British fintech Revolut, has secured a banking licence in its home country after a more than three-year wait.
The London-based company was founded in 2015 and has grown rapidly to become one of the UK’s most valuable private tech firms.
Despite being referred to alongside the likes of Monzo and Starling, the company has been operating in the UK as an e-money institution rather than a bank.
Revolut first submitted its application for a banking licence to the Financial Conduct Authority (FCA) back in January 2021.
The process was a slow one compared with other big-name fintechs that have been licensed as banks. What’s next for Revolut?
What happens now?
Though Revolut’s application has been approved, it cannot immediately start operating as a bank. UK financial regulations require new banks to go through a period of “mobilisation”.
During this period Revolut will complete its preparations and will have to demonstrate to the regulators that it can meet banking requirements. Revolut has said “nothing changes for UK customers during this restricted period”.
Preparation during this period can include securing additional capital, bolstering security systems and onboarding staff to manage banking operations.
Once all the requirements are met, Revolut will receive full authorisation and can provide banking services to customers in the UK.
It’s not clear yet how long Revolut will be in mobilisation, however, the process typically lasts between three and 12 months. Revolut may be on the speedier end of this, given its existing banking operations overseas, how long it has been seeking a UK licence and preparations that have already been made, including the appointment of a UK banking chief last November.
What can Revolut do as a bank?
After completing mobilisation, Revolut can expand its product offering to include loans, mortgages, credit cards and other services reserved for banks.
This could be a big boost to Revolut’s revenue, which reached £1.8bn last year. The company has been keen to establish itself as a “super-app” that offers any and all financial services users may require.
What does this mean for its IPO plans?
There have been signs that Revolut’s relationship with UK regulators and institutions would have been seriously damaged, had it not secured its banking licence.
Rumours that it could leave the UK altogether went around last year when reports claimed the Treasury was planning to reject its banking application. And the company’s senior management have made no secret of their frustrations at the UK regulatory regime.
Revolut co-founder and CEO Nikolay Storonsky said in 2023 that the delayed process made him feel the UK was “not the business environment to operate in the modern world”.
Spats with the UK regulators aside, the company was never likely to move operations entirely, as the UK remains Revolut’s largest market by a considerable margin. The company further showed its commitment to its founding location last month when it moved into a new headquarters in Canary Wharf.
However, a rejected banking licence would almost certainly have turned Revolut management off from the prospect of a public launch in London, which would be a major blow to the UK’s slow IPO markets.
The licence approval cannot have harmed the chances of the London Stock Exchange being in the running for a potential Revolut IPO. The recently announced reforms made by the Financial Conduct Authority (FCA) to the listing regime may also be a point in the UK’s favour.
Storonsky has spoken negatively in the past about the UK’s regulatory restrictions, so the move to simplify the listing regime could make London a more attractive prospect.