Start-up lessons from N26, fast growing digital bank

“Try not to become a person of success, but rather try to become a person of value” to paraphrase Albert Einstein.

Value creation begins with aiming to confront the problem the customer faces. Begin to see further, ‘get out of your own head space’ and see what is upsetting them. See what you never noticed before, despite possibly looking at something 100 times. See things differently. What do customers’ value, what is [really] important to them? It’s not only price, may also be the importance of time saving convenience, or perhaps having a sense of trust and peace of mind ?

Two young entrepreneurs started working in a living room in Vienna, Austria eight years ago. The result of their hard work and business savvy is N26, a digital start-up bank, today valued at Sh384 billion ($3.5 billion), funded by venture capital, working in 25 countries of the European Union and the US.N26 is not yet available in Africa.

Value proposition is a free account with no hidden fees, operated from a smart phone. To open an account, one simply goes to the website, 8 minutes later they’re in business, and a physical card is in the mail.

“Your N26 standard bank account comes with all that you need to spend, receive, and keep track of your money—in one beautifully simple, intuitive app. Get a free virtual debit MasterCard to pay in stores, online, and in apps, and start managing all your finances directly from your phone” says the bank.

Maximillian Tayenthal co-founded the bank in 2013 with Valentin Staff, launching their first banking product in 2015. With an ambitious target of impacting the lives of 100 million customers, they recognised many banking customers were no longer using branches. They realised that, at the time, the look and feel of many banks mobile and online offerings were unattractive. Plus, if one was born in Paris, went to school in Barcelona, did their masters in Vienna and started working in Milan, they would have had to open four different bank accounts. N26 Bank provided a one account solution, from a base in Germany, working in a tightly regulated financial industry, serving customers across Europe, based on a single cloud IT platform.

In six short years how is it possible they have been so successful, withseven million customers and 1,500 staff ? What are the lessons learned for Kenyan entrepreneurs ? What is the N26 secret sauce ?

First, they did not start with the idea of creating a digital bank. Original thought was to offer a prepaid card to teenagers, connected to an app, allowing parents to control the card. After launching a beta [test] version they found it was parents using the card for themselves. This gave them the idea that they could play in the bigger space of digital banking, offering accounts, based on an attractive simple to use app.

N26 was the result of a pivot, a change in direction, based on what customers wanted, responding to market feedback. aCatalyst is working with a client that 4 years ago started an online magazine that pivoted. Today, they have created a company that is doing booming business, ironically, assisted by the restrictions their customer base faces, in this time of Corona. Remember it’s not the strongest, or the most intelligent that survive in business – it’s those that are most adaptable to change.

Secondly, N26 addressed a problem customers had. Thinking fast, thinking slow, we all have this great temptation to quickly think, rush to the conclusion, we absolutely know what customers want. Not giving people what they want, has caused the downfall of many businesses. There are loads of great business ideas out there. Strange thing is they are based on the ‘pain points’, the inconveniences, the things that upset, irk customers when they use a product or service.

Thirdly, focus on creating value, not ‘show off, shinny bling, flashing lights’ success. N26 put customer satisfaction as one of their top performance indicators. Aim was first to create real value for the banking customers, providing a secure way to manage their money from a smartphone. Upstart N26 realised people were dissatisfied with their old banks, which often had a big brother ‘we know what’s best for you’ mentality. By offering a ‘less cost, less time, more flexible’ banking product, the digital bank was able to acquire customers at a fraction of the cost, compared to what traditional competitors had to spend in advertising.

So where do you begin ? Start small, run a number of low risk, low cost experiments, that address the problems people have when they use a product or service. Then continually evolve, make those small changes. Who knows, there might be break through eureka moment, or more a gradual journey down the path of fine tuning. Paradox is that break throughs occur after breakdowns.

“Go as far as you can see; when you get there you'll be able to see farther” was how the historian Thomas Carlyle expressed it.