N26, a Post Bank and Bigdata for Finance Industry (2)

1. Short summary description of the business/service

Number26 (N26) is the Europe’s most modern way of banking. It revolutionizes the traditional banking service and how people spend, save and send money. N26 provides the best online banking system experience for customers.
This new way of banking speeds up all processes and it starts from the moment a new account is created, taking just a few minutes to create one. It is intended to provide a fast, transparent and easy to use service through everyone’s phone.
Transactions are made and shown in real time through mobile apps. Other banks could do the same, but it’s more difficult to implement a system like this due to their existing infrastructure. All possible operations that a conventional bank brand could perform are done and could be undone in just few minutes without the inconvenience of physically to a bank establishment.

If you lose your card, you can block it and unblock it later in case you find it without the need of waiting to get a new card. If someone tries to use your card you can block ATM transactions until you get it back. You can get track of how much money you spend. N26 are regularly innovating high-tech solutions to secure all transactions and detect suspicious activities, allowing the user to accept or block any transaction.

To operate as a bank were affiliated to a banking partner who was the custodian of the money and also had it covered by insurance. N26 customers do not incur any transaction charges. Now that N26 has its own banking license, the same conditions remain. More privileges or benefits could be offered in the future with the much anticipated geographical expansion. “International transfers, savings accounts, investment products, credit offering and insurance will be part of its new products.”

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2. Why is it a big data problem?
The N26 is a direct bank relating to account management visa Smartphones. The Bank was founded in 2013 as FinTech – Startup . To carry out the banking transactions it uses the license of Wirecard -Bank, but since July 2016 also, it has its own banking license. In June 2016, the Bank counted 200,000 customers. N26 meets the following criteria that define big data:

1) Volume, the data is voluminous and inconveniently large to be handled by general analysis methods
2) Variety, it is comprised of several different types of attributes that together have an impact on the service
3) Velocity: N26 has 200 000 customers in Germany, France, Greece, Ireland, Italy, Spain and Slovakia who use this system. It is also growing at a steady rate and is anticipated to move into the rest of Europe. The bank has so-called “real-time banking” on, all transactions can be seen within seconds in the app to the customer via push notification appears. Therefore, customer banking data is constantly on the rise
4) Veracity, the information is from different sources, different countries and currencies. This makes it high veracity data.


Added: 27th Nov 2016

2-1. Vaamo – the Robo-Advisor

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In addition to the large amounts of data that are handled by N26, it is certainly one of the “hottest” Fintech players, not only in Germany but possibly in the rest of the world.  N26 is in partnership with VAAMO, to “offer clients N26 Invest, a co-branded solution that lets users select from three investment strategies depending on their risk tolerance” (www.finovet.com).  VAAMO, robo-adviser applies BIG Data Analytics to determine the best investment strategy for the customer.  The customer does not need to painstakingly go through a lot of investment ‘documentation’ or sit with a financial advisor to decide on what investments to take up.  The robo-advisor brings financial services to customers, tailored for their specific needs as opposed to random financial services

Vaamo – Robo advisor algorithm based on real-time big data -provides below services with less employees.
  1. Identify client profile & Procedure
  2. Recommend suitable financial products
  3. Allocate their asset to investment mix
  4. Recommend adjustment of portfolio through monitoring
  5. Recommend additional service like tax services
Traditionally, they were only possible with human intelligence. However, big data technology – especially real-time data processing – made it possible to choose the best product and provide recommendation service to customers.

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2-3 Impact of Robo Advisor

However, what is a “Robo-advisor”? It is an online wealth management service that provides automated, algorithm based portfolio management advice without human financial planners.

The current capabilities of robo-advice are basic. In general, it bases ts management decisions on simple surveys from clients’ profiles. It monitors and adjusts, then understand the data proposing financial plans depending on customer needs and finally implement such plans.

Most of the users prefer this kind of service due to the privacy offered by being a digital solution and the ability to learn and draw their own path. Even though, it represents an attractive service it won’t meet complex needs from investors, not even with a moderate financial activity. This is where we need to take into account the human factor. The client-advisor relation is very important, persuading clients to take action and synthesizing different solutions remain an essential part for a financial advisor [n].

Is clear that machines are changing the money management landscape and that old-school financial advisors are the ones with the most to lose.

It’s clear that the idea between N26 and Vaamo of implementing a robo-advisor is very intelligent, but the experience of a face to face interaction is important. Therefore, the best of human and robo-advice should come together.


3. Opportunity and Threat
1) Opportunity

+ Approachability to customers

Unlike traditional banks, N26 has significant approachability. Based on web and mobile applications, Number26 provides not only bank accounts and domestic wire transfers, but also investment products. The customers can easily sign up for the service and verify themselves with video chatting by showing their identity. This is huge opportunity for the customers who feel inconvenienced by traditional banking services. Although
traditional banks also provide online banking service, N26 is more convenient to use because of its user-friendly interaction design.

