Yesterday, London-based fintech giant Revolut finally secured a UK banking licence — more than three years after making its application.
The long-awaited stamp of approval from UK financial regulators marked the end of a lengthy and gruelling process for the fintech. Regulators previously found the auditing of its 2020 annual results “inadequate”, and the following year auditors weren't able to verify a portion of its revenue for 2021 — although the issue was later resolved. The company also delayed posting its 2022 company accounts, before posting its 2023 accounts early.
But the financial superapp, which has 9m customers in the UK and 45m globally, is still at the mercy of regulators. It has, voluntarily, entered what’s known as a ‘mobilisation’ phase, during which it will fully build out its banking operations and bolster its senior management team.
In the meantime, nothing much changes for Revolut’s UK customers, a spokesperson confirmed. Revolut services will remain the same until the mobilisation period — which could last up to 12 months — ends.
For now, money held with Revolut will also continue to be protected through the e-money process of “safeguarding”, meaning that the UK’s Financial Services Compensation Scheme (FSCS) deposit protection — which guarantees compensation of up to £85k in case of a bank’s failure — does not yet apply.
Revolut will be required to make another application to exit the mobilisation period showing that it meets requirements for a wide range of internal processes on IT infrastructure, compliance and recruitment.
If its application is successful, Revolut will become a fully-fledged bank that can lend to its UK customers — and launch a raft of new products. It could also strengthen Revolut’s position if — or when — it chooses to go ahead with a long-awaited IPO.
Revolut: the financial superapp
Since its founding in 2015 as a travel finance app, Revolut has launched dozens of other services, from business banking to insurance, kids’ bank accounts to stocks and shares trading products and flight and hotel-booking services. So far this year, it’s added international data plans and Revolut X, a crypto exchange catered to professional traders, as it seeks to trump the product lines offered by other fintechs and meets its customers’ every financial need.
“In the world of fintech, it’s sometimes not so easy to explain what Revolut is to our customers,” Revolut’s chief growth officer Antoine Le Nel told Sifted in an interview in June.
The UK-headquartered fintech has held a European banking licence since 2021 through its Lithuania entity, which has helped “clearly position itself as a bank” in the EU, he says. And its EU operations, which account for roughly 70% of its revenue, give a glimpse into the kind of products Revolut could be set to roll out in its UK homebase if it progresses through the initial mobilisation period.
Revolut customers in Ireland, for instance, can obtain loans and credit cards, and deposit money in interest-incurring accounts. Mortgage plans are in the pipeline for next year, Le Nel told Sifted, which will be tested out in Lithuania this year before debuting in Ireland next year.
For now, Revolut’s lending activities in the UK continue to be limited — although it'll be hoping things don’t stay that way for long. Its UK CEO, Francesca Carlesi, who was recruited last November, is the founder of mortgage fintech Molo Finance; an experience that could come in handy.
Keeping regulators happy
During the mobilisation phase, Revolut will continue to be supervised by financial regulators and will have to supply regular updates to them.
“It’s unusual that a company of Revolut’s size is going through the mobilisation stage,” says partner at law firm CMS Charles Kerrigan, who oversees its fintech practice. Revolut is hardly a tiny startup; it has more than 10k employees and is set to move into a 113k sq ft office in London’s financial district Canary Wharf in May next year.
Kerrigan says that the process typically sees the regulator place a major focus on ensuring a company is well-capitalised enough to operate as a licensed bank.
That shouldn’t be a problem for Revolut. Earlier this month, it posted revenue of £1.8bn and record profits of £438m for 2023, up from losses of £25m the year. It’s also reportedly in talks to sell about $500m of employee-owned shares in a deal that could push the fintech's valuation to $40bn. (Revolut declined to comment on the reports.)
Revolut's pathway to IPO
One possible headwind in the transition process could be Revolut’s ongoing search for a chief financial officer.
Last May, Revolut appointed long-time employee Victor Stinga, who joined the company as a founders associate in 2018, to serve as its CFO on an interim basis after previous CFO Mikko Salovaara resigned citing “personal reasons.”
One Revolut investor, who asked not to be identified so they could speak freely, says that the turmoil the company has experienced in the CFO function likely contributed to the lengthy wait for its banking application.
While the investor talked up Stinga’s ability as CFO, they said Revolut will likely need to hire a replacement with experience on the public markets as it gears up for a potential IPO.
Guidance by the Bank of England stipulates that senior management appointments should be finalised at an early stage of the mobilisation period. A Revolut spokesperson confirmed to Sifted that Stinga remains as CFO on an interim basis.
Exactly where it might list, if it chooses to do so, is also an open question. Speaking on the Sifted podcast earlier this year, Index Ventures partner and former board member Martin Mignot said that he would imagine the jury is still out on a listing location, with New York and London floated as potential options.
“This is a UK headquartered company, so if everything was equal, the UK would be a natural place to list,” Mignot said. “Having said that, these exact same concerns will be in [CEO Nik Storonsky's] mind: the analysts that understand tech stocks are by and large based in New York and in San Francisco; there are more [companies] listed there that are more similar to what they’re trying to do; the market is very deep, there’s a lot of knowledge and capital.”
