disadvantage: The
fintechs deliberately only focus on a small, very specific target group: rather
young and technically up-to-date and with correspondingly high demands. You can
see that in the apps too. They are tidy and look modern - often much more
modern than those of the established top dogs.
You don't have to go to a branch
to open an account, you can do it directly on your cell phone.
Their business models are also strictly geared to the needs
of the young audience. That is why they offer the basic functions for free.
There is no order commission at Trade Republic, N26 offers the usual checking
account functions free of charge. If you want more, surcharges are due. For
younger people, this is the usual routine. Almost everything is initially free
on the web before you have to pay for more functions or less advertising.
The initially free N26 basic account includes the debit card
and three free withdrawals per month. The app has a practical statistics
function that categorizes income and expenses and thus provides a good
overview. Finally, the transparent debit card looks cool. But none of this is
something that knocks every customer off their feet. Overdraft facilities and
the credit function also do not offer any added value, but rather meet
standards.
Features for the audience
On the other hand, it gets more exciting with the paid
accounts. The most obvious thing is that you can now choose the debit card in
five different colors as soon as you pay 4.90 euros a month. One or the other
may turn up their noses at this, but putting a nice card in your wallet is
obviously part of the lifestyle of the younger generation.
The offer itself also reveals interesting details. This is
how N26 offers sub-accounts. That doesn't sound like a world revolution at all,
but more like a savings bank. In order to stand out from the conservative
environment, the Berliners have given their accounts the modern label
"Spaces". To put it simply, areas can be created there in which money
can be saved automatically, for example. N26 also offers a rounding up function
that transfers a few cents to one of these spaces with every purchase.
But joint sub-accounts can also be created for a flat share,
where, for example, all costs are pooled, even between different N26 users. For
9.90 euros, unlimited withdrawals in foreign currencies and various insurances
are also available: travel health insurance and travel cancellation insurance,
as well as travel insurance, insurance for flight delays and loss of luggage.
In addition, insurance for accidents in winter sports and for car sharing
accidents. All of this is aimed at a defined audience. A metal debit card is
then included for EUR 16.90, as well as insurance for rental cars and mobile
phone insurance.
What N26 is missing
What N26 does not have and what does not make it a neobank,
but only a smartphone bank, are various trading functions. there is nor the
ability to trade stocks or other securities, nor the ability to purchase
cryptocurrencies. An absurdity for the young audience that the Berliners want
to appeal to. Unofficially, it is at least conceded that – instead of just
relying on expansion – you would have these features
Trade Republic, meanwhile, chose the opposite path. The
offer is greatly reduced and it is all about being able to trade securities
quickly and easily. In addition, such transactions on the cell phone work very
conveniently. The account is opened and authenticated within minutes. The
purchases are made just as quickly. For many banks, this is simply too big an
act, which is also expensive.
So what's the truth behind the fintech hype? Much of what
the newcomers to the industry currently have on offer is neither new nor
revolutionary. It's just thought differently. And this is where the danger lies
in the business model. The fintechs are still ahead of the game, but they can
be caught up by imitators and there are no technical hurdles. Many direct
banks, for example, are well on the way to catching up here, even if they have
not yet reached their goal.
Does the lead justify the reviews? You will only see that in
retrospect. At the moment it's a bet that the current growth in customers and
the technological advantage can be sustained. Whether this is the case remains
to be seen in the medium term."
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