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Founder’s Story: Going Global: Strategies for European Expansion
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00:00Hi, I'm Chris O'Brien with the French Tech Journal, it's a pleasure to be here, and it's especially exciting
00:05to get a chance to speak to one of the big names in the European ecosystem.
00:11So I'd like to give a big welcome to N26's Valentin Stauf.
00:17Thank you, thanks for being here.
00:18Did I come close on that?
00:20Yeah, I think it was pretty good.
00:22You know, we want to talk today about, and I think there have been a lot of conversations already about
00:27European scaling.
00:29You guys obviously are one of the, again, the big names, you're on the other side of that journey, not
00:35at the end of the journey, of course.
00:37So we want to get a lot of your perspective on the challenges you faced, how you've overcome that.
00:42So just to start, you know, we were talking the other day about some of the early decisions that you
00:49made about how to build the company right from the start, and one of them was expanding right away into
00:5520 countries.
00:58So can you, one, just for anyone who might not know, say, what is N26, in a short sentence or
01:05two, and then what drove you to make that decision early on that you thought, yeah, we're just going to
01:11go big right from the start?
01:14So N26 is a complete, fully-fledged retail bank.
01:18We have a European banking license, and we're active in 23 markets in Europe.
01:22We do everything from day-to-day banking to credits, but also, especially in the last 24 months, have expanded
01:29into building wealth from saving products to crypto to brokerage in general with ETFs to share.
01:39So we do basically everything for you and replace any bank account that you might have.
01:45I think, coming back to your question, I think expanding within Europe quickly to many countries is possible because of
01:54the regulations.
01:55So you can navigate with one banking license in all the European markets.
01:59And so for us, the incremental cost of offering our products in an additional market quickly was very small.
02:08I think that's why we quickly went to a lot of markets.
02:12And I think the complexity increases if you tailor your product and more to each of the markets.
02:20Again, we're still following a European-wide approach with our products.
02:23But by now, for example, in France, we're going to launch in the next quarter also the PEA accounts, which
02:33are the tax-advanced or tax-subsidized investment accounts.
02:37So that's, for example, a product that we've specifically developed for the French market.
02:40And the more you develop for a market, the more cost is on the market.
02:44And so you need to do that, especially for the big markets.
02:47And so you had a product at the beginning.
02:49You felt confident.
02:50You had the product market fit, so to speak, that was enough to go into these other countries.
02:55But then there's sort of optimizing or configuring for each of those markets.
03:01So, you know, when you look at that level of it, you know, the product market fit, how that adapts
03:07to each country, how have you gone about that?
03:11You were just mentioning how you're doing it in France.
03:12Has that been something for each country?
03:14There is then the basic, the platform, and then you have to go the next level for that specific market?
03:20So, I mean, first of all, I think what we see, and it's a driver of all the tech companies,
03:26is you have a more unified consumer out there that is used to an iPhone or a Google-run Android
03:35phone.
03:37And therefore, the consumer in Europe is more and more unified or aligned than 20 or 30 years ago.
03:46You have the same phones that people use.
03:48You have the same streaming platforms.
03:51So, in general, the consumer we go for is still different per country.
03:56But overall, for an early-stage product where you are not sure about product market fit, I think it's good
04:01to expose it to as many people as possible.
04:03And the incremental cost of exposing it, in our case, to 20 countries instead of, you know, only one country
04:10or two weren't too high.
04:12So, it makes sense to see also in which market is it flying, what are the different questions you get,
04:18the different feature requests.
04:21And I think in the beginning that makes a lot of sense.
04:25Afterwards, you need to be very specific on what's your next product.
04:29And then you need to balance between developing French products or developing global products.
04:35And then you have always a question of how much you do for a market and how much you do
04:39invest into a market, into a product that works in all markets at the same time.
04:44And is that more of a cultural question?
04:47And I don't want to get too much of stereotypes, but for instance, does a German versus an Italian versus
04:53a French person think fundamentally different about certain things?
04:57And so, you have to adapt to that?
04:59Or is it more the structural economic?
05:01Again, I live in France, so I know the retirement system, the social systems.
05:06That's different how people think about savings.
05:08Is it more about that piece of it?
05:11So, I think there are a couple of cultural things.
