Revolut seeks a UK banking licence

Revolut, the currency exchange and payments platform has set its sights on disrupting another sector within financial services, with an application for a UK banking licence.

If the application is granted the app would be able to offer its clients full-service current accounts, pay interest on balances and market other products to customers such as deposit accounts, overdraft facilities and loans.

Revolut has been used by more than 12 million individual customers and 500,000 business customers according to the group’s website.

A UK banking licence would theoretically turn the business into a genuine challenger bank and would also provide eligible customers with the protection of the UK Financial Services Compensation Scheme (FSCS) which insures up to £85,000 of customers deposits against fraud or business failure.

Revolut secured a Lithuanian banking licence bank in 2018 but becoming a UK bank would be a notable milestone. The Lithuanian banking status has allowed Revolut to test the water in European markets for new banking products, which we assume it would ramp up as and when it receives UK permissions.

Becoming a UK bank is also likely to significantly enhance Revolut’s valuation. Back in July 2020, the fintech raised $80 million as part of a larger Series D funding round, that valued the business at $5.50 billion.

At the time Revolut said it would use the new cash to build out its European banking offer and to add new features to its US operations.

In the UK Revolut launched a new subscription service last month called Revolut Plus which offered purchase protection insurance on card purchases and refunds on tickets for events that customers couldn’t attend for a monthly fee of £2.99.

The launch was seen as a way to try and attract new customers to the brand, who were concerned about online transactions during the pandemic. Revolut also recently secured a temporary crypto currency registration from the UK FCA which was necessary as UK regulators are scrutinising the way that financial services businesses apply anti-money laundering regulations to cryptocurrency transactions and payments.

The temporary licence, which was granted because of a backlog of unprocessed applications at the UK regulator, will expire in July.

Speaking about the application for a banking licence Nik Stronsky, Revolut’s CEO said: “We want to be the best in class for customer experience, value and capabilities, and offering full bank accounts allows us to do just that” and that “In the future, we want to offer many more innovative products to our UK customers and we are excited to continue driving innovation and competition in the banking industry.”

Last week one of Revolut’s US fintech peers, SoFi, which itself had applied for US banking charter back in October, announced it would go public via a SPAC, in a deal that would value the business at around $8.50 billion.

No doubt Revolut’s management and VC backers will be watching that transaction very closely indeed from here on in.