The UK’s Most Valuable Fintech Struggles for Banking License While Others Thrive

The most valuable fintech in the United Kingdom was granted a banking license last year. However, Revolut remains in a regulatory holding pattern despite its significant customer base and international operations.

Revolut operates as an e-money unit rather than a full bank, with limitations on customer deposits amounting to just £50,000—a stark contrast to the billions held by traditional banks like Barclays, HSBC, or Santander. This status means Revolut’s UK customers lack protection under the Financial Services Compensation Scheme.

Revolut’s path to becoming a bank has been delayed due to its size and regulatory concerns. With over 10 million UK-based customers and operations in more than 40 countries, no other organization has ever pursued a banking license with such scale.

Regulatory Concerns Over Scale and Compliance

Last year, Revolut faced scrutiny for having significantly higher fraud complaints compared to traditional banks like Barclays. These complaints, predominantly from automated push payment scams, raised questions about the fintech’s security measures.

The regulatory challenges have made it a complex process for Revolut to transition into full banking status. However, CNBC reports that Revolut still aims to become a fully regulated bank this year.

Exploring Alternative Paths in the U.S.

In light of these hurdles, Revolut is considering an alternative strategy. According to the Financial Times, it may acquire an existing American banking license to bypass traditional regulatory processes and quickly enter the U.S. market.

This approach could involve targeting a less expensive bank with an established U.S. banking license, thus expanding its customer base significantly. Such a move aligns with Revolut’s recent valuation and funding considerations, potentially increasing its worth substantially through this deal.