Dive Brief:

• Berlin-based neobank N26 is limited to signing up no more than 70,000 new European customers a month after German financial services regulator BaFin imposed a cap on the fintech’s growth, the company announced Monday.
• The cap, which the fintech disclosed along with a recent funding announcement, is the third regulatory action in six months aimed at improving organizational flaws at the startup, The Wall Street Journal reported Monday. 
• The fintech just closed out a Series E funding round of more than $900 million. The round values the company at $9 billion, higher than the market cap of Commerzbank, Germany’s second-largest bank, CNBC reported.

Dive Insight:

BaFin's cap comes five months after the regulator ordered N26 to fix deficiencies in its IT monitoring and customer due diligence. The regulator later ordered N26 to pay €4.25 million ($5 million) over delays in filing anti-money laundering-related suspicious activity reports in 2019 and 2020.

The fine, announced last month, was issued in June and paid in July, the fintech said, adding that it implemented measures to improve the way it reports suspicious activities earlier this year

"To lay even stronger foundations for sustainable future growth, N26 has agreed with the German regulator to temporarily onboard a maximum of 50,000 - 70,000 customers per month," the company said in a statement Monday, adding the cap will be published in an upcoming BaFin order.

The cap will put a significant dent in the momentum of N26's European expansion. The company was taking in an average of 170,000 new customers a month this year, according to the Financial Times. 

In a statement to Banking Dive, N26 Chief Growth Officer Alex Weber called the cap "a temporary measure that will allow us to focus on strengthening processes and frameworks internally." 

"While customer onboarding may be limited for a temporary period, this will allow us to improve the way we progress towards our long-term business goals in the future," he said.

BaFin has been scrutinizing N26’s controls for more than two years. BaFin began auditing N26 after a 2018 investigation by German business magazine WirtschaftsWoche found that individuals could open N26 accounts using fake names, according to The Wall Street Journal.

Despite the cap, N26 appears keen to use its latest $900 million in funding to help it become one of Europe’s largest financial services entities. 

"This recent financing round solidifies the fact that retail banking as we know it has changed," N26 CEO and co-founder Valentin Stalf said in a statement Monday. "With our fresh capital, we are in pole position to become one of the biggest retail banks in Europe, all without a single branch."

The company, which claims to have more than 7 million customers in 25 countries, said it also plans to grow staff by 1,000 globally, with a focus on product, technology and cybersecurity.