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The German smartphone bank N26 has drawn the ire of Belgian savers after it unjustly closed accounts of Belgian customers on suspicion of fraud.
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The Berlin neobank N26 has been on the market for several years now as a hip and purely digital counterpart to the traditional banks. But in recent months, the reputation of the bank, which claims to have 150,000 customers in Belgium, has been badly damaged by poor customer service and sloppy money laundering checks.
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The essence
- Germany’s neobank N26 unjustly blocked the accounts of hundreds of customers after tightening its controls for fraud and money laundering some ten days ago.
- The mobile bank says it counts 150,000 customers in our country, the accounts of dozens are said to be blocked.
- N26 has been under fire for some time for its lax anti-money laundering policy.
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Those problems look set to get worse now that N26 has mistakenly blocked accounts for a slew of customers. In mid-April, N26 introduced additional control systems to detect possible fraud or money laundering.
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In such checks, users’ accounts are sometimes blocked if suspicious things arise. But with the mid-April update, N26’s controllers apparently went into overdrive. Accounts of countless customers were unjustly blocked. As a result, Belgian customers could no longer access their money.
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In a statement, N26 confirms that it has accidentally closed accounts and that it has adjusted its internal detection systems in the meantime. According to the bank, several dozen Belgian customers were affected. “Our teams are now trying to reach the affected customers to resolve this as quickly as possible.”
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Although ‘fast’ seems to be a relative term at N26: in France, where the German bank blocked accounts in the autumn of last year, some customers have been trying to get their money back for months without success.
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Unrest on Facebook
The German bank will apologize on Monday, but it is doubtful whether that will be the end of the matter. N26’s mistake caused quite a bit of unrest among Belgian customers. The fact that those Belgian customers cannot go to a helpdesk in their own country will only fuel that unrest. Even in its home country of Germany, the neobank has a reputation for being notoriously unreachable for customers with questions.
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In some Facebook groups, affected N26 users even wonder whether the bank is still financially healthy. The fast-growing bank, which was founded in 2015, suffered a loss of just under 150 million euros in 2020 – figures for 2021 have not yet been released. But N26 emphasized on Monday that it is not at risk of bankruptcy. The smartphone bank has very wealthy shareholders, including PayPal co-founder Peter Thiel and Kruidvat billionaire Li Ka-Shing.
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What does not make the situation any easier for Belgian customers is that N26 falls under the supervision of the German financial watchdog Bafin. If problems arise, they will therefore have to be solved in Bonn or Frankfurt and not by the Belgian National Bank. The balances in an account of N26 are therefore also guaranteed up to EUR 100,000 by the German government, and not by the Belgian government. Supervisor Bafin did not want to comment on the problems at N26 on Monday.
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N26 is under the supervision of the German financial watchdog Bafin. If problems arise, they must be resolved in Frankfurt.
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‘Neobanks cannot break through as a home bank in Belgium’
Smartphone banks such as N26, Revolut or Monzo have been on the rise in Europe in recent years. But they have never really broken through in Belgium so far. ‘I estimate that neobanks in Belgium have somewhere between 200,000 and 400,000 customers,’ says Jeroen Dossche of the consultant Capco. ‘That represents less than 2 percent of the number of bank accounts in our country.’
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According to Dossche, the fact that the N26s of this world do not get a foothold in Belgium is mainly due to the fact that Belgian banks usually already have a very wide digital offering. ‘At the same time, they continue to swear by what is called a ‘phygital’ model in the sector: you can still contact someone of flesh and blood if problems arise. Even during corona, you as a customer could call someone from the bank’s help desk’.
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The fact that the Belgian customers of N26 cannot reach their banks is, of course, very bad advertising, says Dossche. ‘Although I suspect that the bank simply does not have the capacity to absorb all this. Do neobanks have a future in our country? Yes, if they focus on highly specialized services. But as a broad bank they will not be able to break through in Belgium.’
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