Fintech giant Revolut has finally been granted a long-awaited banking licence from the Bank of England’s Prudential Regulation Authority (PRA), boosting its ability to compete with traditional banks and providing improved consumer protection for millions of customers in the UK.
It took Revolut three years to obtain this license, which was much longer than usual due to a series of obstacles it faced during the application process. The landmark decision by the regulator allows the app-based company to start offering loans, overdrafts and other lending products to its nine million customers in the UK. Additionally, once Revolut launches its banking services, it will be covered by the UK’s Financial Services Compensation Scheme (FSCS), which protects customer deposits of up to £85,000.
Nick Storonsky, co-founder and CEO of the London-based company, celebrated the milestone, calling it a “significant achievement.” Revolut, which was valued at $33 billion during its last funding round in 2021, is one of the crown jewels of Britain’s fintech sector.
Founded nine years ago by Storonsky and Vlad Yatsenko as a money transfer and foreign exchange service, Revolut has quickly expanded to serve more than 45 million retail customers across 38 countries, offering a wide range of services from cryptocurrency trading to insurance. Last year, the company reported revenues of £1.8 billion and pre-tax profits of £437.8 million.
Despite holding a European banking license from the Bank of Lithuania, allowing it to operate within the EU, Revolut’s ambitions to grow in its home market and beyond were hampered by the lack of a UK license. Without it, Revolut could not compete directly with UK banks, and instead operated under an e-money license that required the use of offshore banks to hold customer funds and prevented lending to UK customers. Revolut was therefore not part of the Financial Services Compensation Scheme.
Revolut’s application has been the subject of intense scrutiny in the City, particularly given its rapid growth. The company’s accounting practices were a significant hurdle, which came to attention when its auditor, BDO, raised concerns about nearly £477m of its 2021 revenue, leading to a qualified opinion on its accounts. The issues were later resolved in a 2022 report.
Revolut’s complex ownership structure had complicated matters, and the company recently simplified it to make it easier to obtain a license. Revolut has now been granted a “license with restrictions,” which has triggered a “mobilization” period to build the systems and processes needed to operate fully as a bank. During this period, which typically lasts one year, Revolut cannot hold more than £50,000 of total customer deposits, and will continue to operate under the UK’s e-money regulations.
