Despite their capacity to attract millions in venture capital, many fintechs struggle on the path towards profitability. They draw customers with promises of fee-free banking, responsive customer service, and innovative technology, but they lack many of the tools that traditional financial institutions use to make money.
German fintech N26 has overcome this profitability challenge by introducing premium subscription-based accounts and a new “marketplace model,” which allows its customers to take advantage of products like trading and credit, while collecting fees from the third-party providers of these services.
With many fintechs struggling during the Covid-19 pandemic, some are expecting consolidation in the industry. By taking advantage of its subscription and marketplace models, N26 has put itself in a powerful position amongst fintechs and is expected to make its first acquisition shortly.
CNBC reports more on the topic:
“A big driver of N26′s revenues has been its premium subscription-based accounts, for which it charges between 4.90 euros to 16.90 euros for a range of additional features.
But Tayenthal said the big focus for 2021 will be a “marketplace” model, where it includes products it can’t offer itself — such as trading and credit — while taking fees from third-party providers in the N26 app.
‘In 2020, we actually brought down the burn significantly,’ Tayenthal said. ‘It is true that, at one point in time, while we are still investing into growth, expansion and building up the team, we also want to get more in the direction of profitability.’
The N26 co-founder said his company plans to hire an additional 200 employees this year. It currently employs 1,500 staff globally. The firm is also planning to expand into Brazil, having recently obtained a banking license in the country.
‘The environment in Brazil is actually very favorable,’ Tayenthal said. ‘Everyone has a bank account in the markets we’re in already; in Brazil, this is obviously not true.’”
Overview by Laura Handly, Research Analyst at Mercator Advisory Group