Revolut’s UK Banking License Delayed Over Risk Control Concerns

Two UK regulators—the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA)—have delayed granting a banking license to Revolut, expressing concerns around the the company’s risk and compliance posture, especially regarding cross-border payments (which Revolut is popular for, given its multi-currency accounts and competitive exchange rates) and anti-money laundering (ALM) controls.

That’s a far cry from July 2024, when the London-based fintech Revolut was on course to be granted a UK banking license. Initially, the company was granted “mobilization” status, meaning that the firm could begin refactoring its operations under regulatory oversight, affording its clients the same degree of protections as those of traditional banking institutions. The issuance of a full banking license was expected around a year later, but didn’t happen.

The delay has resulted in high-level tension in the country’s finance sector, with the UK Chancellor pushing for urgent approval, while the Governor of the Bank of England intervened to delay the process citing the need for rigorous oversight.

Revolut’s quest to secure a full UK banking license has been ongoing for more than three years, so this delay threatens to tarnish the UK’s reputation as a hub for fintech innovation in Europe. For Revolut, which has expanded rapidly across dozens of countries and is one of the UK’s most popular apps for cross-border payments, the delay threatens to stifle their ability to offer a wider range of products in its home market. 

Last year, Revolut shared its ambitions to launch new solutions for lending, protected deposits, and other financial services. However, while it remains under mobilization constraints in the UK, clients are limited to holding no more than £50,000 in deposits. In other words, Revolut still can’t operate as a full bank, with customer accounts still acting as e-money accounts without full regulatory oversight.

Naturally, Revolut’s licensing saga is having a ripple effect across the broader UK fintech sector. Early on, neobanks enjoyed a relatively warm reception in the UK, with competitors like Monzo and Starling receiving licenses in 2016 and 2018 respectively. However, as the sector rapidly matures, regulators are sharpening scrutiny, proving the fact that company size, growth, and popularity don’t make them exempt from increasingly stringent regulatory requirements. 

Clearly, the era of ‘move fast and worry about regulations later’ isn’t going to work anymore, forcing fintech companies of all sizes to build in risk and compliance controls that are at least on par with traditional banking institutions. Also, despite widespread political support for digital banking in the UK, it’s ultimately the independent regulators that have the final say.