What the N26 and Allianz partnership means for banking

So N26 (or Number 26 as most people still call it) said it will introduce a premium credit card that includes insurance services provided by Allianz (details can be read here).

I quickly (and this time I really mean quickly) want to dig a bit deeper on three things that I thought about after reading the press release. The effects on:

· Customers
· Banks and
· The future of banking

So what does this mean for customers?

Basically a lot! For the customer this does not only mean a new fancy looking black card. It actually means the journey goes on and that they can expect more and more upcoming services in the near future (as it seems their modular tech is ready to integrate those services now based on their own banking license). At the moment still a lot of N26 users do not use their N26 account as their primary account. Why? Because of trust issues, missing services, lagging know-how at customer support level (no banking experience), etc. It can have various reasons. But this is slowly changing as some challenger banks try to add services and to make the access to them as easy as possible (and get banking experience in house )— and therefore increasing the chances that people use them as their dominant bank account. But so far only Simple (but for them it is a bit easier by being part of a multinational bank) and N26 really made progress on that front. In the future it will be possible (and standard) to offer different products for different customer types based on smart use of their customer data (and no worries privacy will still play a major role) on one platform. And those services will be much easier to use. A service will be added by a simple click and/or suggested via a push notification if you are for example traveling abroad.

This does mean no fixed contracts, no expensive fees and even more pressure on the cost structure of traditional banks. If N26 (and others) are able to become the primary bank account for their clients then this will be a game changer (and they will need a lot more cash due to regulatory requirements — but Hey! liquidity seems to be for free these days).

What does this deal mean for FinTech?

A second major thing: Allianz trusts N26 and got it approved with their internal compliance and risk team! That means a lot! One of the world’s largest insurance company trusts a small company based in Berlin that wants to revolutionize the banking world (or at least Central Europe). Everybody who has ever done a deal with a big bank or insurance company knows how painful and long this process can be and how important this achievement is.

How could the future of banking then look like?

IMHO (and this is not only my opinion) it will be Banking-as-a-Service or Banking-as-a-Platform. However you want to call it the setup stays the same. I want to illustrate this based on N26 and their existing partners Transferwise, Allianz and vaamo.

The key will be customer acquisition (channels) and low CACs (partnerships, etc) and to make the customer journey as smooth and good looking as possible (UX, Design) . Once they are on the banking platform and the one click shop works, then it is highly unlikely that they will leave except they make a really bad experience with a service or customer support (can happen especially in the first few years). Also as regulatory authorities like BaFin and others are getting more advanced and more experienced with new ways on how to identify your customer (but still there is a long way to go), FinTechs will be able to even optimize the KYC process even further in the future. And when we are getting closer and closer to Banking-as-a-Platform, the major business model will not be to offer every service on your own like most banks still do but to specialize on a specific services (like Transferwise) or the be the platform (like N26 and BBVA) and split revenues. Let’s see if this works out but we can definitely be looking forward to even better banking experiences as FinTech is growing up rapidly!