05:14So, I'll give you one example.
05:15I think Germany is the only country where people always open, actually, to decencies.
05:19If you look at the Italian market, no one ever opened to decencies as the terms and conditions.
05:25So, that's fundamentally different.
05:28But it's – and you have already mentioned a couple of things.
05:32I think, in general, that's also the hypothesis that we are following is there's a European consumer that has certain
05:38desires and certain expectations that are very aligned, I would say.
05:42So, people want to use an app that doesn't feel like a traditional bank, but more like Spotify.
05:49And at the same time, there are specific – and in our market – specific things you need to adapt
05:55that are more structurally introduced.
05:59So, for example, you mentioned different pension systems.
06:02You mentioned – I can mention, like, different payment systems.
06:04So, if you have a certain payment system in a country, like BZoom in Spain, if you don't have it,
06:09you're not competitive because 90% are using it.
06:12So, therefore, you need to have that feature to be competitive in that market.
06:17In France, for example, if you're longer-term not offering the tax-subsidized or advantaged investment accounts, I think you're
06:26not competitive.
06:27So, that's more introduced complexity from existing systems.
06:33I'll give you another example.
06:34So, on paper, you should be able to use one IBAN.
06:40It doesn't matter if it's a German one or a French one or a Spanish one for a mobile contract
06:45in Spain, in France, in Germany.
06:48But, factually, a French mobile company wouldn't accept a German IBAN.
06:53So, therefore, we needed to introduce a French IBAN for our French customers to make their account really usable as
06:59a primary account.
07:00And so, I think that the consumer is united, but because of the systems being different, you need to introduce
07:07some things to be competitive.
07:09Yeah.
07:09I don't think I've ever read a TOC in my life, ever.
07:12I'm American, so I'm just conditioned to be exploited and, you know, just give up everything.
07:18So, all my rights.
07:19And you can sue in the end.
07:20Yeah.
07:22Well, I can't because it probably says in the TOC that I can't sue you and I didn't bother to
07:27read it.
07:27So, when you're looking at all those things, you know, you're one company.
07:34People wish to some degree Europe was one market.
07:38And it is and it isn't.
07:40And so, when you're over the course of the history of the company, how do you decide when the timing
07:46is right to then push more?
07:49You have a basic product in there.
07:51It's getting some traction, but maybe it's not, you know, massive adoption.
07:55And so, how do you continually evaluate that to say, okay, now is the time to really push in this
08:00market, go into a new market?
08:02What are the criteria that you kind of look at?
08:04Again, I think it's really 90% is European-wide.
08:07And only 10%, maybe 15% is local.
08:10So, therefore, you push anyway for products that everybody expects.
08:13In our case, that's really innovation on the wealth-building side.
08:16Currently, it's more innovation around family accounts, how you use accounts with families, with partners, how you can structure your
08:25day-to-day banking.
08:26So, statistics, so that's all things that you launch globally, and only, I think, 15% would be local.
08:33So, therefore, you go always, I would say, for the European-wide products first.
08:38And I think what we actually do today, we use the different markets for a source of innovation.
08:43So, sometimes, you have products that are more advanced in a certain market, and you then try to bring this
08:50perspective to a new market.
08:52And so, that's something that, where we try, that our customers in all markets benefit, actually, from the exchange between
08:57the different markets.
08:59I can give you another example.
09:00So, we've just recently launched mobile contracts as well.
09:03And we've actually looked at the pricing in all 23 markets that we're in, and we figured out that Germany
09:09is one of the most expensive mobile phone and mobile contracts markets in Europe.
09:15And then we said, okay, that's a good market to be disrupted, because when you go to Austria, I'm from
09:20Austria, it's one of the cheapest mobile phone markets.
09:23And so, when you have this European-wide or even global perspective, you can actually see where the market is
09:28inefficient, and you can launch products that are disruptive to one market that in the other market might be taken
09:35as a standard.
09:36And you see that in mobile contracts, you see that in interest rates, so, for example, Germany is one of
09:42the most competitive markets in interest rates.
09:46If you look at Spain, it's not very competitive, so you can actually easily kind of launch these products.
