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15 Feb 2020

N26 withdraws from the UK: what does it mean for your money?

The challenger bank will close all current accounts by 15 April

Digital bank N26 is withdrawing from the UK market, closing several hundred thousand accounts in the process.

The Germany-based bank says its EU banking license will no longer be valid in the UK when the Brexit transition period ends in December.

So current account customers are being told they have until 15 April 2020 to withdraw all funds from their accounts and find somewhere new to bank.

Here, we dig deeper into the reason behind the move, explain how to switch if you have an N26 account and explore how this regulatory change will impact other European challenger brands.

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Why is N26 leaving the UK?

N26 launched in the UK just over two years ago - so it hasn't been around long, but it claims to have several hundred thousand customers.

It boasts strong business in the EU, where it has five million customers, and has plans to build its presence in the US. The bank even posted a blog titled 'Leaving the UK does not change our global vision to transform retail banking for the better'.

So why would it close in the UK?

Thomas Grosse, chief banking officer at N26, blamed Brexit. He told Which?: 'While we respect the political decision that has been taken, it means that N26 will be unable to serve our customers in the UK and will have to leave the market.'

But that's not the whole story. N26's European banking license won't be valid in the UK after Brexit. But it could have continued to operate here while it applied for a UK banking license.

N26 didn't comment on why it chose not to do this, but sources close to the bank suggest it underestimated the cost and complexity of operating in the UK market, which would have increased under a local license.

What does 'Nexit' mean for current account holders?

Current account holders will have until 15 April to withdraw money from the account and find a new home for it.

If you have large amounts of money held in an N26 account, you needn't worry. All funds in N26 accounts continue to be protected up to u20ac100,000 under Germany's equivalent of the FSCS scheme.

If you were a customer of N26 Metal or You, your subscription will only be charged up to 14 March 2020. The last month will be free.

How do I close and switch my N26 account?

Closing your N26 account will be relatively simple if you only used it to spend with.

The bank is advising you simply withdraw all your funds before the April deadline, either by taking out cash at an ATM, or by transferring it to another bank account.

If you have a negative balance, you need to pay it off by the deadline.

Customers who fail to withdraw all their cash by 15 April will be contacted with details of how to recover it.

The process might be more time-consuming if you used it as your main bank account and have multiple regular payments or direct debits going out.

N26 is not signed up to the current account switching service (CASS), so you can't switch your account to another provider in seven days and will have to do a manual switch.

CASS carries over direct debits and standing orders as part of a switch, so there's no need to set them all up again.

With N26, all you can do is drain your account of funds. Then you'll have to check all the direct debits or subscription payments you rely on it for and set them back up from a different account afterwards. The same goes for regular transfers you have going into your N26 account.

For more help closing an N26 account, visit the bank's UK website, which has been updated with a list of FAQs.

Will other European brands stop operating in the UK?

N26's closest European rival is probably Revolut.

Revolut only holds a European banking license. However, it operates in the UK under an e-money license, meaning it technically isn't a bank here. Because of this, the UK's lack of EU membership shouldn't make a difference to its current operation.

Most other European banking and savings institutions are allowed to operate in the UK under 'passporting' rules. This allows firms authorised in a European Economic Area (EEA) state to conduct business within other EEA states based on their 'home' member state authorisation.

The Financial Conduct Authority (FCA) says 'passporting' will continue during the implementation period, but firms are likely to have to adjust their business to operate in the UK from 1 January 2021.

But many firms have planned for this. French savings provider, RCI Bank, for example, joined the UK Financial Services Compensation Scheme (FSCS) in March 2019.

What are the best N26 current account alternatives?

In our original first look at the N26 current account when it soft-launched in December 2018, we were underwhelmed.

N26 largely had all the same features other challenger banks offered at the time, such as the ability to freeze the card in-app.

Its main draw was fee-free overseas spending at the Mastercard exchange rate with no markup, but customers were still charged a 1.7% fee on cash withdrawals abroad.

The table below compares what alternative challenger brands are offering that could replace your N26 account.

The account that most appeals to you as an N26 alternative will depend on what you want to use it for.

If you're looking for a full current account, Bo and Revolut won't fit the bill. Revolut is technically a prepaid card, not a bank account, and Bo functions more like one of these.

Starling Bank became a Which? Recommended Provider this year, as feedback from real customers and our expert analysis deemed it one of the best banks on the market.