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

LONDON — A year on from securing its initial U.K. bank license, Revolut is still awaiting full authorization from regulators.

The fintech giant was granted a banking license with restrictions in July 2024 from the U.K.'s Prudential Regulation Authority (PRA), bringing an end to a years-long application process that began back in 2021. The PRA is a unit of the Bank of England.

This key victory moved Revolut into what's known as the "mobilization" phase of a company's journey toward becoming a full-fledged bank.

During this period, firms are limited to holding only £50,000 of total customer deposits — well below the hundreds of billions of pounds customers deposit with major high street lenders such as Barclays, HSBC and Santander.

Revolut customers in the U.K. are also still served by the company's e-money unit, instead of its banking entity. This means they are not directly insured by the Financial Services Compensation Scheme, which protects customers up to £85,000 if a firm fails.

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

Revolut is currently still awaiting its consumer credit license, which would enable it to offer credit cards and other services in the U.K.

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

CNBC was unable to independently verify the report. The BOE declined to comment and the Treasury did not immediately respond to CNBC's request for comment.

A spokeswoman for Revolut said that while the firm was unable to comment on specifics, the company remains on track to launch a fully regulated U.K. bank this year.

"We are progressing through the final stages of mobilisation and continue to work constructively with the PRA," she told CNBC via email.

"Given Revolut's global scale, this is the largest and most complex mobilisation ever undertaken in the UK. A thorough review is an expected part of the process and getting this right is more important than rushing to meet a specific date."

Barney Hussey-Yeo, CEO of fintech firm Cleo, said that "anti-growth regulatory posture" from the U.K. was likely a contributing factor in the delays to Revolut exiting its mobilization phase.

"Revolut is already a regulated bank in over 30 countries, including some of the toughest jurisdictions in the world," he told CNBC, noting the company is worth more than some major U.K banks on a rumored $65 billion valuation.

"If that's not enough scale or rigour for the PRA, it raises serious questions about the UK's regulatory expectations — because they now look excessive," Hussey-Yeo added.

Regulators are nervous about getting it wrong due to the lingering "scar tissue" of the 2008 financial crisis, said Simon Taylor, head of strategy at fraud prevention platform Sardine AI.

"The U.K. has historically had one of the single most risk-averse regulatory postures in the world when it comes to capital requirements, especially," he told CNBC.

Another factor at play is Revolut's size. No other firm has entered the mobilization phase of bank authorization with more than 500,000 customers. Revolut serves over 10 million customers in the U.K.

Once it exits the mobilization phase, Revolut would need to gradually start migrating customers to its U.K. banking entity — a significant undertaking.

This, coupled with Revolut's already lengthy history in the U.K. market and complaints over fraud, makes it a "complex player to authorize," according to Taylor.

"A lot of the larger banks historically complained about Revolut being a major source of their fraud risk," he told CNBC. "My guess is that these complaints and issues have shown up in the BoE's regulatory reports, and they have material, well grounded concerns."

Still, Taylor conceded that Revolut has "some of the most sophisticated technology to detect and prevent these issues, and has been at the front line of dealing with the scams issue."

Ensuring Revolut obtains full authorization to operate a bank is important for the U.K. government — particularly as it faces criticisms from the tech industry that changes to the non-domicile tax status, along with increased taxes on capital gains, have created a hostile environment for entrepreneurs.

"Every element of wealth capture for the U.K. — jobs, taxes, equity gains — has been eroded," Cleo's Hussey-Yeo said, adding that there was a heightened risk that richly valued fintechs like Revolut could move their global headquarters outside of the U.K. if such measures continue.

Sardine.ai's Taylor said Revolut receiving full bank authorization "would be a massive symbolic win" for the government.

"The Chancellor [of the Exchequer] cannot afford to lose Revolut to another jurisdiction — but Revolut looks at a global market and sees lots of willing suitors for its business, and very little willingness from the U.K.," he told CNBC.