N26 withdraws from Brazilian market, focusing on Europe
German digital bank N26 is exiting the Brazilian market as it refocuses on its core European markets, ending its ambition to become a “truly global bank.”
Berlin-based N26 said its decision to pull out of the Brazilian market aligns its strategy with a primary focus on its European operations. The bank’s entry into Brazil, initially announced in 2019 with ambitions of global expansion, faced challenges and did not progress as planned. N26 had begun testing its services in late 2021 but did not make them available to the general public.
Over the next two months, N26 will wind down its Brazilian operations, allowing approximately 70 Brazil-based employees to apply for positions at the bank’s European offices.
N26’s exit from Brazil follows previous departures from the United States two years ago and the UK in 2019, citing Brexit-related issues.
The digital bank last secured funds two years ago, raising $900 million at a valuation of $9 billion. However, since then, N26 has faced rising compliance costs and increased regulatory scrutiny, resulting in growing losses. In May, the company announced a four percent reduction in its workforce as it adapted to the challenging macroeconomic environment.
N26’s decision to exit Brazil reflects its shift in focus to continental Europe, specifically targeting markets in Germany, France, Italy, and Spain. The bank had previously faced difficulties in attracting local investors to support its expansion plans in Brazil.
This withdrawal is another setback for N26, which has faced regulatory challenges in Germany. The country’s financial regulator, BaFin, fined the business €4.25 million in 2021 for its lax money laundering controls and placed a temporary limit on the number of new customers the bank could onboard each month, capping it at 50,000 new customers. In a rare move, the regulator also appointed a special supervisor to monitor the digital lender.
Founded in 2013 by Valentin Stalf and Max Tayenthal, N26 had raised $1.8 billion from investors over the past decade, including prominent names such as Peter Thiel’s Valar Ventures and Li Ka-shing’s Horizons Ventures. Despite decent investments, the bank reported a loss of €172 million in 2021, even as its revenues grew by 50 percent to €182.4 million. Compliance expenses and anti-money laundering controls skyrocketed, resulting in cost-cutting measures, including a reduction in the workforce.
N26’s Brazilian operations, although separate from its European operations, represented only a fraction of its client base of over 8 million. The bank had been testing its products in Brazil, with potential customers joining a waiting list.