09:51And as we are one of the few players that are active all over Europe, and most of the banks
09:56are only in one market, there has been a not effective market between different countries based on kind of market
10:06domination on only a few players that are out there that have just decided not to compete on interest rates
10:12or not to compete on certain things.
10:13And from an organizational point of view, again, a multinational company based in Germany, do you have a systematic approach
10:22to constantly evaluating and spotting and analyzing what those entry points could be?
10:30Because, for instance, I wouldn't naturally assume that N26 and the mobile business would make sense.
10:36The way you explained it, it does make sense.
10:38Is there a group within the group that's kind of their job is to keep analyzing, you know, adjacent markets,
10:47other economic tension points and say, is there some value we could bring?
10:53And if so, what does that look like as N26?
10:58So when I look at how we are organized today, a lot of things are in product and tech centrally.
11:06So we have, but there again, we have an office in Germany, we have an office in Barcelona, where in
11:11Germany we have about 1,000 people.
11:12In Barcelona we have 450, and then we have a smaller office in Vienna with around 75 people.
11:19And how you run each of our product divisions is that you have always a business leader and a product
11:24leader.
11:25And these two people are basically mini-CEOs of each of the products.
11:29So someone would be a mini-CEO of our overnight savings, or our saving products in general.
11:36And this team is then again cross-functional.
11:39There's developers, there's business people, there's designers, there's UX experts.
11:45And these together are actually responsible for innovation in that area.
11:51So they also are responsible for the business around Europe.
11:54And they are responsible also to have a global view on what's going on,
11:58and if there's an innovative product from any other country around the world,
12:02to make sure it's prioritized against products we have already on the roadmap.
12:06And so that's really, we try, and I think that's the most efficient way to do it.
12:11We try to have innovation coming from the company.
12:14You cannot have top-down innovation.
12:17So in the end, sometimes an idea could also come from myself or from someone else in a C-level.
12:22But then normally it's pushed to the team, and the team needs to prioritize it against all the ideas that
12:26they have.
12:27And then they compete openly against each other, depending on the KPIs that are important to us.
12:31It's interesting because, you know, again, being an old man in tech and seeing many cycles of this,
12:37I'll see companies adding services, adjacent services, getting it to new markets, new sectors.
12:44And sometimes it goes too far.
12:46You know, a company that does everything is a company that doesn't really do anything well,
12:51or you don't have a sense of what is this company.
12:54And, you know, not to call them out, but I think a lot of us went through this experience with
12:58Evernote,
12:59where Evernote started as, like, it's a simple product.
13:01It was super useful.
13:02It was pretty cool.
13:04By the end, it was doing 500 different things.
13:06And I remember the CEO said, well, we can't kill any features because each one is used by 5%
13:10of our customers.
13:11But there was no core thing that was Evernote anymore.
13:16So how do you kind of balance that?
13:18You want to maintain the business, the unit economics, the identity, the brand,
13:23but you want to balance that expansion into new areas.
13:28So I think that was a big topic.
13:30And if you would have asked me five years ago, or even eight years ago, I would have said, okay,
13:34it's many more products.
13:36I think what we figured out on the way is that in the core product of retail banking,
13:41on how you do your day-to-day banking, credits, investment, building future wealth,
13:46and all the things that are connected to that directly, that's where we can make our biggest difference.
13:53And I think it's a pitfall, actually, to say we go for five other services that are very far away.
13:59And then when you look at the roadmap, I think it should be always a balance between input from existing
14:07customers.
14:09We try to make sure that we have enough things on the roadmap as well that are coming from requests
14:14of customers.
14:15Then you can say, okay, what do you look at from competition around the world?
14:19What are they doing?
14:19So you have a part of that.
14:20And then you have some ideas that are maybe disruptive, that no one has done before.
14:25And this balance between customer requests where the product market fit is actually pretty low,
14:30because people really request it.
14:31The other one is competition, where also that product market fit is a little bit lower,
14:37but sometimes you don't know if it's even working at competition.
14:39Everybody talks about it, but in the end no one is using it.
14:42And the third one where you have the highest product market fit risk is really where you introduce completely new
14:48ideas.
14:49But in the end, you have to have some of these bets as well,
14:53because some of the things that you do and innovate on, maybe no one has ever asked you about.
15:02So maybe the consumer doesn't even know that he wants the product.
