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

In London, Revolut, the fintech powerhouse, finds itself in a prolonged wait for complete banking authorization, a year after initially securing a restricted license in the UK. The Prudential Regulation Authority (PRA), part of the Bank of England, granted Revolut this license in July 2024, concluding a lengthy application journey that began in 2021. However, the firm is currently in the 'mobilization' phase, which restricts it to holding only £50,000 in total customer deposits, a stark contrast to the hundreds of billions managed by traditional banks like Barclays and HSBC. While customers in the UK continue to use Revolut's e-money services, they lack the protections offered by the Financial Services Compensation Scheme, which safeguards deposits up to £85,000. The delays in securing full banking status have been attributed to various challenges, including the sheer scale of Revolut's operations and regulatory scrutiny, as mentioned by financial analysts. At present, Revolut is still in pursuit of its consumer credit license to expand its offerings to include credit cards and more. Reports suggest that a key meeting involving British Finance Minister Rachel Reeves and the PRA was unexpectedly canceled, likely due to intervention by the Bank of England's Governor Andrew Bailey. The Bank of England has refrained from commenting, and the Treasury has not responded to inquiries regarding this development. A spokesperson for Revolut stated that the firm is on track to launch a fully regulated bank within the year. The spokesperson emphasized the complexity of the process, noting, 'Given Revolut's global scale, this is the largest and most complex mobilization ever undertaken in the UK.' They reiterated that thorough evaluation is crucial, prioritizing accuracy over hastiness. Industry leaders have voiced concerns about the UK’s regulatory environment, with some arguing that an 'anti-growth regulatory posture' may be contributing to the delays. Barney Hussey-Yeo, CEO of fintech Cleo, pointed out that Revolut operates as a regulated bank in over 30 countries, raising questions about the PRA's stringent expectations. Simon Taylor, head of strategy at fraud prevention platform Sardine AI, highlighted the caution exercised by regulators in light of the 2008 financial crisis, which has cultivated a cautious regulatory environment in the UK. Revolut's customer base of over 10 million in the UK further complicates its transition to full banking operations, as it would need to methodically migrate customers to its banking entity post-mobilization. This multifaceted situation is compounded by historical complaints from larger banks about fraud originating from Revolut. Despite the challenges, experts agree that securing full banking authorization is pivotal for the UK government, particularly amidst criticisms of its business environment. The potential exodus of highly valued fintech firms like Revolut could pose significant risks to the UK’s economic landscape. Taylor concluded that securing this authorization would represent a significant achievement for the government, emphasizing the urgency of addressing Revolut's regulatory journey before the firm considers relocating its global headquarters.