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N26 is pulling out of Brazil as the once high-flying German online bank narrows its focus to Europe in an effort to cut losses.
The Berlin-based lender said on Tuesday that it would close its Brazilian operations over the next two months, admitting defeat in its attempt to take on Nubank, the South American country’s largest online lender.
The retreat leaves N26, which was valued at $9bn in late 2021 just before rising interest rates hammered European and US fintechs, focused on continental Europe, including Germany, France, Italy and Spain. The lender had previously pulled out of the UK and US.
The future of N26’s Brazilian operations had been in doubt for more than a year as it struggled to attract local investors to help fund its expansion and, more recently, deciding against selling them, according to people familiar with the matter.
The closure is in line with the group’s strategy of focusing on “its European core markets”, N26 said.
Leaving Brazil is the latest setback for a company that has been in the crosshairs of Germany’s financial regulator. Last month, BaFin indicated it was willing to partially lift a cap on how quickly N26 could take on new clients that it had imposed in late 2021 over the group’s organisational shortcomings.
Founded in 2013 by Valentin Stalf and Max Tayenthal, N26 raised $900mn in October 2021 but has struggled to staunch losses. Its most recent accounts show that it lost €172mn in 2021 while revenues increased 50 per cent to €182.4mn.
Last year, it significantly ramped up spending on anti-money laundering controls and compliance. In an attempt to cut costs, the group culled 4 per cent of its workforce earlier this year.
Its Brazilian operations have about 70 employees and N26 said that local staff could apply for jobs in its European offices. N26 had set up its operations in Brazil as a legally separate entity from its European operations.
N26 did not disclose how many clients it had attracted in South America’s largest country, but it accounts for a fraction of N26’s more than 8mn clients. The bank had so far only been testing its products in Brazil and potential customers were invited to join a waiting list.
Over the past decade, N26 raised $1.8bn from investors including Peter Thiel’s Valar Ventures and Li Ka-shing’s Horizons Ventures.
