Are N26’s best days behind it?
N26 is one of Europe’s most prominent digital banks, with $486 million in sales in 2024. Yet despite the German neobank’s impressive growth over the past 12 years, we cannot help but wonder if it will ever live up to the promise of the US$9 billion valuation it achieved in 2021—the height of pandemic-induced tech startup hype.
The valuation of N26 has reportedly fallen by nearly 2/3 since then. While a $3 billion valuation is nothing to sneeze at, it is important to note that there has been no recovery in how investors value the company in private markets, in stark contrast to its peers Monzo and Revolut. Both of the UK neobanks saw their valuations fall in the post-fintech bubble hangover, but not as sharply as N26. And the valuations of Revolut and Monzo both rebounded as investors regained confidence about the UK neobanks’ prospects.
All neobanks struggle with the regulatory learning curve. It is one reason incumbents are hard to displace. But for N26, the regulatory travails are constant—and interfering with its core business.
In December, Germany’s financial regulator BaFin banned N26 from issuing new mortgages in the Netherlands and imposed new capital requirements on the digital lender, citing anti-money laundering (AML) shortcomings. BaFin also installed a special representative to track N26’s progress in fixing its compliance problems.
In explaining its decision, the German financial regulator said that a special audit found lapses in N26’s business organization, risk management, and complaint handling, violating the German Banking Act. The measures mark the second time since 2021 that BaFin has ordered a special monitor to oversee N26.
The German neobank has sought to address regulatory concerns with some personnel changes. In August, one of the original founders, Valentin Stalf, said he would step down as co-CEO and join the supervisory board. A new chief risk officer was also appointed starting on Dec 1. The bank in 2025 doubled the size of its supervisory board to six, installing a new chair who once sat on the board of Germany’s central bank.
N26’s new CEO, Mike Dargan, who will begin his job in April, hails from the world of investment banking. He worked at UBS for almost a decade, most recently serving as Group Chief Operations and Technology Officer. Before that, he served in senior roles at Standard Chartered and Merrill Lynch.
The appointment of Dargan, with his extensive background in traditional banking, is seen as a move to reassure regulators and strengthen N26’s internal controls and risk management.
“What drew me to this role is both the clarity of the mission and the scale of the opportunity,” Dargan said in a LinkedIn post commenting on his job change. “The future of banking will be shaped by those who combine disruptive technology with unwavering client trust. My focus will be clear: to build on N26’s strong culture of innovation while strengthening its position as a trusted, world-class digital bank.”
Under Dargan’s leadership, and assuming it can overcome regulatory obstacles, N26 has reasonably good prospects. Its fundamentals are, after all, strong. The German neobank has five million customers in 24 countries in Europe and has raised nearly US$1.8 billion from heavyweight investors known for backing winners. They include Singapore’s sovereign wealth fund GIC, Tencent, and Peter Thiel, as well as venture capital firm Earlybird and insurer Allianz.
N26 also wisely pulled the plug on misguided expansion, exiting the U.S., UK, and Brazil in recent years to focus exclusively on its profitable core European markets of Germany, France, Spain, and Italy.
Looking ahead, N26 should continue its shift to an interest-driven model, leveraging rising rates on customer deposits and growing subscription revenue from premium accounts. Building out investment platforms (stocks, crypto) and introducing business banking services could also help diversify revenue streams.
If N26 can do these things, its best days may be yet to come.
