Digital finance app Revolut has finally received a UK banking licence, ending a three-year long tussle with regulators. While the new licence does come with ‘restrictions’, Revolut has claimed this status is common for new lenders and allows it to expand its UK banking operations before a full launch.
Revolut was founded in 2015 and has since amassed nine million UK customers, with a total of 45 million worldwide. Becoming a fully-fledged bank will give Revolut the opportunity to widen the range of products and services it can offer in the UK, including holding customers’ cash, and offering branded mortgages and loans. Up to this point, Revolut has operated as an e-money payments business without the full capabilities of a bank or the same FSCS (Financial Services Compensation Scheme) protection.
Why has it taken Revolut three years to get a banking licence?
Most organisations expect a decision from regulators on whether they can operate as a bank within 12 months of applying, but this has dragged on for much longer for Revolut. This has been put down to questions over how it accounts for its turnover, its complicated share structure and a range of other considerations. These include how money-laundering checks were carried out and there were questions raised about the firm's corporate culture.
Revolut claims all these issues have now been resolved, though major consumer groups have warned there are still more steps it needs to take to protect customers. Other issues, such as having sufficient staff, systems and structure to function as a full bank are commonly addressed by new banks during the ‘restrictions’ period.
How will Revolut change now it has a banking licence?
At the time of writing, there are no significant changes that Revolut users need to be aware of. As a bank, Revolut will now be able to hold deposits for customers and launch its own lending products, including mortgages. This is likely to open up even more sources of revenue for what is already the most valuable fintech company in the UK at around £30bn.
Change is already afoot, as Revolut have launched a cash deposit scheme that allows customers to deposit up to £100 in cash for free at a range of retailers across the country. Any amount over £100 will attract a 1.5% fee. Note that the minimum deposit is £10 and the maximum is £500 per transaction, £750 per day, £2,250 per month and £10,000 per year.
It is rare for a bank to charge customers for depositing cash, but this is a sign that Revolut is looking for ways to operate as a full bank with all the responsibilities that entails while remaining an online-only organisation. Banks are expected to provide sufficient cash services to customers and identify gaps in cash access. You can expect this new scheme to be followed by lending products and mortgages as Revolut expands its banking service. It could even trigger further expansion into other territories, including the US.
Revolut UK CEO Francesca Carlesi said the banking licence “is a significant step forward for Revolut and for our customers. 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.”
Is Revolut the best app-only bank?
Revolut may be the biggest, but it is not the only app-based banking option in the UK. There are a whole host of firms offering similar promises to simplify payments and make banking easier by grouping everything you need in one app. You can check out the competition and how we rate each firm in our article 'The best app-only bank in the UK'.
