After obtaining its banking license in 2016, fintech startup N26 started offering bank accounts to anyone in the Eurozone. But because of the German banking license, clients received a German International Bank Account Number (IBAN) that started with the letters DE.
That shouldn’t be an issue as Germany is part of the Single Euro Payments Area (SEPA), meaning that anyone with a European IBAN can send money to anyone with another European IBAN. In reality, European financial institutions — and their customers — suffer from IBAN discrimination.
For instance, a utility company sometimes doesn’t accept foreign account numbers for direct debits. Or a company may require local bank accounts to pay its employees. That’s why several European fintech startups teamed up and created a campaign called “Accept my IBAN.” Wise created this coalition and other members include N26, Revolut, Starling Bank and Klarna.
But things aren’t going to change overnight. Some challenger banks have started opening branches in other European countries so that they can offer local IBANs. In theory, this shouldn’t matter. In practice, it means that many customers can switch and use a challenger bank as their main bank account.
And now, new N26 customers in France automatically receive a French IBAN from N26’s local branch in France. As an added benefit, these customers with a French IBAN no longer have to tell tax authorities that they have a foreign bank account — that’s less paperwork.
As for existing customers, N26 is going to offer a way to switch from a German IBAN to a French one. This feature isn’t live yet, but the process should start in the coming weeks. This is a significant change as N26 has 2.5 million customers in France. It is one of the company’s main markets as N26 manages 8 million bank accounts across 24 European markets.
“While the European single market exists for the benefit of customers, with EU legislation mandating seamless acceptance across borders for all European IBANs, IBAN discrimination continues to exist today. This sometimes creates unnecessary friction for banking customers who may struggle to deposit their salaries or pay for utilities if they do not have a local IBAN,” N26 GM for France and Benelux Jérémie Rosselli said in a statement.
“Having launched local IBANs to millions of other customers in our European markets, we’re excited that all our customers in France will be able to have a fully French N26 account with a French IBAN by the end of the year,” he added.
This isn’t the first country that is getting local IBANs. In addition to Germany, the startup also offers local IBANs to customers in Spain and Italy. The company says that this change has led to a significant increase in customer deposits.
Similarly, Revolut started offering Lithuanian IBANs after obtaining a banking license in Lithuania — it doesn’t have a banking license in its home country, the U.K. It then added local IBANs in France, Ireland and potentially other countries. Bunq also offers local IBANs in the Netherlands, Germany, Spain, France and Ireland.