Wise is reportedly aiming to become a UK bank having “contacted experienced financial services executives over the past two months” regarding the matter, according to a report from The Times.
Plans are understood to be in the very early stages; Wise officials have not yet made an application for a banking licence to the Bank of England or the Prudential Regulation Authority (PRA).
Over the past few years, Wise has evolved its services from its core international payment offerings. The company now offers multi-currency accounts and competitive fees for international payments for customers, while also distributing debit cards for individual users and businesses.
In recent years, the debit card offerings and customers’ ability to earn interest on balances holding certain currencies, such as US dollars and euros, have moved Wise’s product offerings more into retail banking.
Wise also offers investment funds backed by BlackRock.
According to its 2024 financial report, Wise held £18.6bn of cash and liquid investment grade assets, an increase of 28% from last year. The company also held £17.1bn in customer balances.
John Cronin, a banking analyst at SeaPoint Insights, told The Times it was “entirely plausible” Wise could become a licensed UK bank.
“They could potentially look to convert the funds they safeguard into deposits, which they could then recycle into lending opportunities,” said Cronin.
“A banking licence would give them direct access to the UK’s payment infrastructure enabling them to reduce their reliance on third-party banks for clearing and settlement, potentially reducing costs and operational complexity.”
How does it currently operate
While Wise is not currently a licensed bank and therefore not a licensed deposit taker and lender, it is able offer digital banking services via its electronic money institute (EMI) licence in Europe.
Its EMI licence was granted by the UK’s Financial Conduct Authority (FCA) in 2016 and enables Wise to offer its multi-currency customer accounts and debit cards in the UK.
One of the distinctions between an EMI license and a banking license is that money held within the former is considered electronic money and not traditional depository money.
Wise’s potential pivot to traditional banking could see it continue to offer competitive FX rates on cross-border payments against traditional banks, which is its initial origin, seeking to provide cheaper international payment fees.
A new competitor?
With more than 15 million customers across 160 countries, Wise reported a £565m pre-tax profit for the 2024 financial year, significantly less than competitors like Revolut’s £1bn-plus pre-tax profit, but also significantly higher than Monzo’s £15.4m last year.
Revolut and Monzo have both acquired UK banking licences to offer lending services, such as overdrafts. However, it is unknown how long the process could take Wise in its application process.
It took Revolut up to three years to secure a banking licence from the PRA, and Monzo two years. And even when a license is granted, applicants can wait a significant amount of time before they are able to offer banking services.
While Revolut’s banking licence was conditionally approved last year, the digital banking giant remains stuck in the “mobilisation” phase, which caps deposits at £50,000 and restricts lending.
Its customer accounts are still considered e-money accounts and have to adhere to cash withdrawal and currency exchange limits for security reasons.
Both Revolut and Monzo have been able to garner customers by offering competitive foreign exchange rates for both its UK and international users. Revolut uses a real-time rate tool whilst Monzo’s adopts Mastercard’s rates which comes with no weekend surcharge.
With Wise hanging its hat on its cheaper, it operates a mid-market rate, considered a fairer exchange rate than market standards.
Wise also offers guaranteed rates when transferring funds from account to account, insights and transparency of the cost conversion, and real-time tracking of its currency converter to see how they have changed in days, months and years.