15:05And so I think you still need to keep a little bit of space for these disruptive products as well.
15:11That's a little bit the balance we try to go for.
15:15And does that come with, I have to imagine a piece of that is also some pressure to deliver growth
15:23and get growth targets,
15:24whether you're public and you're answering to public market investors or private investors who are hoping for a liquidity event
15:32or some kind of return at some point, and they want to make sure that you're hitting a certain X,
15:38whatever the KPI is, you're hitting a certain percentage growth.
15:42So someone might say, hey, well, not a great business, but this could add 10% to something.
15:48Do you go through that calculation?
15:50Do you look at something and say, well, the revenue could be great, but it could be a nightmare,
15:56but we're under pressure to hit a mark or do something for someone?
16:01So I think it's a very good challenge that you're touching on.
16:05And I think having an investor base that is aligned with the idea you want to build the company
16:12and is prioritizing the same things that as a founder or a management team you're doing is super important.
16:19And it gets more difficult over the lifetime of a company because today we've raised 1.5 billion over equity
16:26in the last 10 years.
16:28And you have obviously very, very different investors with very, very different interests.
16:33You have people that joined us at a valuation of 5 million.
16:38They're very aligned, I would say, with a long-term vision on the company.
16:41Then you have people that joined us maybe at 9 billion.
16:44They might have, you know, the tech valuations came down in the last couple of years,
16:48so they have different interests.
16:50Maybe they just want to do a little bit of liquidity now and get some return on their investment quickly.
16:55And so I think balancing that out with a good governance is extremely important.
17:00So as we are a regulated bank in Europe, governance is even more important.
17:06So you have a supervisory board, you have the different shareholders,
17:11but balancing that out in the best interest of the companies is one of the key things
17:14that you need to watch out for as a founder to balance kind of the interests of the different stakeholders.
17:22In the end, you need to do everything for your customers, from my perspective.
17:26But it's easier said than done, because in the end, you have these questions of, you know,
17:29do you launch a product now with which pricing do you optimize for revenue in the next 12 months,
17:3624 months, or in the next five years?
17:38It sounds easy to prioritize for customers, but in the end, that's exactly the question.
17:42Do you want to go for growth in the next 12 months, or do you want to do, you know,
17:46100 million more in revenue?
17:47And so I think that's really the tough questions you have to discuss within C-level,
17:53founding team, supervise your board, and then take the right decisions.
17:57Speaking of customers, let's talk about that a little bit, because again,
18:01the arc, the timing of the company is really across a time when fintech banking really digitalized.
18:08I mean, it had been for a long time in bits and pieces, and then really took off the last
18:13decade,
18:14last 15 years.
18:15In terms of walking customers through that transition, finance and health are probably
18:22two of the most both regulated, but also personal things that you deal with in terms of, you know,
18:28your money, your data, things that are very close to you.
18:32So in terms of building trust and bringing people through that, and then continuing to do that,
18:38as you think about new markets, new products, what was the challenge initially,
18:43and how do you continue to think about that?
18:46So initially, I would say one of the biggest question marks that investors also had was,
18:51exactly what you asked, is someone going to trust a new bank?
18:56So it was a big question around trust.
18:58I think what has changed by now is that everybody understands that the main trend of consumers
19:04is going to mobile banking, and even with, like, different challenger banks.
19:08And so therefore, this has changed.
19:09So now it's an accepted product category.
19:11The question is only, will it be 50% of the market, will it be 30% of the market,
19:17or will
19:17it be 90% of the market?
19:19And so that has really, really changed over time.
19:23I think we have seen a big change in, again, that's, I think, fundamental to the success
19:29that we could have had in that industry, is the transparency that you have through social
19:35and the connected world through the internet.
19:39Because if you wanted to build a bank, like, 30 years ago, you would have needed to invest
19:47millions of millions of euros into a marketing campaign to build trust.
19:50But what has changed is today you go online and you look at fintech and you read customer
19:59reviews, you see it's on the App Store, you see the star rating, and that creates a huge
20:05amount of trust.
20:07And this connectivity throughout the community and the first customers actually helps you
20:13to overcome the trust issue in the first place.
20:18And the product has become more and more important.
