Revolut’s Long Road to Full UK Bank Authorization
More than a year after securing a provisional banking license, fintech powerhouse Revolut continues to navigate a complex regulatory maze before becoming a fully authorized UK bank. In July 2024, the London-based disruptor was granted a restricted banking license by the UK's Prudential Regulation Authority (PRA), a branch of the Bank of England known for its stringent oversight. However, multiple obstacles mean Revolut today remains in the so-called “mobilization” phase—a stage that caps customer deposits at just £50,000.
Despite boasting over 10 million UK customers, Revolut still operates under its electronic money license in the UK, which lacks the direct buffer provided by the Financial Services Compensation Scheme. This important scheme insures deposits up to £85,000, providing customers peace of mind should a bank fail—something Revolut UK customers are yet to fully benefit from via the banking entity.
Regulatory Hurdles and Industry Skepticism
Experts point to a mixture of regulatory caution and Revolut’s rapid growth as factors dragging out the approval process. Barney Hussey-Yeo, CEO of fintech Cleo, cites the UK's "anti-growth regulatory posture" as a possible cause, especially since Revolut is already a regulated bank across 30+ jurisdictions worldwide, including countries with some of the toughest banking regulations.
Such skepticism, some argue, highlights a tension between encouraging innovation and maintaining financial system stability—a delicate balance in a post-2008 financial crisis world. Simon Taylor, strategy lead at fraud prevention platform Sardine AI, explains this guarded stance stems from the UK’s historically risk-averse capital requirements, shaped profoundly by previous financial downturns.
The Challenge of Scale and Complexity
One notable complication is Revolut’s sheer scale in the UK market. Unlike any prior firm entering the mobilization phase, Revolut shoulders an extensive customer base exceeding half a million during this controlled stage. Transitioning this enormous clientele from an e-money platform to a fully regulated banking institution necessitates meticulous planning and operational adjustments, demanding time and regulatory reassurance.
Moreover, Revolut's growth has not been without controversy. Larger legacy banks have historically viewed Revolut as a source of increased fraud risk, which likely factors into the Bank of England's comprehensive regulatory reviews. Yet, Taylor emphasizes that Revolut invests heavily in sophisticated fraud detection technologies and remains a frontline defender against emerging scams, underscoring the fintech’s commitment to security amid scrutiny.
The Broader Significance for the UK Fintech Landscape
Beyond Revolut’s own trajectory, the drawn-out licensing saga has broader implications for the UK’s fintech ecosystem. With rising concerns about the country’s business climate — including recent changes to non-domiciled tax statuses and hikes in capital gains taxes — industry leaders worry about the potential brain drain and relocation of high-value fintech firms abroad.
Hussey-Yeo warns that continued regulatory and fiscal strain threatens the UK’s ability to retain globally competitive companies like Revolut, which could opt for friendlier international markets. Taylor concurs, describing a fully authorized Revolut UK bank as a "symbolic win" that the government cannot afford to let slip away in its bid to remain a global tech and financial hub.
What Lies Ahead?
Revolut remains optimistic, emphasizing ongoing constructive engagement with the PRA. According to a company spokesperson, the firm is progressing steadily through the final mobilization stages with plans to launch a fully regulated bank in the UK within the year. Yet, as this story unfolds, it sheds light on deeper questions about the future of fintech regulation, the balance of innovation and safety, and the UK’s role in the evolving global financial landscape.
Editor’s Note
Revolut’s battle for a full UK banking license illustrates the challenges fintechs face amid cautious post-crisis regulation and intense market scrutiny. As the UK government grapples with retaining tech talent and fostering economic growth, the Revolut case raises essential questions: How can regulators adapt to rapidly evolving fintech models? And can the UK maintain a competitive fintech environment without compromising financial stability? For readers and stakeholders, this saga offers a timely lens into the complex dance between innovation, risk, and regulation.
