The trend is clear: More people than ever before are switching from traditional banks to online banks thanks to their lower fees, higher yields, and better customer service. In the United States, the first major “direct” banks to operate without physical branches were Ally, Capital One, and Discover. But over the last few years, a new crop of “challenger” banks like Betterment, Chime, and SoFi have emerged, all aimed at millennials who prefer to bank via their smartphones.
Now, Europe’s largest online bank has crossed the pond to join the fray. In July, the Berlin-based N26 says it began rolling out its first U.S. checking account to a waiting list of 100,000 beta users, with plans for a public launch later this summer. The N26 U.S. account comes with a debit card, as well as a slick mobile app that tracks your spending habits and sends an instant push notification every time you make a transaction. There’s no monthly maintenance fee, it takes less than 5 minutes to open an account on your phone, and your deposits are FDIC-insured via Axos Bank, N26’s current partnering institution in the United States.
But with so many online banks to choose from, what makes N26 stand out?
In Europe, “two things make N26 unique,” says Oliver Smith, a London-based editor at AltFi and former senior reporter at Forbes. “Firstly, its geographic coverage: It operates a fully regulated current account under a European banking license across 24 EU markets, vastly more than anyone else … Secondly, N26 is targeting a slightly older demographic than its rivals, with a more “serious” brand which it says has allowed it to attract older (and hopefully more profitable) customers at an average age of 31.”
In the United States, N26 is betting on a few innovative features.
“If you direct deposit into our account, you’ll get paid up to 2 days faster than you would with a traditional bank,” says N26’s U.S. CEO, Nicolas Kopp, who spoke with Reviews.com over the phone from the company’s American headquarters in New York. If you receive weekly or bi-weekly paychecks, you probably get paid on Fridays via a paper check or direct deposit. However, many employers actually transfer funds to your bank on Wednesday night or Thursday morning. Banks then spend the next 24-36 hours processing your money before depositing it into your personal account on Friday.
“We found a way to process the transactions faster on the backend that’s fully compliant with financial regulations,” Kopp says. The U.S.-based online bank Chime offers a similar “early direct deposit” feature on its checking account, so N26 may be at the forefront of a new trend to make Wednesday the new payday.
Another N26 feature that really stands out is Spaces, the ability to divide your checking account into multiple sub-accounts and set individual savings goals for each “space.” During our test-drive of the U.S. beta, we were really impressed with how customizable N26’s Spaces are — you can choose the number of spaces, the name and image of each space, and set a target deposit amount. Transferring money between spaces is instantaneous.
Kopp says the U.S. public launch will also include Moneybeam (N26’s peer-to-peer money-sending service that works like Venmo), two free ATM withdrawals per month, and a “perks” program, which is “a brand new feature for N26 that offers rewards on your most-loved subscriptions here in the U.S.”
Four years ago, N26 drew the ire of some European customers on social media after closing hundreds of accounts without clearly communicating why. It later explained the closures were due to money-laundering concerns and excessive ATM withdrawals, and promised to communicate “more transparently and proactively” with customers in the future.
“I was there at the time because I helped build the business in Europe,” Kopp says. “We learned and we improved. Customer communication is key, and we’re well-staffed now to communicate with our customers in the way they deserve to be communicated with.”
Oliver Smith independently agreed the incident was likely the result of growing pains. “In 2016, N26 only operated in a small handful of markets with less than 1 million customers,” he says. “Many digital banks in recent years have fallen afoul of regulators, disappointed their customers, and suffered all kinds of outages and scandals. The difference with these banks, as opposed to ‘traditional’ high street banks, is how they communicate their failings and are happy to fail ‘publicly’ rather than trying to cover up their faults.”
N26 isn’t the only European bank with its sights set on America. Earlier this summer, the U.K.-based TransferWise — which mainly targets travelers and immigrants tired of currency exchange and money transfer fees — launched its own U.S. debit account, and even tapped “Queer Eye’s” Tan France to help roll it out. Another British “challenger bank” with a huge European user base, Revolut, will open U.S. deposit accounts later this year (you can currently join the waitlist).
While their checking accounts offer great benefits, so far none of these European imports offer a U.S. savings account. N26’s Spaces seem like a great way to micro-budget for near-future purchases, but for large amounts of cash, you’re better off keeping your savings in a high-yield savings account at a U.S. online bank. Particularly in light of the Fed’s recent online banks, they’re still the best way to generate passive income on your savings.
Bottom line: If you want to get paid on Wednesdays, N26’s checking account is worth a look.