Revolut has received a U.K. banking license from the Prudential Regulation Authority, the fintech said Thursday.
The move ends the London-based company’s three-year wait for a license in its home country. But it comes with restrictions: chief among them, the bank cannot hold more than £50,000 in total customer deposits during the “mobilization” phase it’s entering now.
Nothing will change for customers, Revolut said. But for the next year or so, the mobilization phase will allow the fintech to test its systems as it rolls out new services, and address any issues that regulators identify.
A full U.K. license will allow Revolut a platform for loans, mortgages, credit cards, overdraft protection and savings products — facets that its neobank competitors Monzo and Starling already provide.
The license will also guarantee protection of customers’ deposits up to £85,000 ($109,500) if the bank fails.
Revolut thus far has been operating as an “e-money” payments company in the U.K., partnering with banks that hold customer funds. It does, however, hold a European Union banking license, and another from Mexico.
But a U.K. license is seen as crucial to the company’s prospects: Roughly 21% of Revolut’s revenue in the 12-month span that ended in March came from U.K. customers, according to documents seen by The Wall Street Journal. A U.K. license could also be seen as a steppingstone toward the effort to gain licensing in broader international markets such as the U.S.
A number of factors contributed to Revolut’s three-year delay in gaining a U.K. license.
The application ran into multiple problems, including a warning from auditors that they could not fully verify revenue figures in the group’s 2021 accounts.
Auditor BDO, for one, said last year that much of Revolut’s 2021 revenue could have been “materially misstated” because of the faulty design of the fintech’s IT system. Revolut has improved its internal controls, the company’s interim CFO said this month, according to the Financial Times.
Revolut’s share structure also was found to be inconsistent with the PRA’s rules. British regulators required the company to condense its six classes of shares into ordinary shares – a process Revolut has resolved, according to CNBC.
And perhaps regulators waited to see a clean full-year audit. Revolut reported 2023 pre-tax profit of £438 million ($545 million), compared with a pre-tax loss of £25.4 million in 2022. Revenue nearly doubled to £1.8 billion ($2.2 billion), up from £920 million in 2022. And, not to be overlooked, Revolut filed its annual report on time this year.
“Today’s announcement is a significant step forward for Revolut and for our customers,” Francesca Carlesi, Revolut’s U.K. CEO, said Thursday in a statement. “It is a tremendous responsibility to be a bank in the UK and we will work relentlessly to offer products and services that improve the financial lives of everyone who uses Revolut.”
The license, too, could be seen as a step toward an initial public offering, which executives have stated as a goal. The company is in talks with investors to sell $500 million of existing shares in a deal that would value Revolut at more than $40 billion, according to Bloomberg — although The Wall Street Journal this week put the upside at $45 billion. Either way, that’s far more than the $33 billion at which the firm was valued in 2021.
“We are incredibly proud to reach this important milestone in the journey of the company and we will ensure we deliver on making Revolut the bank of choice for UK customers,” CEO Nik Storonsky said Thursday.
Revolut counts 9 million U.K. customers and 45 million worldwide, the company said.
