After a three-year wait, Revolut receives a UK banking license

Revolut secured the long-awaited bank licence from City regulators. This will allow it to compete with high street banks, and improve consumer protections in Britain for millions of Revolut customers.

The Financial Technology Group had tried for three years to get a license from the Prudential Regulation Authority of the Bank of England. This was much longer than usual because they had encountered a number of obstacles in their application.

The decision of the regulator to approve the app will allow the business to offer loans, overdrafts, and other lending services to its nine-million customers in the UK. Revolut’s bank will be covered by the Financial Services Compensation Scheme in Britain, which covers customer deposits of up to £85,000.

Nik Storonsky (40), the co-founder and CEO of the London-based firm, has hailed this development as “an important milestone”.

Revolut , widely regarded as one of the jewels in Britain’s financial tech sector, was valued at $ 33 billion during its last fundraising round of 2021.

Since Storonsky, 40, and Vlad Yatsenko set up the privately-owned group nine years ago, it has grown quickly. The business began as a foreign exchange and money transfer service. It has over 45 million retail clients in 38 countries. The company’s operations are vast and include services ranging from cryptocurrency trading to life insurance. Last year it generated revenues of £1.8 billion and a profit before tax of £437.8 millions.

It has been unable to grow in Britain or overseas because it lacks full authorization in its own market. Although it has a license in Europe, issued by the Bank of Lithuania. Financial watchdogs from other countries, like the United States are more likely be suspicious of the company, if they have not been able to obtain a license from their main domestic regulator.

Revolut was also prevented from directly competing with British banks due to the absence of a UK license. It has operated in its home market under an e-money license, which means that it had to use third party banks to hold the money of British customers and was not able to loan to domestic customers. Revolut does not participate in the Financial Services Compensation Scheme.

Revolut’s application to Bank was closely watched in the City where the business attracted scrutiny due to its rapid growth.

Revolut’s accounting issues have posed a number of challenges to the approval process for a license. BDO, Revolut’s external auditor, raised concerns over almost £477million of Revolut’s revenue. BDO gave only a “qualified opinion” on Revolut’s 2021 accounts, despite the fact that the auditor claimed to have resolved the issue in the 2022 report.

Revolut’s complex ownership structure was a further obstacle to obtaining a UK banking license before it recently simplified its share class.

The Bank has granted it “authorisation with limitations”, meaning that the company will begin what regulators refer to as a “mobilisation period”. It is a common practice for new lenders to use this period to set up the necessary systems and processes to run as a bank. Revolut can only hold £50,000 in total of the customer’s deposit during this period. This usually lasts around a year. Revolut’s British customers will not be affected by this period, as the company will continue to run in the UK according to e-money regulations.