Why Revolut's journey to become a UK bank is taking so long

LONDON — A twelvemonth connected from securing its archetypal U.K. slope license, Revolut is inactive awaiting afloat authorization from regulators.

The fintech elephantine was granted a banking licence with restrictions successful July 2024 from the U.K.'s Prudential Regulation Authority (PRA), bringing an extremity to a years-long exertion process that began backmost successful 2021. The PRA is simply a portion of the Bank of England.

This cardinal triumph moved Revolut into what's known arsenic the "mobilization" signifier of a company's travel toward becoming a full-fledged bank.

During this period, firms are constricted to holding lone £50,000 of full lawsuit deposits — good beneath the hundreds of billions of pounds customers deposit with large precocious thoroughfare lenders specified arsenic Barclays, HSBC and Santander.

Revolut customers successful the U.K. are besides inactive served by the company's e-money unit, alternatively of its banking entity. This means they are not straight insured by the Financial Services Compensation Scheme, which protects customers up to £85,000 if a steadfast fails.

Roadblocks and the sheer size of Revolut are among the galore reasons wherefore the firm's slope authorization process is taking longer than expected, analysts told CNBC.

Revolut is presently inactive awaiting its user recognition license, which would alteration it to connection recognition cards and different services successful the U.K.

Meanwhile, the Financial Times reported Tuesday that a gathering arranged by British Finance Minister Rachel Reeves with Revolut and the PRA was cancelled aft an involution from Bank of England Governor Andrew Bailey.

CNBC was incapable to independently verify the report. The BOE declined to remark and the Treasury did not instantly respond to CNBC's petition for comment.

A spokeswoman for Revolut said that portion the steadfast was incapable to remark connected specifics, the institution remains connected way to motorboat a afloat regulated U.K. slope this year.

"We are progressing done the last stages of mobilisation and proceed to enactment constructively with the PRA," she told CNBC via email.

"Given Revolut's planetary scale, this is the largest and astir analyzable mobilisation ever undertaken successful the UK. A thorough reappraisal is an expected portion of the process and getting this close is much important than rushing to conscionable a circumstantial date."

"Revolut is already a regulated slope successful implicit 30 countries, including immoderate of the toughest jurisdictions successful the world," helium told CNBC, noting the institution is worthy much than immoderate large U.K banks connected a rumored $65 cardinal valuation.

"If that's not capable standard oregon rigour for the PRA, it raises superior questions astir the UK's regulatory expectations — due to the fact that they present look excessive," Hussey-Yeo added.

Regulators are tense astir getting it incorrect owed to the lingering "scar tissue" of the 2008 fiscal crisis, said Simon Taylor, caput of strategy astatine fraud prevention level Sardine AI.

"The U.K. has historically had 1 of the azygous astir risk-averse regulatory postures successful the world when it comes to superior requirements, especially," helium told CNBC.

Another origin astatine play is Revolut's size. No different steadfast has entered the mobilization signifier of slope authorization with much than 500,000 customers. Revolut serves implicit 10 cardinal customers successful the U.K.

Once it exits the mobilization phase, Revolut would request to gradually commencement migrating customers to its U.K. banking entity — a important undertaking.

This, coupled with Revolut's already lengthy past successful the U.K. marketplace and complaints implicit fraud, makes it a "complex subordinate to authorize," according to Taylor.

"A batch of the larger banks historically complained astir Revolut being a large root of their fraud risk," helium told CNBC. "My conjecture is that these complaints and issues person shown up successful the BoE's regulatory reports, and they person material, good grounded concerns."

Still, Taylor conceded that Revolut has "some of the astir blase exertion to observe and forestall these issues, and has been astatine the beforehand enactment of dealing with the scams issue."

Ensuring Revolut obtains afloat authorization to run a slope is important for the U.K. authorities — peculiarly arsenic it faces criticisms from the tech manufacture that changes to the non-domicile taxation status, on with accrued taxes connected superior gains, person created a hostile situation for entrepreneurs.

"Every constituent of wealthiness seizure for the U.K. — jobs, taxes, equity gains — has been eroded," Cleo's Hussey-Yeo said, adding that determination was a heightened hazard that richly valued fintechs similar Revolut could move their global office extracurricular of the U.K. if specified measures continue.

Sardine.ai's Taylor said Revolut receiving afloat slope authorization "would beryllium a monolithic symbolic win" for the government.

"The Chancellor [of the Exchequer] cannot spend to suffer Revolut to different jurisdiction — but Revolut looks astatine a planetary marketplace and sees tons of consenting suitors for its business, and precise small willingness from the U.K.," helium told CNBC.