European challenger bank N26 launches in the U.S.

N26, the European mobile banking startup with more than $500 million in funding from big-name backers including Peter Thiel’s Valar Ventures and Tencent, is finally launching in the U.S.

The German company first revealed plans to expand to the U.S. back in 2017, a rollout that was initially mooted for 2018 before being pushed back to 2019. Today, N26 is kicking off the first phase of its beta launch, starting with the 100,000 customers who signed up for the U.S. waiting list.

By way of a quick recap, the Berlin-based startup was founded in 2013 as Number26, before rebranding as N26 in 2016 when it obtained its own banking license. The pitch behind N26 is one of speed and efficiency — it’s available only on mobile and the web, and it promises that anyone can open an account within minutes of applying. Through the app, users can see all their payments and activities in real time and receive notifications for all in and out transactions. Also, each transaction is automatically categorized by type, while users can set themselves daily spending limits.

N26 has been gradually expanding into new markets following its debut in Germany and Austria in 2015, and it now serves 3.5 million customers across Europe. The U.S. is its first market outside of Europe, while it plans to launch the service in Brazil shortly too.

Show me the money

With brick-and-mortar bank branches closing across the U.S., mobile-native services such as N26 could be well-positioned to capitalize on the shifting banking landscape. It is actually one of a number of so-called “challenger banks” already in operation, such as Chime, which recently raised $200 million at a $1.5 billion valuation. Other players include Zero, which raised a $20 million tranche of funding a few months back; Varo Money, which raised $45 million last year; and Simple, which was acquired by Spain’s BBVA for $117 million back in 2014.

Fresh from a $300 million raise, which bestowed upon it a valuation of $2.7 billion, N26 is well-financed to challenge the challengers, so to speak. It’s also the latest in a line of European startups to ramp up their ambitions stateside — a few weeks back, money transfer service TransferWise introduced its debit card to the U.S.

At launch, N26 will offer a standard checking account and debit card, with no account maintenance fees or minimum balances required. “We will eliminate the frustration of visiting branches, waiting on the phone, and paying fees for basic services that should already be included,” said N26’s U.S. CEO Nicolas Kopp.

During the beta phase, the company said that it will waive its ATM withdrawal fees, though the ATM operator may still charge something. And when it launches fully to the public, N26 will make the first two ATM withdrawals each month free, after which it will cost $2 per withdrawal plus however much the ATM operator charges.

It’s also worth noting here that N26 will make money through the usual interchange fees that banks charge to the merchant.

Later this summer, N26 plans to launch its Metal premium tier accounts, which come with additional perks and a stainless steel Mastercard — the company hasn’t revealed pricing for that, but using the European figure as a starting point, we can perhaps expect the figure to be in the $15-$20 per month range.

N26 has been setting out to create a modern bank built from from various fintech technologies and services. A few years back, N26 partnered with TransferWise, giving its customers access to cheap international money transfer tools directly inside the N26 app. Later, it launched a new investment product in conjunction with Vaamo and a savings account with Raisin.

The company hasn’t indicated whether it plans to roll out similar offerings in the U.S., but if it did decide to do so, such shared revenue deals would be another obvious conduit for it to earn money.

While N26 already has its own banking license in Europe, for its U.S. foray it’s partnering with Axos Bank — previously known as BofI Federal Bank — to operate legally. The company told VentureBeat that it may pursue its own U.S. banking license in the future.

“The U.S. launch is a major milestone for N26 to change banking globally and reach more than 50 million customers in the coming years,” added N26 cofounder and CEO Valentin Stalf. “We know that millions of people around the world and particularly in the U.S. are still paying hidden and exorbitant fees and are frustrated by poor banking experiences. N26 will radically change the way Americans bank as it has for so many people throughout Europe.”