Should fintech companies with banking ambition get a license or partner with a bank for one?

This is an important distinction for a challenger bank, almost an existential question.  Berlin, Germany-based challenger bank N26, which has a banking license in Europe, has decided to go with the partnership route for the license in the U.S., Nicolas Kopp, CEO of N26 USA, told Bank Innovation in the latest episode of Fintech Unfiltered podcast.

N26, which is headquartered in New York, plans to launch in the U.S. later this year. Instead of opting for a banking license, the mobile-first neobank decided to take the less tedious path and partner with an FI for a banking license. Kopp could not disclose the name of that partner yet.

Having a banking license gives the company more freedom. In Europe, many challenger banks — N26, Starling, Metro Bank, Fidor — prefer having a banking license. It’s far easier to attain, and opens multiple European markets. Most U.S.-based neobanks decide to follow the same path as N26 USA — witness Simple and Moven.

In the U.S. there are benefits to having one, Kopp explained, but perhaps it’s the tedious and time-consuming process with the OCC that has led N26 to not pursue this option in the States. Kopp explained “time to market,” is one of the most important mandates for N26. By avoiding the application process, N26 can focus on what it does best: engineering a seamless, user-friendly mobile app.

“This way we can focus on our engineering and customer service,” Kopp said.

And besides, N26 has a lot of preparation to do before it launches this year. To hear Kopp explain about what goes into setting up a challenger bank in the U.S., the difference between a U.S. audience vs. European, tune into the podcast below.