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Digital-only bank Number26 suddenly closed several hundred accounts last week, and it’s blaming ATMs for doing so.
The company, which is live in Germany and Austria, closed a few hundred of its 160,000 accounts and subsequently released a statement that highlights several reasons for the closures.
Number26 used much of the real estate in the release to explain that some customers made 15 to 30 ATM withdrawals per month, and each transaction cost the company a network fee in the range of $1.70 to $2.30. This frequent activity drove up costs and was not sustainable.
The company also indicated that it may have closed some accounts because of suspicions of money laundering and account misuse.
This is a significant challenge for digital-only banks that do not have their own ATM networks. In many countries, this prevents customers from withdrawing cash without paying a fee. Most digital-only banks cover the withdrawal cost to attract customers.
Many propose that digital-only banks can funnel savings into other features such as free ATM withdrawals because they do not have costs from operating a physical branch network. But many of these startups have yet to become profitable and have only just started to generate revenue.
It’s unclear why Number26 shuttered these accounts instead of just implementing a limit on ATM withdrawals, a technique other startups have adopted. Ally, a U.S.-based digital bank that used to offer unlimited free ATM withdrawals, limited ATM fee reimbursement to $10 per billing cycle in August 2015. U.K.-based transfer app Revolut, meanwhile, has always had a limit on the cash volume users can withdraw with its companion card.The existence and growth of these companies indicates that we’ve entered the most profound era of change […]
