Established banking giants are ripping customers off with hidden fees and a lack of transparency, driving Millennials to embrace a new generation of digital banking services, according to N26’s head of international markets.

Speaking after the German digital bank launched its current account service in the UK last week, Alexander Weber told FStech that bank fees and account charges were partly to blame for pushing young people towards mobile-only banking, with 1,000 UK customers signing up to N26 every day in the past week.

“You know traditional banks, everyone knows they care about earning money off you and rip you off as good as they can, so hidden fees, no transparency,” he said, explaining that Millennials in the bank’s 22 European markets are demanding transparent, easy-to-understand products that build trust and integrate with their digital lifestyles.

“Being transparent and making money is not a juxtaposition,” Weber added.

“We are very profitable per customer based on the high activity we see with our customers, when customers spend a lot with their cards, when they use the account, when they put money on the accounts, that’s where we make money without taking fees from the customer,” he explained.

Commenting on the “above expectation” number of UK customers signing up for the N26 current account, Weber said that interest in mobile banking app - which launched in beta phase in October - was evidence of the rapid adoption of innovative financial products among younger customers who look to their banks to become lifestyle brands.

“What’s an interesting shift is banking and financial services moving away from financial products,” Weber continued.

“No customer cares about a financial product, they don’t say ‘oh I have a cool loan’. But they think about ‘I can buy a house, I can go on a vacation’ so it’s basically the realisation that customers don’t care about your product, but they care about you solving their problems.”

Research recently conducted by the bank also showed that 80 per cent of Millennials are postponing financial decisions because they either do not understand them or because of a lack of trust in the lender.

It is for this reason that N26 is planning to roll out a number of additional features to its account services in the UK, including an overdraft facility, in the coming months.

Weber revealed that the bank is also planning to launch series of ‘premium’ account services - N26 Black and N26 Metal - with a membership feel and a suite of services tailored to the lifestyles of globetrotting Millennials.

“I think we want to move away from having a premium card to having a freemium model, where they also say there are a lot of benefits other than only the card that come with being a Metal member or being a Black member.”

The Metal cards in rose quartz and slate grey designs will offer services such as access to WeWork spaces around the world for digital nomads, while a third party partnership with Allianz offers in-app travel insurance.

However, despite the fashionable accoutrements, moves from N26 and its digital rivals - including the rapid expansion of Monzo and Starling Bank - are not just a result of hype, but rather reflect a wider shift in the global financial services landscape which is redirecting investment into FinTechs.

Weber said: “The industry is becoming also much more confirmed by the funding rounds that have been raised, the profitability we’ve shown, these are giving much credibility and fuel to the industry and it’s not a bubble or a hype – and I think the valuations, these things are based on fundamentals.”

Since it was launched in Berlin in 2015, N26 has attracted investment from Tencent, Allianz and the investment vehicle of Paypal founder Peter Thiel, enabling it to expand quickly across Europe.

Weber says this acknowledgement that digital challengers have the potential to become serious global players is fuelling N26’s ambitions to become the Netflix or Spotify of the banking world.

“We think we’re in a unique position to build the first global brand in finance in banking like it’s been built in music or entertainment,” he said.

According to Weber, globally connected technology is the key structural advantage digital banks have over incumbent banking giants. “The thing they’ve done which we don’t consider being really global is in every country they have a different IT infrastructure, “ he said.

“So if you move from the UK to Hong Kong you need to open a completely new account – we want to create this borderless banking experience that if you move around the globe there should be an easy way for you to stay with the same bank.”

To that end, N26 is planning to launch its brand in the US in early 2019 by partnering a bank with a federal licence, enabling the digital bank to roll out its full proposition of services while the underlying infrastructure is provided by a more established rival.

“What was important for us was to be available everywhere,” Weber added.

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