Revolut Awaits Full Bank Approval in the UK

LONDON – A year has passed since Revolut obtained an early UK banking license, yet the fintech company is still awaiting full regulatory approval.

The firm received a restricted banking license from the UK’s Prudential Regulation Authority (PRA) in July 2024, marking a significant milestone in an application process that has been ongoing since 2021. Just to clarify, the PRA is part of the Bank of England.

This achievement has placed Revolut in what is called the “mobilization” phase, a crucial step towards becoming a fully operational bank.

However, during this period, the company can only manage a maximum of £50,000 in total customer deposits, which is notably contrasting with larger banks like Barclays, HSBC, and Santander.

Customers in the UK using Revolut are not actually in a bank’s safety net. The company’s electronic money unit operates but is not insured by the financial services compensation scheme, which typically covers up to £85,000 in the event of a business failure.

Analysts have pointed out that the complex hurdles involved are partly why the banking approval process has extended beyond initial timelines.

Currently, Revolut is also in the process of securing a consumer credit license, which would enable it to offer credit cards and additional services within the UK.

Meanwhile, reports indicate that a meeting scheduled for Tuesday involving UK official Rachel Reeves, Revolut, and the PRA was called off following an intervention by Bank of England Governor Andrew Bailey.

CNBC has not been able to confirm these reports independently. The Bank of England opted not to comment, and the Treasury has not responded to inquiries.

A spokesperson for Revolut stated that while they cannot disclose specific details, they are progressing toward launching a fully regulated UK bank this year.

“We are approaching the final stages of mobilization and are collaborating constructively with the PRA,” she mentioned in an email to CNBC. “This mobilization is the most extensive and intricate to take place in the UK, and we believe thoroughness should take precedence over hurrying to align with a specific timeline.”

What’s Causing the Delays?

Barney Hussey-Yeo, CEO of Fintech Firm Cleo, suggested that the UK’s cautious regulatory approach may be contributing to the delays that come with exiting the mobilization stage.

“Revolut is already regulated in over 30 countries, and in some of the most stringent jurisdictions,” he commented, adding that its current valuation exceeds that of the major banks in the UK, with estimates around $65 billion.

“If this isn’t enough to satisfy the PRA, it raises serious questions about the UK’s regulatory expectations.”

Concerns have also been shared by Simon Taylor, head of strategy for fraud prevention platform Sardine AI, who expressed trepidations about regulators possibly repeating past mistakes, given the aftermath of the 2008 financial crisis.

“The UK’s regulatory stance has historically been quite risk-averse, especially where capital requirements are concerned,” he noted.

A Major Endeavor

Another factor affecting the situation is Revolut’s sheer size. Other companies facing the mobilization phase have not had to deal with as many customers; Revolut has over 10 million users in the UK alone.

Once they complete the mobilization phase, Revolut will need to start the gradual process of integrating its customers into UK banking.

Given the company’s long-standing presence in the UK market, there are complexities at play. According to Taylor, significant concerns have been raised by other major banks, which often cite Revolut as a key source of fraud risk.

“I suspect these issues are covered in the Bank of England’s regulatory reports,” he stated, acknowledging that Revolut does possess advanced technologies for fraud detection and prevention.

A Symbolic Victory

For the UK government, granting Revolut full banking permissions is crucial, especially as rising capital gains taxes have created a challenging environment for entrepreneurs. There’s been noticeable pushback from the tech industry regarding unfavorable tax statuses.

Hussey-Yeo from Cleo remarked, “Various aspects of UK wealth—like jobs, taxes, and stock gains—are thinning out,” pointing to the risk of valuable fintechs like Revolut considering moving operations outside the UK if this trend continues.

Taylor from Sardine AI emphasized that full bank approval for Revolut would represent “a monumental victory for the government.”

“We can’t afford to lose Revolut to another country, especially given its global ambitions and the myriad of other interested parties in the market,” he concluded.