Number26: Germany’s Mobile-First Bank Of The Future

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Valentin Stalf, co-founder of banking company Number26, learned how to build companies at Rocket Internet, the Berlin-based incubator created by Germany’s Samwer brothers.

Like many young entrepreneurs Stalf and his co-founder, Maximilian Tayenthal, both natives of Vienna, decided to headquarter their company in Berlin because they knew it would be easier to find financial backing and talent in the German capital.

Stalf (right) with co-founder Maximilian Tayenthal

They incubated their venture in an accelerator created by German media company Axel Springer, one of the most active European corporate investors in start-ups. Axel Springer invested, as did Earlybird, one of Germany’s most active venture funds, and Swiss VC fund Redalpine. In April the company attracted Peter Thiel’s Valar Ventures to join existing investors in a €10 million round.

Like other Berlin start-ups, Number26 has international ambitions; it launched on January 26th in Germany and Austria but plans to expand to other European countries this year. Stalf is a scheduled speaker at NOAH Berlin.

What were you and co-founder Maximilian Tayenthal doing before Number26?
I studied business and briefly went to work for a large investment bank and for a strategy consulting company. After finishing with a master’s degree at the University of St. Gallen I decided I wanted to do something entrepreneurial and joined Rocket Internet. I was part of various task forces, mainly on payments projects, including Payleven and Paymill, so this gave me an overview of the fintech sector. In early 2013 Maximilian, a friend from school, and I decided to do something on our own in this sector. He was working as a lawyer and before that as an assistant to the CFO of a big insurance company. Fintech requires regulatory expertise, so with my experience in Internet and fintech and Maximillian’s regulatory experience and financial background we thought, ‘we can do this.’

Why the name Number26?
In a Rubik’s Cube you have 26 cubes made up of different colors. If you know how it works it is very easy to solve. The same is true in fintech.

Number26 pivoted while it was in Axel Springer’s accelerator. In what ways did the company change and why?
In the beginning we envisaged a different product: a prepaid card for teenagers that would allow parents to load pocket money and give real-time feedback on their spending. When we did the beta we found that the parents were using it for themselves. We also realized that 80% of what people do with a retail bank account is connected with their cards so at the end of 2013 after raising some more money we decided to work on the first mobile bank for all types of customers.

Is this why you struck a partnership deal with Wirecard Bank?
It makes sense to partner with an existing bank that has the regulatory knowledge and licenses. Wirecard is more flexible compared to other banks and open to new models.

Number26 has been called the Simple of Europe. What is your differentiator with banking start-up Simple, which only made a small dent in the market and was acquired by BBVA in 2014 for $117 million?
There are two fundamental differences. In the U.S. there are no banking licenses handed out anymore. This is not true in Europe.

The European banking market has historically been fragmented so there is an opportunity to create one retail bank for Europe with several million customers in 28 countries with one back end and the same product offerings.

Secondly from a product perspective we want to bring more intelligence into bank accounts and show clients the right things at the right time. We can, for example, use geolocation of smartphones to prevent fraud in real time. This is something traditional banks are not so good at.

Like Simple we are working with a major credit card provider — in our case Mastercard — and when you go shopping we can show you how you are spending your money and help you work on budgeting and spending goals. But we plan to go beyond that and become a fintech hub.

What does becoming a fintech hub mean in practice?
Companies like TransferWise or SavingGlobal or Lending Club all are targeting niche markets but they are much better at what they do than traditional banks. The next step is to bundle these alternative banking services and give our customers access to those in one click. That is where the future is going. It is still very early but there is a big opportunity and a massive amount of customers that are ready to switch their banks. That is the main driver for our business. Old traditional banks will lose massive market share in the coming years to young and product-focused fintech companies.

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