Fast-moving fintech startups are supposed to be killing banks. But we’ve yet to really establish what a banking system without these legacy players might actually look like. After all, what is really happening is that the individual services banks offer — saving, loans, and money transfers — are being broken off and revamped by separate, individual fintech startups.
But according to Number 26 CEO Valentin Stalf, this isn’t going to be the way of things for very long. What comes next is what should really scare banks.
I sat down with him just as the Berlin-based company launched an English-language version of their mobile banking app, which has been running in Germany and Austria since January.
Number 26 already has 25,000 users, primarily from word of mouth, Stalf says, without actually doing any marketing.
Stalf thinks that after the unbundling of financial products that we are seeing now — where each fintech startup takes on a specific niche — there will be a rebundling of services, with startups plugging into one another and working together. The name “Number 26” comes from the 26-move Rubik’s Cube solution discovered by scientists Daniel Kunkle and Gene Cooperman in 2007. The company believes that if you have the right strategy, a complex problem like a Rubik’s Cube or even the banking system, can solved.
“The customer could have an account with us, but they can invest some money with, or get a loan from Lending Club or do an international transfer with Transferwise ,” Stalf told us. “Then we would be better than every traditional bank, and able to offer a better rate.”
“It could be that the bank plugs in there,” he admitted. “But I don’t believe that because they are much to slow.”
“I think there will be a massive shift in market share. It is not going to happen tomorrow, but I think it is going to happen much faster that most banks expect.”
Number 26 has raised €12.5 million ($US13.7 million) so far to create a digital-only bank account accessed through an app.
You can sign up for an account in just four minutes, online, without sending in any documents. At the end of the sign-up process you get a video call to verify your identity, show Number 26 your passport, and answer a few questions.
But while the digital-only bank doesn’t have any branches, its services are still running on top of traditional banking systems. Number 26 accounts are attached to a debit card that works at ATMs and shops that take MasterCard. Number 26 also doesn’t have a banking licence itself, so the funds held in its accounts are actually looked after by German bank Wirecard.
Number 26 also has a lot of financial tools, which can tell you where you end up spending your money, be it clothing stores or restaurants. The app will also recommend what is best for you to do with your money. If you regularly earn more than you spend, the app will recommend that you put your extra capital into a savings account, Stalf explained.
Transactions and payments show up on the account in real time. You can also block the connected card by pushing a button in the app. You can unblock it from within the app too.
Right now the company is just working to improve its salary account, but plans to add savings and overdraft options at a later date, Stalf said.
Stalf will consider British company Atom Bank to be a direct competitor when its product launches, while Moven and Simple offer similar services in the US.
“I think the longer term goal in the next 12 months is to go to other European markets. The broad vision is to build one bank for the European market. Because I think that is what the lives of young people look like. They don’t care about boundaries within Europe, they are living European lives. It makes no sense to have an English bank and a German bank anymore.”
The company currently has 45 employees.
Number 26’s app is available in English on Android and online now, but is still waiting for approval from Apple’s app store. Stalf tells me it should be available by the end of the week.