Revolut Secures Banking License in the UK, Set to Disrupt Traditional Banks

Revolut, the prominent UK fintech company, has finally received approval from the Prudential Regulation Authority (PRA) for a banking licence after a three-year wait. This development marks a significant milestone for the London-based digital bank as it moves towards becoming a fully licensed banking institution.

With the new licence in place, Revolut will soon have the capacity to hold customer deposits and offer various lending products, including credit cards, personal loans, and mortgages. However, the company will first enter the PRA’s “mobilisation” stage, which comes with a 12-month period of restrictions. During this stage, banks must demonstrate their readiness for full operation while addressing any additional issues raised by the regulatory body before they can function as a UK bank.

As part of the transitional phase, Revolut will be limited to holding only £50,000 of total customer deposits and will face restrictions on certain new offerings. This is a common industry process, as other new banks like Monzo, Starling, Atom Bank, Zopa Bank, GB Bank, and Kroo have also gone through similar stages.

Nik Storonsky, the CEO of Revolut, expressed his pride in reaching this important milestone and emphasized the company’s commitment to becoming the preferred bank for UK customers. Revolut has experienced rapid growth since its establishment in 2015, attracting customers with its no-frills accounts, competitive foreign exchange rates, and the ability to withdraw cash in over 120 countries. The company also offers a premium app service that includes features like overseas medical insurance and the option to trade stocks and cryptocurrencies like Bitcoin and Ethereum.

Revolut’s entry into the realm of fully licensed banking institutions is expected to disrupt the competitive dynamics of the UK’s financial services industry, potentially prompting traditional banks to accelerate their own digital transformation efforts. This development is particularly exciting for consumers, as it may lead to increased market competition in credit card rates and loans, ultimately benefiting the customers.

Francesca Carlesi, the UK CEO of Revolut, highlighted the significance of the announcement for both Revolut and its customers, emphasizing the company’s commitment to offering products and services that improve the financial lives of its users. She expressed excitement for the next phase of Revolut’s journey in the UK and the opportunities it presents.

Revolut’s recent financial performance has been impressive, with the company posting record profits. In 2022, Revolut made a pre-tax profit of £438 million, a significant increase from the £25 million loss in the previous year. The company’s revenue also nearly doubled to £1.8 billion. Revolut’s expansion has been rapid, with new offices opened in countries like Brazil and New Zealand in 2023. The company currently boasts nine million customers in the UK and has added 12 million customers globally in the past year, bringing the total customer base to over 45 million.

Revolut’s growth has outpaced that of its digital money firm competitors like Monzo and Starling, which have approximately nine million and three million customers respectively. However, unlike Monzo and Starling, Revolut was unable to offer lending products without a banking licence in the UK. To address this limitation, Revolut obtained a European banking licence, allowing it to offer personal loans in France, Germany, and Spain, as well as credit cards in Ireland and Spain. In 2023, Revolut expanded its loan book to £528 million.

Revolut initially applied for a UK banking licence in 2021 and has been anticipating approval ever since. The company already holds a European banking licence, thanks to approval from Lithuanian authorities. This latest development is a significant achievement for Revolut and sets the stage for its continued growth and success in the UK market.

In conclusion, Revolut’s acquisition of a banking licence from the PRA is a major milestone for the company. It opens up new opportunities for Revolut to expand its product offerings and compete with traditional banks in the UK. The company’s rapid growth and success indicate a promising future as it continues to revolutionize the financial services industry.