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No regrets: You won’t want this to happen to your startup

FrankfurtThe Smartphone Bank N26 is the best-funded finance start-up in Germany. In January, the young bank of investors received about 260 million euros and was rated by its own with 2.3 billion euros. This makes it the first German fintech “unicorn” – companies are named, which are valued at least one billion euros.

But as investors celebrate the company launched in 2015, customers are complaining about the quality of customer service. Several cases became known in which users were the victims of fraud and then for weeks received no information from the bank. The hotline is available since last August only for customers with a chargeable N26 account ready, the chat is not 24/7.

Either accounts were opened on behalf of the Betrayed at N26, or fraudsters have gained access to their existing accounts and stolen money there. In one case, it should have been 80,000 euros. Consumer advocates urge a quick improvement in customer service.

In addition, other banks complain about a lack of accessibility of the bank. And the financial supervision Bafin noted according to information of the Handelsblatt 2018 numerous deficiencies, which must now shut down N26 as soon as possible. In the interview, Valentin Stalf, co-founder and CEO of N26, commented on the allegations.

Mr Stalf, numerous N26 customers have been victims of fraud in recent months. How could this happen?

There have been a few phishing cases – mostly via e-mail or phone. Unfortunately, some customers have disclosed personal information such as passwords or card identification numbers. And then fraudsters have partially deducted amounts from their accounts. Unfortunately, as we have grown a lot in recent years, we are increasingly getting caught in the crosshairs of scammers.

Some affected customers complain that they were unable to reach N26 for days at a time.

Meanwhile, all affected customers have their money back. That took longer than it should have lasted. And we certainly did not communicate optimally in some cases, which we greatly regret. But we have improved our customer service in the meantime.

How did phishing come about, are your anti-fraud systems not mature?

The systems at N26 are very secure and we can ward off threats well. But of course there is a steady learning curve in the topic, as with other banks too. There are many different attack scenarios that are always evolving and you always have to react differently.

The financial supervision Bafin is worried because N26 has grown rapidly, but the structure of the structures has not kept up. In a special audit in 2018, the Bafin noted many shortcomings.

We regularly have audits of internal auditors, auditors and regulators. It is quite normal that you also have a bigger test every now and then. This is the case with all regulated banks.

But the abuses that the Bafin has found in you, according to financial circles, are serious.

I can not go into concrete tests. But we are in very close contact with the Bafin and take every exam extremely seriously. If there are any complaints during an audit, we will promptly implement improvement measures in consultation with Bafin. Our goal is always to reach the status required as soon as possible. Incidentally, I do not believe that we have a poor set of staff at N26 – we now have more than 800 employees.

However, there are vacancies in the Management Board after Finance and Risk Manager Matthias Oetken has left N26.

Matthias Oetken has already decided to leave N26 more than six months ago. We have already found a successor and will present it to the public in due course.

Many banks have also complained to the Bafin, because they could not reach N26 in a timely manner, when it came to stopping fraudulent transfers. Many of the cases occurred in the first quarter?

We worked hard on our accessibility in the first quarter, and especially in the past four weeks. For two or three weeks, we have also been really easy to reach for other banks, for our customers for some time. Since March, we have reached a good level that we can be proud of. I think we are better than the market average. But I can not rule out that there were problems in individual cases.

How has your response time to requests from other banks changed?

Half a year ago, we did not always manage to report back to other banks on the same day. Today, we usually answer such requests within a few hours, usually on the same day. This corresponds to what is usual in the banking environment.

What exactly did you improve?

We have massively increased our customer service team. The number of employees has tripled in the past year. Today, 400 internal and 200 external N26 employees work in customer service. In retrospect one can say that we should have hired more people before, but now we are in a good position.

Have you also improved your inspection systems to better detect illegal transactions?

In addition to the system we have developed ourselves, we use a proven system for transaction monitoring, which is also used by more than 30 other banks in Europe. But with scammers constantly changing their attack scenarios, every bank needs to keep evolving, and so do we. We now have our own team of 50 people at N26, which deals with nothing other than fraud prevention.

Abroad you can open in some countries an N26 account via Foto-Ident procedure, which is considered more uncertain. Did you tighten the security measures?

Personal legitimacy varies. In Germany, something like photo identification is not allowed by law, in other countries already. But these are just the regulatory minimum requirements anyway. In addition, we often make even more extensive security checks. If inconsistencies are noticed, a procedure is lifted to a higher security level. This can lead, for example, to the fact that there is an additional video call or in addition a photo or video must be taken.

How many cases are you aware of when opening accounts with stolen identities?

Percent, these are very few cases. I do not believe that we are above the market average in terms of numbers.

An IT expert told us that N26 is also so attractive to scammers because customers receive a German IBAN. How do you rate the problem?

There is no evidence in our data that our accounts are being used more frequently for fraud because we are granting a German IBAN. Basically, we want to become the industry leader in fraud prevention and security. Our claim is to set the standard in future for safety issues. But this is a permanent struggle – not only for us, but also for other banks.

Markus Gunter, CEO of N26 Bank, recently said at a conference that N26’s internal processes are not as modern and innovative as the customer interface. Do you have a lot of things going on internally?

At N26 many processes are automated. Customers can control many things themselves, such as card blocking, via the app. Internally, we are also driving forward digitization and automation. We have very high demands on us and compare ourselves with companies like Google or Spotify. Judging from that, we can become even more digital – and that’s what we’re working on. We will digitize and standardize much more over the next two years.

Our claim is to set the standard in future for safety issues. But that’s a permanent fight.

Almost two years ago, you announced your expansion into the US for 2018. Did you postpone the start date because you first want to strengthen your internal structures and security arrangements?

Our delayed start date in the US has nothing to do with the expansion of security structures and new internal processes. We will be launching in the US in the coming months. We work together with a partner bank, have a very good team and will launch a very good product on the market.

How do you deal with the criticism of N26 in recent weeks?

As we become bigger and better known, the media interest in N26 increases, and some cases of fraud immediately hit the media. But as bad as some do, the situation with us can not be. Because compared to most other banks, we have better customer ratings and much higher organic growth – that does not come from anywhere.

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