Nicolas Kopp on Banking on the Cloud
N26, a mobile-first and mobile-only digital bank is open for business in the US, and Nicolas Kopp, CEO of N26 Inc. is excited to bring new services to the growing mobile lifestyle. N26, founded in 2013, launched its first app in 2015 and since then has attracted 2.5 million customers across 25 European markets. What’s different about N26 is that there are no brick-and-mortar locations – in essence, it’s doing business in the cloud, on the cloud. As a result, its business model and mode of operations looks unique.
Nic, it's great to talk with you again. Thanks for your time. You joined the company in 2016. What is the most exciting aspect of this role for you?
What excites me most is that no day is the same. In my role I focus on three separate leadership aspects. You always need to keep certain things constant and focus on where you want to get to, what goals, what sort of the “North Star” we're achieving together as a team. On the people side? Just how do you build the best team, how do you get new people on board, how do you make sure that the team works efficiently and well together, that people are happy and motivated, and contribute. Then the third area to track is processes. Especially how we're setting ourselves up for the processes side to succeed here in the United States. Keeping these three topics top of mind should eventually lead to customer success and sort of a fan base that uses our app. We want them to be excited about using our app so they’ll become loyal users and by reviewing our app, they’ll spread the word. Hopefully we will have made their lives better one way or another.
That's perfect. Are there differences in your US customer culturally from the cultural situations that you have in the EU?
Customers in Europe and the US are different, and also within Europe. Let’s not forget continental Europe. Let’s take a step back. N26 is live in 26 markets by now (when you include the US). We just launched Switzerland, so we're live in continental Europe, live in the UK, and just launched the US a couple weeks ago. To answer your question, I think customers within Europe are different just like with the US depending on where you're from geographically, there are differences.
At the highest level two things stood out to me when I moved over to the United States.
First, I think savings rates on average for European customers are slightly higher. For example, compare Germany and the United States: I think it's up to five times higher the savings rate in Germany than in the US. So what does that mean for us building products and features that help people save more here in the US? It’s of paramount importance.
The second key distinction that I discovered is people are very focused in the US on what they're getting for their spend. This whole concept of cashback, rewards, points is definitely something that people here in the US are a lot more focused on than European customers in general.
So the two key differences are around savings rates and rewards or points, and we are addressing both at N26 with features around Spaces. I think you may know about that feature where you help people set up accounts in real-time, or our Perks program where you can earn benefits on brands that a lot of our customers use like Tidal, Luminary and different podcasts or music streaming apps. Some of the newer, hipper brands out there.
If we could talk a little bit about the impetus of opening a mobile-only bank. What was the thought process behind that?
I am happy to talk to you a little bit (about that). I’ve worked very closely with both of our founders and know Valentin Stalf, our global CEO, back from undergrad. The company was founded in 2013 and its mission is that it wants to empower people (our customers) to live and bank their way. So what we discovered in the early days is that if you zoom out to this twenty-, thirty-foot view you had back then, and still have today, a lot of innovation on the mobile side. Things like customer experience and the mobile experience that people are getting on their computers, they are getting on their phones with significant improvements, for example, music streaming with Spotify, Apple Music, and so forth. Think about entertainment in general with Netflix, also mobility; things have improved significantly with Uber, or instant messaging, social media with Facebook, WhatsApp and all these companies coming up.
Back then, already a trend had been underway where the mobile phone, and the way customers interact with their device, where they spend much of their time, was in the process of shifting over to mobile. The experiences there have improved significantly over the last couple of years.
But one key industry, financial services, was behind the curve so we set out to sort of tackle that problem within financial services for our customers.
What are the benefits and the challenges of being a cloud-only business?
I see a lot of benefits, frankly. From a high-level strategic point of view it is beneficial because it allows you to scale better, and also a lot of features and ways of using most modern technologies are better deployed on the cloud and supported more efficiently.
Certain security and safety mechanisms are in place that basically allow you to protect your customers if you're on the cloud. One very clear example is if you have servers in your room or basement and the building burns down a lot of the customer data is lost. So I think also from a customer perspective there are benefits. I would summarize it as scalability, the ability to deploy the most modern technologies to build your bank, and security mechanisms that also benefit our end users.
Did you have to adapt from a typical corporate structure to accommodate the new business model?
Good question. By new business model do you mean mobile-only, and cloud-based?
What I'm thinking about is that N26 doesn't have any brick-and-mortar customer locations, right?
No that's a very good point, we do not have brick-and-mortar locations. I think most people live their lives on their mobile phones, they prefer to also do banking on their mobile phones. For the times where you want to speak to a person you can also call in or chat in. So N26 no physical branches. And how does that impact our business model? It actually has a lot of benefits. We save all the real estate costs, the complexity that comes with operating these branches. You also see in general a trend in the United States and globally where branch penetration is dropping continuously. We just took a more radical approach and the savings we have based on that we can pass on to our customers by offering cheaper products and activities.
So in place of tellers and personnel at brick-and-mortar locations, do you have call centers? And are you set up in that fashion for support for your customers?
Yes, 100% correct, we have call centers. You can call us, email us, chat to us. That's still very important for customers to have that human touch if they need it. So on that side, we're quite well set up, and then you can also imagine on the customer communication side. There are a few things you need to change so you will communicate with your customers, mainly in-app or through email, and then in-person because they don't have a forum to come walk in and get the information. There are definitely changes in communication structure, but we think the changes that we're implementing and offering to customers are actually the ones that are preferred. I don't think a lot of people appreciate the sort of Saturday morning going through your mail and see what kind of letters you got. You prefer to do things on the go, when you get a push notification by your bank or an email to work through things that way.
As far as developing your app, what kind of back end does it use? What cloud provider do you guys use?
In terms of the infrastructure, we’re microservice-based. We’re an Agile environment, use CI/CD and have numerous deployments per week. We empower the team to the maximum, to make sure that they can use the tools that best benefit them to achieve their goals. We work with tight, small teams as squads where the product managers work with back-end engineers depending on the features, accessories, designers so it's a very cost-functional way of working.
Sure, and where does most of this take place? Is this stateside or is this in Europe?
We're spread across three different locations. I would say majority of our engineering currently is still in our Berlin headquarters. We have a development office in Barcelona, and an engineering team in New York City, so it's a three-pronged approach. We're opening another hub on the engineering side in Vienna, Austria, soon.
Talk to me about the US rollout, and what kind of growth you're expecting.
In terms of the US rollout; we were in beta for a couple weeks. We launched on July 11th into beta, where we onboarded customers from our waitlist of a hundred thousand people and then released publicly. Customers can now sign up for an account publicly. It takes five minutes.
What haven't we talked about that you'd like to be sure to be included?
I think the one message that my peers could be interested in is the importance of design and user research. In a lot of companies, not necessarily the consumer tech companies and startups; but more traditional companies, design and research is little more than an afterthought. What N26 does quite successfully is speaking to our users. We are very rigorous around soliciting feedback, having regular sessions with perspective users, and also current users that give us feedback on the product. We’re using this insight to fully inform our strategy for our whole US business. Not just the product roadmap, but the product roadmap is a large part of the overall strategy of the US business. Sometimes I think people tend to maybe underestimate the power or the importance of the end users and their voice. Listening to them, and instilling the right insights and feedback from the conversation on a qualitative level but also quantitative service, informs our product roadmap and what we're doing overall. That's the strategy of N26 which is something that I'm quite proud of.