Number26 closed accounts because customers made too many ATM withdrawals

Number26 closed accounts because customers made too many ATM withdrawals

European smartphone-only bank Number26 has finally provided an explanation for its decision to cancel hundreds of customer accounts last week: users were making too many ATM withdrawals.

The German-based challenger caused uproar on social media last week after telling a host of customers that their accounts had been cancelled and would be closed within two months.

Much of the Twitter ire was fuelled by what customers claimed was a lack of communication - although the firm insisted that there was a reason for each closure it refused to comment on specific cases, citing data protection.

Stung by the "strong reactions" to the cancellations, Number26 has put out a statement promising to "inform our customers more transparently and proactively in the future".

Explaining the rash of account closures, the firm cites suspicious misuse and money laundering but also flags a more surprising reason: too many ATM withdrawals. A "number of customers" made around 15 cash withdrawals per month and sometimes up to 30. Number26 offers withdrawals for free but, in its home market of Germany, takes a hit of up to EUR2 each time a customer takes out some cash.

"We cover this fee with the assumption that most customers will use their accounts and this benefit, reasonably," says the statement.

Acknowledging its delicate business model, the startup adds: "We do have to recognise that we are not able to cater to all clients with our product, as this would mean that the vast majority of our customers would have to bear the significant cost burden of a very small minority. That’s why we issued the recent cancellations."

Comments: (5)

A Finextra member
A Finextra member 06 June, 2016, 16:01Be the first to give this comment the thumbs up 0 likes

ATM withdrawals a 'benefit'?
Well I never.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 06 June, 2016, 19:38Be the first to give this comment the thumbs up 0 likes

ATM withdrawal is a feature. Free ATM withdrawal - because Number26 covers the EUR 2 fee per withdrawal - is a benefit.

A Finextra member
A Finextra member 07 June, 2016, 10:46Be the first to give this comment the thumbs up 0 likes

Regardless of ridiculous justifications which are mostly culpabilising the bank and not its clients, we have to sympathize with them: No FI is immune to hiccups when trying to innovate. There is no clear (design or otherwise) references and the regulatory environment cannot keep up; Hence, we are still at the beginning of the innovation wave.

One thing is sure though: The one-service-fit-all model is gone.

A Finextra member
A Finextra member 08 June, 2016, 03:41Be the first to give this comment the thumbs up 0 likes

it is ironic that Number26, which positions itself as not being like traditional banks, faces the same cost-margin-profit issues as traditional banks, and in this cases makes the same type of business decision that traditional banks often make, and now has the same type of image problem that traditional banks have had.

it will be interesting to see how quickly Number26 adapts to its business issues and customer responses, and how different from traditional banks Number26 can remain over time. 

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 08 June, 2016, 07:59Be the first to give this comment the thumbs up 0 likes

@CraigFocardi:

Spot on. I tried conveying something similar last year but you've said exactly what I'd meant.

I'll believe fintech can disrupt banking the day it hops off the VC gravy train & still manages to provide better CX than banks. (https://twitter.com/s_ketharaman/status/608944400656396289).

 

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