N26 eliminates deposit costs for its customers

According to a media report, the Berlin-based fintech is reacting to the ECB's expected interest rate turnaround. Many other banks are still undecided.

Berlin-based neobank N26 will no longer offer negative interest rates in the future, as the Handelsblatt reports. As of July, it apparently plans to "no longer charge a deposit fee of 0.5 percent on deposits over 50,000 euros."

The start-up is thus reacting to the announcement by the European Central Bank (ECB) that interest rates will rise this year. "In order to pass on the benefit of this as quickly as possible and to support our customers in the current times, especially with savings plans, we are waiving the deposit fee early on," says N26.

After several years of ultra-loose monetary policy, the ECB said in early June that it would change course and stop its multi-billion bond purchases by the end of the month due to high inflation. Key interest rates will also be raised by a quarter of a percentage point for the time being. The deciding factor is the current interest rate on commercial banks' deposits with the central bank, which is minus 0.5 percent.

N26 says it has more than seven million customers in 24 countries. In its last funding round in October, the Berlin-based company reached a valuation of around 8.5 billion euros, up from 7.8 billion euros eight months ago.

Few banks had previously eliminated negative interest rates for their customers in preparation for the ECB's interest rate changes. The first major retail bank to announce such a move was ING Deutschland in mid-May. The direct bank increased the allowances for balances in checking and overnight deposit accounts from 50,000 to 500,000 euros on July 1. However, many banks do not want to give up their negative interest rates until the ECB's penalty interest rate is abolished. Deutsche Bank, for example, said in mid-June that the amount of its deposit fee will depend on the ECB's deposit rate.