+ Compatibility with other Fintech services

N26 is currently cooperating with other fintech services namely Transferwire(An overseas wire transfer service through the internet) and Vaamo(A B2B robo-advisor-solutions). By cooperating with other fintech services, N26 has a broad coverage of their services. It means their service is not limited only to banking, but also can be extended to automated financial advisory. This is not yet provided by its competitors. Automated services give N26 a distinct advantage over their competitors. N26 do not need to hire thousands of employees to provide services for their customers. This significantly reduces their overhead expenses on human capital. In addition to the cost saving on human capital, N26 is also better placed to expand to other countries than its competitors.

+Target Market: Young Generation

N26 appeals to the young generation, offering them more options for entry level investments.  The younger people do not have much wealth and traditional or conventional methods of investment may not have much options for them. Because of this ‘Appeal Factor’, N26, has the potential to become more popular than most financial  services currently offered by traditional high street banks and financial services.

2) Threat

maxresdefault– Security
Security is one of the most important issues for fintech companies. Because fintech is an emerging market, it is not well recognized by traditional customers, and customers are more likely to be hesitant to commit to N26 because of security threats. In case it is revealed that they do not have enough security on their network infrastructure, N26 will face a significant crisis. Although the threat of security always exists in internet
services, a security issue is more likely to have a higher adverse impact on the reputation of N26 than it would on other general internet services because of the financial nature of the business and the maximum potential loss.

– Credibility(In comparison with its competitors – Traditional banks)
The distinct advantage of the traditional banks is stability based on their long history. Because fintech companies like N26 are young, it will take time for conservative customers to have unreserved confidence on the new fintech services. N26 has to prove that they are financially and technically credible by providing stable services until they are recognized by traditional customers.

By Jaeho Shin, Sicelesile Ndlovu and Moises Daniel Garcia

Bibliography
1. Wikipedia(2016. 10), Available at here
2. N26(2016,10), Available at here
3. N26 Support(2016. 10), Available at  here
4. Techcrunch(2014. 10) Available a here
5. Techcrunch(2016. 07), Available at here
6. Techcrunch(2016. 02), Available at here
7. Vaamo(2016. 8) Available at here

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6 thoughts on “N26, a Post Bank and Bigdata for Finance Industry (2)

  1. First of all to not give this any negative connotation, I enjoyed reading your case study.
    About the N26 bank, there apparently have been problems with ATM withdrawals of 2€ for every time a customer wants to take out some cash. Consequently, many of the accounts have been closed leaving the credibility of the bank in doubt. Nevertheless, I personally think it was more part of the innovative idea in the competition with traditional banks. Once, this issue of marginal costs is overcome there should be a good potential for the N26 concept.
    https://www.finextra.com/newsarticle/29004/number26-closed-accounts-because-customers-made-too-many-atm-withdrawals

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  2. An interesting feature of N26 is that they’ve actually have not done any marketing to promote their services, but they have acquired most of their customers through word of mouth, which clearly shows that the people using it are very satisfied with the bank.

    In addition, an aspect of their business model that you could really emphasize is the partnership-based offering of services. They have taken advantage of the unbundling of financial products that is nowadays the trend and twisted it into the other direction: the rebundling of services: every newly created start-up focuses on a niche product or service, but they work together as a way to maximize the quality of the customer experience. In the case of N26, the fact that they offer a bank account, but then provide the connection to Lending Club (for obtaining loans) or Transferwise (for international transfers), translates into much lower prices for the customers, as compared to the rates they would get from a traditional bank.

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  3. Another possible threat could be an increase in competition with the traditional banks. When these banks start seeing how this business model is much more appealing to the costumers and how they are loosing customer to N26, I think that they’ll start implementing services like the ones offered by N26. The question is if N26 would be able to compete with banks which have significantly more economic resources and manpower than they do.

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  4. Super interesting article! I know people are really slow to trust FinTech companies, or any financial innovations that banks roll out too (e.g. some people still don’t trust contactless cards). How do you think N26 will establish trust in the market, especially with the Robo-Advisor? With wealth management people often trust people over news sites, analysis etc. especially when they have little experience in investing, so it would be interesting to see how they are dealing with these issues.

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  5. I think N26’s appeal is the no-frill banking service where the customers only need the basic services such as keeping money, withdrawing money, paying online, and basic transfer capabilities.

    While the idea of a digital bank might be a nightmare to my parents, I honestly don’t mind using it as I have a positive perception towards online transactions. But people of a different generation might have a different perception and might not be convinced with N26.

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  6. Thank you for the interesting case. I think one of the biggest issues with these services is that the people do not trust them. This is most prominent in the older generation. How do you think N26 will counter this?

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