One of the most recognized FinTech companies, Revolut, has been granted a licence to operate as a bank in the United Kingdom. The procedure took more than three years, so this definitely will be a huge move forward regarding further development, but there are a few things left to do before it gets to hold customers’ deposits.

Long-delayed Approval

Revolut applied for a UK banking license way back in 2021. The company had to sweat it out ever since to convince regulators that it had sorted out a host of problems—among them, issues with accounting and regulatory compliance within the EU, and aggressive corporate culture. In 2016, the UK’s Financial Conduct Authority launched an investigation after a whistleblower claimed that Revolut wasn’t properly checking for money laundering. That investigation concluded in 2017.

Addressing Concerns

Revolut has since addressed matters related to its full compliance with anti-money laundering and terrorist financing regulations. It also worked on its corporate culture. However, consumer group Which? raised concerns over how the firm handles scams and the refunding of victims. Which?Spokesperson said that customers’ money would be safeguarded by the Financial Services Compensation Scheme (FSCS), up to £85,000, following the granting of the banking licence. But Revolut still has to significantly enhance how it deals with scamming.

Frustrations of CEO

Its founder and chief executive, Nik Storonsky, formerly a trader at Lehman Brothers, last year expressed his frustration over the slow process of licensing. He said it’s difficult to run a business in the UK with high taxes and red-tape-wielding regulators strangling his business. Indeed, he threatened to float on the US stock exchange rather than the UK, which would have been a blow to the prestige of the London Stock Exchange.

This is why it is important to Revolut to get the UK banking license. It basically allows them to transition from an e-money firm into being a fully-pledged bank. To put it simply, they would be able to hold customers’ deposits, give loans, mortgages with branding, etc. With this new status, however, would come much stricter regulation and having to join the FSCS.

Well, at the moment, Revolut is in its mobilization stage, which involves building up banking operations. The period that the startups use to deal with outstanding issues and make sure that their staffing levels, IT systems, and governance checks are adequate. Under the guidance of the Bank of England, this process should not last longer than one year, but it can occasionally take a few months.

Future Prospects

Other points on this regulatory punch list Revolut has not made public, but a nod from UK regulators could be enough to sway other markets — such as the US — to stamp their approval. Storonsky noted: “We are incredibly proud to reach this important milestone in the journey of the company and we will ensure we deliver on making Revolut the bank of choice for UK customers.”

Financial Success

This is an announcement shortly after Revolut reported record profits of £438 million for 2023, as compared to a £25 million loss in the previous year. Profits were boosted by higher interest rates and ambitious expansion plans that increased their user base by 12 million customers.

Future Plans

As Revolut hinted last month, they are about to prepare for a major IPO. They told their annual report that they had strengthened their financial controls and brought them to the level expected of quoted companies. The company is said to have plans to sell some employee shares to private investors first, which may raise its valuation to as much as $40 billion (£31bn). Revolut was last valued at $33 billion in 2021, topping it as the most valuable fintech company in the UK.

Finally, this realization of getting a UK banking license brings this moment as one of the greatest milestones in the history of Revolut. These new opportunities for growth bring additional challenges and responsibilities in their wake. Now, the company should focus on compliance with all the regulatory requirements and prove that it is capable of being a reliable and secure bank for its customers.