Why Was Revolut’s Banking Licence Delayed? 

It’s gone from a plucky younger startup, to being one of many world’s largest fintechs. However till this week, the web banking big Revolut had been unable to function as a conventional financial institution.

Now, over three years because the agency submitted its first utility with the Financial institution of England, the UK’s largest fintech unicorn has secured a banking licence.

The brand new standing removes one of many firm’s largest obstacles to development. It should enable Revolut to carry buyer deposits and convey new monetary merchandise to market.

As a brand new financial institution, Revolut has entered the “mobilisation” stage. It should now have one yr with deposit restrictions to show it may be totally operational, earlier than it’s eligible for a similar permissions loved by conventional lenders, equivalent to Barclays Financial institution.

Revolut lastly secures licence — why the wait?

Revolut’s battle to safe a banking licence has been well-documented over time. As lately as April 2023, Revolut obtained a warning after it appeared to recommend {that a} banking licence was imminent. It first lodged an utility in 2021.

Watchdog issues stemmed from the corporate’s delayed 2021 annual report, wherein the auditor BDO was unable to confirm round 1 / 4 of Revolut’s turnover (£477m).

In an interview with the Monetary Occasions final Might, Storonsky maintained that the challenges are bureaucratic. “In the end it isn’t actually [Revout], it’s typically the banking disaster we see for the time being that makes regulators additional cautious,” he stated.

Different components embody reputational harm after numerous high-profile cyber assaults led to buyer losses. As properly, regulators had been reportedly involved about Revolut’s aggressive organisational tradition.

Job adverts posted on the agency’s web site supplied perception into what this appeared like. Candidates had been advised they’d be assessed “precisely, not kindly”, and “it would damage”.

In reply, Revolut established a brand new set of firm values and employed a behavioural crew designed to enhance relationships within the work setting. It additionally launched its first Monetary Crime Report earlier this yr, to reveal its dedication to strong safety protocols.

Why did Revolut want a financial institution licence?

There are numerous incentives for Revolut to use for a banking licence. Now that its utility has been tentatively granted, the agency will have the ability to maintain buyer deposits, and take its own-branded loans to clients, together with mortgages, to market.

Doubtless, gaining the nod of approval from the UK watchdog will even make banking regulators in different nations, together with the US, extra prone to comply with.

Revolut’s pissed off founder, Nik Storonsky, beforehand warned that the enterprise may abandon the UK in response to the continued crimson tape. The risk prompted the then Enterprise Secretary, Kemi Badenoch, to hunt an emergency assembly with Revolut earlier this yr.

Monzo, the same fintech product and Revolut’s closest rival within the UK, obtained its banking licence in 2017. The corporate reported its first revenue in June.

What’s subsequent for Revolut?

2024 is a yr of development for Revolut. Again in Might, the agency introduced a $500m sale of its firm shares, in an effort to rapidly increase Revolut’s worth and appeal to funding. It has additionally been on a hiring spree, including 2,000 new employees to its headcount in 2023.

Subsequent March, the corporate will transfer right into a new multi-million pound workplace house in Canary Wharf, in a relocation apparently meant to cement its standing as a monetary powerhouse.

Nonetheless, these development ambitions could also be curbed by the restrictions of the UK banking licence. Because of its new financial institution standing, Revolut will face extra stringent laws and have to ensure buyer deposits as much as £85,000.

Commenting on the approval, Storonsky stated: “We’re extremely proud to achieve this essential milestone within the journey of the corporate and we are going to guarantee we ship on making Revolut the financial institution of alternative for UK clients.”