Fintechs have challenged traditional banks in the UK in the customer service product sense, with or without full banking licences.
Barclays CEO CS Venkatakrishnan has suggested fintechs such as Revolut benefit from an uneven playing field, arguing banks and fintechs are held to different standards when it comes to consumer risk management.
Speaking at the FT Global Banking Summit on December 2, Venkatakrishnan noted Revolut still does not have a full UK banking licence, despite being cleared for one in July 2024 by the Prudential Regulation Authority (PRA).
Barclays CEO then noted fintechs which operate without full UK banking licence are “free from some of the very important consumer obligations that we have to fulfil”.
These consumer duty obligations require banks such as Barclays to act in good faith, ensure products and services meet appropriate standards, provide effective customer support, and report regularly to regulators.
“I think we should continue to operate with our standards, with our integrity, with our regulation,” said Venkatakrishnan. “If we can marry them, we will be happy.”
How do Revolut currently operate?
It has been 16 months since the PRA cleared Revolut for a UK banking licence, so why has Europe’s most valuable fintech not received one yet?
Revolut is still currently in the ‘Mobilisation Phase’ of receiving its full license, which requires the fintech to perform consumer duty due diligence requirements and maintain them, but not to the same length as fully licenced banks and other fintechs.
The mobilisation phase requires impending licensees to map out its business plan to its lead UK regulator, the PRA in Revolut’s case.
Revolut must also demonstrate capital and liquidity which meets Internal Capital and Liquidity Adequacy Assessment Process requirements, £50,000 cap on deposits, and regular monitoring, such as assessments and audits.
Revolut CEO Nik Storonsky has made it clear it is the company’s “number one priority” to secure a full UK banking licence, but as Venkatakrishnan stated, there are both pros and cons to operating without one.
Do Revolut need a UK banking licence?
Despite operating without a full UK banking licence since its launch in 2015, Revolut has still grown into one of the world’s most popular and valuable fintech companies.
The digital bank has more than 65 million global customers and has established a presence in regions such as Eastern Europe, Latin America and the Middle East.
The last several years has seen Revolut also significantly expand its capital and investment as it has reached a $75bn valuation through secondary share sales of employee’s shares and dividends.
Among these other benefits, Revolut has been able to save on costs as it is not required to hold higher capital requirements, as well as being able to be more agile with some of the customer services it offers as it is not obliged to follow more stringent rules with a full banking licence.
However, without a full banking licence, Revolut could be viewed as a least trusted partner to bank with as its customers deposits and funds are not covered and protected by the Financial Services Compensation Scheme (FSCS).
Revolut will also not be able to offer lending services without a full banking licence, which is becoming increasingly profitable for financial institutions in the UK, as outstanding consumer credit loans hit £233bn ($309bn) in October 2024.
