After a three-year wait, Revolut, the UK's most valuable financial technology company, has finally received a UK banking license, albeit with certain restrictions. This landmark achievement signifies a pivotal moment in the company's trajectory, as it paves the way for Revolut to hold customer deposits and offer a broader range of financial products, including its own-branded loans and mortgages.
The journey to obtaining this license has been fraught with challenges, including addressing accounting issues, EU regulatory breaches, and reputational concerns. Revolut has also faced scrutiny over its anti-money laundering practices and customer service regarding fraud reimbursement. However, the company has maintained its commitment to regulatory compliance and improving its corporate culture.
The granting of the license marks a significant shift for Revolut, as it transitions from its previous status as an e-money firm to a fully licensed bank. This change will enable Revolut to directly access customer deposits, opening up new revenue streams and opportunities for growth. However, it also subjects the company to stricter regulatory oversight and participation in the Financial Services Compensation Scheme, providing additional protection for consumers.
While the final approval of a full UK banking license is not guaranteed, it is considered highly likely at this stage. Revolut is now entering a "mobilisation" period, during which it must establish the necessary infrastructure, systems, and personnel to meet the regulatory requirements for full banking operations. This process is expected to take several months but should not exceed a year.
The UK's approval of Revolut's banking license is likely to have a domino effect, potentially leading to regulatory approvals in other key markets, such as the United States. Revolut's founder and CEO, Nik Storonsky, expressed his pride in achieving this milestone and reaffirmed the company's commitment to becoming the "bank of choice" for UK customers.
This development comes on the heels of Revolut's announcement of record annual profits of £438 million for 2023, a remarkable turnaround from the £25 million loss it incurred a year earlier. The company's profitability was driven by higher interest rates and a significant expansion in its user base, which grew by 12 million customers last year.
Revolut's ambitions extend beyond the UK market. The company is reportedly preparing for a potential initial public offering (IPO) and is exploring a pre-IPO sale of employee shares to private investors, which could further boost its valuation.
