Revolut secures a UK banking licence after a three-year wait, paving the way for a stock market flotation and expanding its financial services offerings.
In a major development for the fintech sector, Revolut has finally been granted a UK banking licence after a protracted three-year wait. This milestone not only signifies a new chapter for the company but also sets the stage for a potential stock market flotation.
The journey to secure the licence has been anything but smooth for Revolut. The process faced significant hurdles last year when auditors expressed concerns over the verification of the company’s delayed 2021 accounts. Despite these challenges, the announcement marks the end of what co-founder and CEO Nik Storonsky described as a “long and tiring” saga.
Storonsky, reflecting on the achievement, stated, “We are incredibly proud to reach this important milestone and we will ensure we deliver on making Revolut the bank of choice for UK customers.” Francesca Carlesi, Revolut’s UK boss, echoed his sentiments, calling it a “significant step forward” and expressing eagerness to commence operations.
The Prudential Regulation Authority (PRA), part of the Bank of England, has issued Revolut a banking licence “with restrictions.” While the PRA has not commented on the development, the licence will allow Revolut to hold deposits and offer financial products such as credit cards, personal loans, and mortgages, enabling it to compete with established banks. Additionally, customers will benefit from the Financial Services Compensation Scheme, which protects deposits up to £85,000.
Despite the licence, UK customers will not see immediate changes. Revolut must first complete a “mobilisation” stage, which could take up to a year. This phase involves building its banking operations, securing investments, recruiting staff, and upgrading IT systems to prepare for offering new products. Initially, Revolut will be limited to holding £50,000 in total customer deposits.
Founded in 2015, Revolut has rapidly grown its footprint, offering payment services and the ability to trade stocks and cryptocurrency. It already holds a banking licence in Europe, approved by authorities in Lithuania. The company’s ambitious expansion includes opening offices in Mexico, Brazil, and New Zealand.
Executives at Revolut are keen to pursue a stock market float and are actively working on improving financial controls. Reports suggest the company is in discussions to sell hundreds of millions of pounds worth of employee-owned shares, potentially valuing it at up to £35 billion. This move is expected to boost investor confidence and support its growth trajectory.
The news of the banking licence is likely to be well received by Revolut’s investors, including Japan’s Softbank and the UK’s Balderton Capital. Suranga Chandratillake of Balderton expressed his excitement, saying, “The team have already demonstrated tremendous affinity for what modern consumers want.”
Revolut, which applied for the UK licence in 2021, has its headquarters in London and boasts 9 million customers in the UK and 45 million globally. The company recently reported pre-tax profits of £438 million for 2023, a significant turnaround from a £25 million loss the previous year.
The road to securing the licence was fraught with challenges, notably when its auditor BDO could not verify £477 million of revenues—approximately three-quarters of its 2021 turnover—which may have been misstated. Despite these setbacks, the company’s recent achievements indicate a promising future as it prepares to expand its banking services and potentially enter the stock market.
