N26, a neobank headquartered in Berlin, Germany, received its long-awaited license from the central bank of Brazil to start operations out of São Paulo, which was earlier scheduled to be launched almost two years ago.
The license granted is known as Sociedade de Crédito Direto (SCD) which means to “direct credit company”, and is one of two fintech licences issued by Banco Central do Brasil.
The SCD license will allow N26 to grant loans and financings and to purchase receivables through its platforms – as long as it uses its own capital.
SCD license allows the firms to sell receivables from their loans to financial institutions. They can also fund their loans through lines of credit from the National Economic and Social Development Bank (BNDES).
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Delayed Launch?
The launch was originally scheduled for the end of 2020, but was delayed.
Back in December, Valentin Stalf, Founder and CEO, of N26 mentioned that the bank was focussing on its core markets. Namely: Germany, France, Spain and Italy.
The bank has planned not to announce its Brazil launch until the end of the first quarter, according to a spokesperson cited by Finance Forward.
Since February 2019, Eduardo Del Guerra Prota has been heading up Brazilian expansion plans for N26, according to his LinkedIn. He is a former Santander analyst, and most recently has worked at Cielo, the largest credit and debit card operator in Brazil.
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According to Prota, N26 initially plans to offer a simple digital banking account. But later intends to use its licence more fully to offer credit solutions, as well as investment options.
Brazil, has a population of 210 million people, and most of it is unbanked. Its major digital challenger, Nubank, took early advantage of this.
In June, the Brazilian Fintech sailed past the 25 million client mark, doubling its user base within a year.
In the first quarter of 2020, Nubank claimed it was acquiring 42,000 users each day on average.
N26 in Brazil
The challenger bank holds at least a 7.4% market share of all consumers in Brazil and Mexico.
Although the challenger is not generating profits, in the first six months of 2020, it managed to reduce its losses by 32 percent, which bodes well for eventual profitability.
It was a challenging year in 2020 for N26’s expansion outside of “key” markets. In February, the fintech decided to pull its operations out of the UK.
According to the BBC, the challenger had just 200,000 UK users upon exit.
In May 2019, N26 fired ten of its 90-person New York-based workforce. It marked the first instance of job losses for the fintech.
Then in August, N26 said it had “nearly” hit the half a million-customer mark in the US. Almost double the numbers the fintech reported back in January 2020.
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