20:22So 20, 30 years ago, you would have been able to fake a product and say it's a great product,
20:27but in the end it wasn't a fake product and no one would, a great product, no one would
20:30knew about it or they would take time to figure it out.
20:33And you could overspend and then overcome that your product is not good.
20:37But today everything is based on the product.
20:40Not only in our industry, but everywhere.
20:41And so it's all about how good your product is, how your customer think about the product
20:46and how, in the end, they recommend the product.
20:50At N26, still the majority of new customers that we acquire is coming through recommendations.
20:57And so putting everything into the product is most important.
21:02Yeah, it's interesting.
21:03And it's not to say that, you know, again, especially in the U.S., I mean, history of
21:07banks, you always kind of feel like you're getting screwed with hidden fees or a thing
21:11because you don't read the terms of service, you know, that you didn't know about why did
21:16it cost me $50 to take withdrawals from the ATM or with over limit or stuff like that.
21:22So it's not that that was just a problem for you.
21:24But certainly it's interesting because then it was probably easier for someone to hide that
21:2930 years ago in a classic bank, and we don't all know that we're getting hit with that
21:32because we're not talking to each other.
21:34Now, if you're really crappy to your customers, we're going to figure that out pretty quickly
21:40as other people looking for banking options.
21:43In that sense, then, as you kind of look through all those different things that you have to
21:50navigate when you're scaling up, there's a lot more consumer protection here, too.
21:56There's the data, there's specific financial regulations, there's the classic banking regulations.
22:03And I've heard this a lot since I've been here.
22:05You were talking about regulation as an enabler at the beginning, which has, I think, been the
22:10story of fintech in Europe.
22:11But if you're a founder trying to navigate today European regulation, what kind of advice
22:19would you have there?
22:20I know there's the sort of general work finance and then there's banking regulations, so there's
22:25different aspects of that.
22:27But yeah, how would you talk to a young entrepreneur today thinking about that?
22:33So first of all, I think a highly regulated industry has the opportunity, if you are doing
22:39it well, you can expand quickly and no one else will enter as quickly into the market.
22:43So I think that's also something fintech has benefited from European regulation and being able to
22:48scale quickly across all markets.
22:51So that's the benefit.
22:52On the other hand, I would recommend to everyone to overinvest into regulation.
22:56I think what we need to understand is, in fintech specifically, it's a highly regulated industry.
23:02We have a European banking license.
23:06And in the end, you are working on the forefront of innovation.
23:10If we use AI for fraud detection and anti-money laundering, no one has done it before in that industry.
23:21If we use AI for credit models, no one has done it before in that industry, at least not in
23:29the way we did it.
23:30Maybe some other companies do it at the same time.
23:32But that means you need to be compliant on things that no one has ever done before.
23:39And so therefore, you need to overinvest in communication with regulators and you need to launch new products.
23:44At the same time, you need to educate and be a partner with the regulator to learn about the products.
23:53And I think that's my advice, but it's also, from my perspective, the biggest challenge we face today
24:01is the rapid transformation of technology in a highly regulated industry
24:06and to make sure that you're still able to innovate while you comply with all regulation
24:15and at the same time have a close dialogue with the regulator and a proactive regulator
24:20that helps you to navigate that surrounding.
24:23I mean, I think that's something I've appreciated coming to Europe.
24:27In the U.S., Silicon Valley, there's sort of a reflexively negative view of government regulation bad
24:34in the way, killing innovation.
24:37But we've seen those cycles in the U.S.
24:39We deregulate banking.
24:41There's a huge crisis.
24:43You know, to me, the ideal is that you have those as partners helping with the trust issue.
24:47If I know as a consumer someone's got my back, the government, there's rules,
24:52and someone's enforcing them, I would think I would be more inclined to trust someone
24:58who's been validated in some sense.
25:01The government said, yeah, in 26, they're following the rules.
25:04We set up these rules to protect you.
25:05They're following them.
25:07So I'm more comfortable beginning a journey with you.
25:11And it's absolutely the case because we have a banking license.
25:14A lot of people trust us with their money.
25:16So that's not to be underestimated because you have your own banking license.
25:19You have deposit insurance.
25:21So actually, factually, the risk for customers to put something to us or anyone else
25:26who has a banking license is pretty low.
