After a long two years, Europe’s biggest neobank Revolut is closer than ever to learning if its UK banking licence application will be stamped "approve" or "decline".
It’s a huge moment for the London-based digital bank, which now has over 28m retail customers and recently hit profitability — but crucially can’t lend or provide regulator-protected deposits without a licence.
CEO Nik Storonsky has been increasingly vocal about his frustrations with UK regulators over the delay — and UK politicians have called a meeting with the fintech giant next month as they reportedly grow nervous about it moving its HQ out of the country if the application is rejected.
Sifted understands that publishing a clean set of 2022 financial results is central to Revolut’s licence approval process, which is ongoing and decided by the Bank of England's Prudential Regulation Authority (PRA). Revolut could publish the results before its official September deadline.
So what exactly is at stake for Revolut?
What would no licence mean for Revolut?
A UK banking licence refusal would “hamper Revolut's long-term ambition to become a global banking provider”, Pitchbook analyst Nalin Patel tells Sifted, and give it fewer ways to make more money.
As a regulated e-money institution in the UK without a full banking licence, Revolut can't offer lending products like mortgages. It’s also harder for Revolut to become a primary bank account for UK customers, as it lacks customer deposit protection.
Revolut investors hope that a licence — and the trust that comes with it — would help the bank win new customers, and also incentivise existing customers to hold larger deposits with the neobank, including salaries.
These are more consistent, predictable revenue drivers than things like crypto trading, which helped Revolut achieve its first full year of profit in 2021.
If its UK licence were refused, it’s likely that the company would shift its focus to outside the UK in the hope of better luck with regulators.
Revolut was granted a full banking licence from its European regulator in Lithuania in 2021, which works as a passport across the EU, allowing it to offer full banking services in several countries.
European banking is already proving lucrative for Revolut: in 2021 European revenues (£432m) were more than double UK revenues (£195m), according to its most recent company accounts.
That’s despite the fact that many countries in Europe have been slower than the UK to adopt neobanking apps, and that on the continent Revolut has a number of already-established rivals, like N26, which has significant market share in France, Germany and Italy.
Revolut has also applied for banking licences in the US and Australia, and has appointed country CEOs in Mexico, Brazil and India — large markets it’s hoping to crack.
Why is Revolut in this position?
One of Revolut’s biggest shareholders says the size of the business is slowing down its banking licence application, which it applied for in January 2021. (The investor refused to be named because of the sensitivity of the application.)
Revolut offers some 50 products and services to its 28m retail and 500k+ business customers, which is a whole lot of paperwork for regulators to get through. Its licence-holding competitors were much smaller when their applications were approved; Monzo was got a full banking licence in 2017 and Starling in 2016.
"Regulators like firms that are focused and vanilla, not firms expanding globally at lightning speed, launching 20+ products a year, involved in crypto, etc,” a source close to the company tells Sifted.
But that’s not all that will be turning regulators off.
Revolut has previously come to heads with the FCA over how transparently it flags potential money laundering — a key requirement for UK businesses.
Then there is also the question of Revolut’s accounting. When the fintech published its (delayed) financial accounts for 2021, it caused quite a stir. Its auditor BDO suggested that 75% of Revolut's 2021 revenues — that's £477m of £636m — “may be materially misstated”. Revolut issued a public statement at the time saying “the financial statements give a true and fair view” of the company’s results — but its own board members told the FT that this statement showed a lack of understanding of the auditor’s opinion.
The neobank has also faced fines from its European regulator in Lithuania over late financial filings, and the European Central Bank over compliance breaches. Revolut says it has resolved both matters.
Implications for UK tech
Revolut is a poster child for UK tech, and has been endorsed by the prime minister himself as a "fintech success story". If Revolut quit the UK it would be a huge setback for the government’s “science and tech superpower” ambitions, say investors and founders.
“[Refusing the licence] would be a risky move by the regulator, as it won’t necessarily paint the UK as the fintech-friendly nation once perceived, and would make a lot of current and future founders think twice,” a source close to Revolut tells Sifted.