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By Eric Auchard
FRANKFURT, Dec 3 (Reuters) - Number26 is looking to succeedwhere traditional lenders have struggled, by relying on mobilephones to build a true pan-European bank.
The German financial services start-up is expanding into sixEuropean markets, making it the first mobile phone bank tostraddle the region's borders, it said on Thursday.
Number26 is entering France, Italy, Spain, Slovakia, Greeceand Ireland, the latter being a test for moving into Britain,and eventually plans to develop a continent-wide bank.
Founded by two Austrians and based in Berlin, the companyrevealed plans to offer a MasterCard and basic currentaccounts via a licence from its partner Wirecard Bank ofGermany, which guarantees funds using the German DepositProtection Fund. Its parent, Wirecard, also suppliesNumber26 with core banking software and transaction processing.
Without branches, legacy computer infrastructure and byrelying on selective outsourcing, mobile-first banks can competewith little up-front capital against big banks, all whilepromising lower lending rates and higher rates on savings.
Number26 also has a jump on rival mobile-first banksincluding Atom Bank which took a UK bank licence in June andTandem, which received a licence this week. Both plan to startoperating in Britain next year. BBVA, Spain's No. 2bank, has taken a 29.5 percent stake in Atom.
"The model for these mobile start-ups is to compete onfees," said Andrew Copeman, an analyst with financial researchfirm Aite Group in Edinburgh. "Banks can't afford to go afterthose rates because they are saddled with big overhead frombranch networks and old systems."
Taken by surprise, banks have responded by ploughing moremoney into fixing creaky systems, rolling out mobile apps oftheir own and shuttering many branches. Worldwide, banks couldcut half their jobs in 10 years as they fight to stay relevant,the former head of Barclays has said.
"I don't see banks at all as my competitors. They just can'tmove fast enough," Number26 Chief Executive Valentin Stalf, 30,said in an interview.
CLEAN SLATE
The company, which launched early this year in Germany andAustria, provides more than 80,000 customers with accounts forcash withdrawals, deposits and overdraft services up to 2,000euros via a slick smartphone app.
"We see the current account as just a starting point," saidMaximilian Tayenthal, 35, Number26's co-founder and chieffinancial officer. Credit, savings and insurance products willfollow, he said.
It recently began offering a retail checkout-basedalternative to bank ATM machines for cash withdrawals anddeposits in Germany. It now counts 6,000 cash outlets includingsupermarket chain REWE, or more ATMs than Deutsche Bank andCommerzbank combined.
The Number26 name refers to the optimal number of quarterturns it takes to solve a Rubik's Cube puzzle and is a play onthe most efficient route it can find to reinvent banking.
Mobile phone-based banks aim to tear up the rule-book of anearlier generation of direct banks, which used online sites andtelephone call centres to woo millions of customers away frombank branches starting in the 1990s.
ING's DiBa and others are now some of Europe's biggestretail banks after being spun out of parent banks to offer awide array of services created within those banks.
By contrast, Number26 is looking to evolve rapidly into afull-service banking hub, providing not just services of its ownbut those from third parties. It is in talks to offer moneytransfers from TransferWise, loans from LendingClub and depositcomparison site SavingGlobal on its platform.
The 75-employee company has raised 12.5 million euros inventure funding. Backers include Peter Thiel, founder of PayPal and one of Silicon Valley's top investors, EarlybirdVenture Capital and Axel Springer Plug & Play, both of Germany,and Swiss-based Redalpine Venture Partners. (Editing by David Clarke)