25:29But it's actually really this combination of, I think, regulation has a lot of benefits.
25:35You cannot do fintech without regulation.
25:37That's clear.
25:37We don't need to discuss that.
25:38So you will always have a regulator.
25:40But I think you need to be proactive.
25:42And I think if I would have one wish, I think it would be more proactive regulation across Europe,
25:50working together with the pioneers in each of these fields to form the regulation of the next couple of years.
25:59Okay, I think we have time for one more subject here.
26:01We're running out of time.
26:03But we, of course, have to talk about AI.
26:08So let's talk about AI.
26:09In terms of your business, there's sort of two elements.
26:13How is it impacting or is it impacting the core business, the products, et cetera?
26:17And then more, I guess, on the operational expansion side.
26:22Is it something that's facilitating now how you think about expanding in terms of new products, new markets?
26:29Or is it not really having an impact at this point?
26:33So I think AI, especially in the banking industry, is going to have and already has a big, huge impact.
26:41Because everything is based, you have so much data.
26:44And it's a virtual product.
26:46And if it's a virtual product, then AI has even more massive impact.
26:50And concretely, in our case, it helps us to be one of the safest accounts out there in fraud protection,
26:57email detection, all these things, all AI-based.
26:59We have a model that combines more than 300 data points on each of the transactions
27:03and detects fraudulent transactions before they actually happen.
27:08It is massively impacting on the cost-based side.
27:11Because if you look at our cost base, a big part of that is still customer service.
27:16And from my perspective, already today, we have a chatbot that is answering 30% to 40% of our
27:21customer requests.
27:24But I expect, in the future, the effort we need to put into customer service only being 10% of
27:32what we do today.
27:33Because most of the things will be answered by a chatbot that, in the end, answers better than our staff
27:39today.
27:40And that is massively disruptive.
27:42And you will even see a change in customer care.
27:48So you will not ask a question in the future, but you will already search for a solution.
27:52And that chatbot will execute, actually, the solution immediately within the chat.
27:56And so I think there's a transformation happening in how we do customer service today to how we have done
28:02two years ago.
28:04And that will continue with massive impact.
28:06And then you have all the areas of more finance-specific products.
28:11So when it comes to credit scoring, there's a lot of AI impact.
28:14It's, again, data.
28:15It's all about data.
28:17Cohorts, who's going to default.
28:19And AI is having already today, in our models, a massive impact.
28:25And so I think that the finance industry is going to be one of the most impacted and disrupted one
28:32by AI.
28:33And I think the companies that have been created over the last 10 years will benefit from AI over-proportionately
28:40to the traditional players.
28:42Because the traditional players have data silos.
28:45And the foundation to deploy AI efficiently is that you have access to data.
28:49And so that's, I think, the biggest challenge for traditional players to benefit from AI as much as companies that
28:57have only been created over the last 10 years.
28:59But are you guys, I mean, there's so much hype around this stuff, it's often just tough to sort out.
29:04But are you scanning the horizon and thinking there's some agentic native or AI native that's going to come around
29:11and completely gut our whole business?
29:14Or is the core business still pretty sound given all the regulatory and stuff that we've talked about and the
29:21trust?
29:22And two kids with the Gen AI vibe coding thing are not going to come along and replace that?
29:27So I think in banking, I think I still, you know, you will have a bank account.
29:31I think there's some things that will change.
29:33You will have your own AI agent that executes things for you on the bank account.
29:37But still, you also don't always want to talk to an AI agent if you execute a transaction.
29:42So you might want to just press a button because it's easier.
29:44So I think it's disruptive, but how I look at AI today is what we're missing today is still the
29:54deployment of real products in AI that are there.
29:58But to really use it and have only 10% of our customer service volume being answered by a human,
30:04but 90% automatically at a different quality point, that's what we're working on.
30:07You will see so much progress in the next year on that, that that is, I always try to wear
30:14the use cases for a certain AI thing.
30:17And some, and then on the way you learn, maybe some are more disruptive and some are less disruptive.
30:22So that's how I think about it.
30:24All right.
30:24Well, we have the angry red clock now, so we've gone over.
30:27But thank you very much for your time.
30:29Thank you very much.
30:29Please give Valentin a round of applause.
30:31And thank you for joining us.
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