The financial technology powerhouse Revolut has finally obtained a long-anticipated banking licence from the Bank of England’s Prudential Regulation Authority (PRA), enhancing its capability to compete with traditional high street banks and providing improved consumer protections for millions of UK customers.
Revolut’s pursuit of this licence spanned three years, significantly longer than usual due to a series of hurdles encountered during the application process. This landmark decision by the regulator allows the app-based company to begin offering loans, overdrafts, and other lending products to its nine million UK customers. Additionally, once Revolut launches its banking services, it will be covered by the UK’s Financial Services Compensation Scheme (FSCS), protecting customer deposits up to £85,000.
Nik Storonsky, co-founder and CEO of the London-based firm, celebrated this achievement, calling it an “important milestone”. Valued at $33 billion during its last fundraising round in 2021, Revolut is considered 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 rapidly expanded to serve over 45 million retail customers in 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 licence from the Bank of Lithuania, allowing it to operate within the EU, Revolut’s growth ambitions in its home market and beyond have been hampered by the absence of a UK licence. Without it, Revolut has been unable to compete directly with British banks, operating instead under an e-money licence that required using third-party banks to hold customer funds and prevented lending to UK customers. Consequently, Revolut has not been part of the FSCS.
Revolut’s application has been under intense scrutiny in the City, particularly due to its rapid growth. One significant obstacle was the company’s accounting practices, which drew attention when its auditor, BDO, raised concerns over nearly £477 million of its 2021 revenues, resulting in a qualified opinion on its accounts. These issues were later resolved in the 2022 report.
Further complicating matters was Revolut’s complex ownership structure, which it recently simplified to facilitate the licence approval. Now, Revolut has been granted “authorisation with restrictions,” initiating a “mobilisation” period to build the necessary systems and processes to operate fully as a bank. During this period, typically lasting about a year, Revolut can only hold £50,000 in total customer deposits and will continue to operate under e-money regulations in the UK.