Digitalisation and payment expert Marcus W. Mosen expects competition between traditional banking groups and neobanks to pick up significantly in the coming years, with the new digital players continuing to gain market share. Fintechs are already the new fourth pillar of the German banking industry and the innovators of everyday financial services, says the Chairman of the Supervisory Board of digital bank N26 talking with Börsen-Zeitung.

This is particularly true for retail banking. "Conversely, this also means that the other three old pillars of the banking industry are crumbling in this area." It is no coincidence that all banking groups in Germany are reducing their branches.

Mosen, who was CEO of the payment company Concardis until the end of 2018, expects a digitalisation push, particularly in the next two years: The further development of artificial intelligence (AI) alone will drive purely digital business models forward more quickly. "This all plays into the hands of the new players in the banking industry."

The fact that the traditional banking groups are also in the process of developing digital services does not change anything for Mosen. There is still the old infrastructure in the background, he says. "It makes a difference whether there is just a fancy new front end on the smartphone or whether the entire back end of a bank is in the cloud," Mosen continues. The strategic difference is: "The new players – such as N26, for example – can work with completely different pricing models thanks to more efficient platforms."

In view of this development, the Berlin-based neobank N26 is not in a hurry for an IPO, according to its Supervisory Board Chairman. "In my opinion, an IPO is realistic in the next two to four years," says Mosen. The market environment for IPOs is currently not where it needs to be, and the company still wants to grow. "It is important to show how the company is developing for a few more years," adds Mosen.

When the time is ripe for the IPO, the 59-year-old assumes that N26, with its clear focus on Europe, will also go public in Europe and not in the US: "The German market would certainly be a good option." The industry expert, who was appointed Chairman of the Supervisory Board at the end of 2022, invested in N26 himself in the early stages and is still a shareholder.

Before an IPO, the growth restrictions imposed by the German Federal Financial Supervisory Authority (BaFin) would first have to be finally lifted. When this happens is a decision for BaFin alone, emphasises Mosen.

However, N26 has been in an excellent dialogue for more than a year, in which the Supervisory Board is also directly involved. "All the things that had to be implemented have now been implemented. Accordingly, the restrictions could be lifted in the foreseeable future," says Mosen optimistically. The issue was an absolute priority for the entire bank.

In December, BaFin relaxed the growth restrictions somewhat. Since then, the company has been allowed to take on 60,000 new customers per month, 10,000 more than before. According to Mosen, however, this does not represent any tremendous operational relief. Neobrokers and neobanks have significantly higher growth figures.

Above all, N26 is not a purely German bank but a European one. "And European platforms have a completely different dynamic as well as different challenges and opportunities than traditional banks," emphasises the industry expert.

He points out that the differences in the business models still need to be emphasised more in public. There is also much more to explain to regulators. "I believe that there are still gaps in understanding and that more bridges need to be built. Ultimately, BaFin also has an interest in the success of digital banks."

N26 is aiming to break even in the second half of the year and remains "solidly financed", as Mosen emphasised in the interview. The need to reach break-even more quickly has increased for many start-ups with the collapse in financing opportunities – even if business models are not geared towards a quick break-even in the first few years.

The N26 managers have high hopes for the planned launch of trading services in the second quarter. This will make the platform even more attractive because bank accounts and trading will be combined in one app.

Mosen warned politicians in Berlin and Brussels against over-regulating the market development of fintech platforms and thus slowing down developments. Europe is also in competition with US platforms and, to some extent, also with Asian platforms, he said. "I am in favour of the idea that we in Europe should create our own digital infrastructures, our own platforms and offerings. But that requires freedom for development."

According to Mosen, regulation in Europe needs to be rethought: Customers should be given more personal responsibility for banking transactions. It is absolutely right that data protection interests are safeguarded. "But regulation should not dictate too much about what a normal customer can do, how, when and where."