2021-11-19 15:29:49

Europe's neobanks find U.S. market tough to crack

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American Banker
By John Adams

European digital financial services upstarts like N26 and Monzo were able to attract investors to fuel a U.S. expansion, but recently scaled back their plans and refocused on their home markets after encountering a crowded American market.

N26 on Thursday said it would discontinue U.S. operations after January 11, 2022 and would focus on its European business, where it would add new financial products such as investments. N26's decision is the second setback for a non-U.S.-based challenger bank in the past month. The London-based Monzo in October withdrew its application for a U.S. banking license after reportedly being told it would be turned down.

Both companies faced steep competition in the U.S. and a difficult path to obtain licensing, factors analysts say will confront other non-U.S. challenger banks that try to establish a foothold here or scale existing American operations.

The U.S. is a market that already has a burgeoning community of neobanks and fintechs offering specific and tailored services to their customers, said Zil Bareisis, head of Celent's retail banking practice in London.

N26 has pulled out of the U.S. market, while Monzo has withdrawn its application for a U.S. banking license.

Though it raised $900 million in October, pushing the companys valuation past $9 billion, N26 faced a $5 million fine from German regulators in June for late submissions of money laundering reports, a ruling that included a limit on new customer onboarding.

N26 also laid off 10% of its New York office in May 2020, citing impacts from the pandemic, and U.S. CEO Nic Kopp left N26 in March 2020. N26 pulled out of the U.K. in February 2020, saying that because of Brexit, its European banking license would no longer be valid in the U.K.

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