Revolut, the largest fintech by valuation, has achieved a significant milestone by securing a banking licence in its home country, the United Kingdom.
This development marks the culmination of a protracted three-year regulatory approval process and represents a crucial step in expanding Revolut’s service offerings and solidifying its market position.
Understanding the Mobilisation Stage
The mobilisation stage, also referred to as Authorisation with Restrictions, is a critical phase in the Bank of England’s new bank authorisation process.
This stage is optional and provides new banks, like Revolut, with additional time to finalise and deliver the development of their IT infrastructure, governance, and risk management frameworks.
During this period, banks are authorised but must adhere to specific restrictions, such as a £50,000 annual deposit limit per customer.
However, the fintech can continue offering services as a payment institution under its existing e-money licence from the Financial Conduct Authority, thereby circumventing this limit imposed during mobilisation. This allows Revolut to maintain its current customer base and service offerings without disruption.
The Bank of England’s guide clarifies that mobilisation is not intended for initiating a bank’s strategies or systems but rather for completing the build-out of the bank.
Firms are expected to avoid making material changes to their strategy or key personnel during this stage.
The mobilisation period must be concluded within 12 months, with a Variation of Permission application required at least three months before the period’s end to allow for regulatory assessment.
Revolut will likely secure further investments during this stage. Although the company has not publicised any fundraising plans, it is considering a secondary share sale round for its employee shareholders, aiming for a valuation of $45 billion.
This financial boost will be instrumental in supporting the company’s transition from a payment institution to a fully-fledged bank.
New Products and Services for UK Customers
With the new UK banking licence, Revolut can expand its product offerings significantly.
As a bank, Revolut can now introduce lending products, including overdrafts, loans, and savings accounts, which were previously unavailable under its e-money institution status.
This expansion will enable Revolut to compete more effectively with traditional banks and other challenger banks like Monzo and Starling.
Additionally, the new banking status brings enhanced security for customers. Deposits will now be protected up to £85,000 under the Financial Services Compensation Scheme (FSCS), providing greater peace of mind for account holders.
Revolut’s focus on innovation continues as it partners with CMC Markets to offer contracts for differences (CFDs) products to its customers.
However, the company has also streamlined its services by terminating the Lite brand in several emerging markets. These strategic moves aim to enhance Revolut’s service portfolio while maintaining a robust and secure banking environment for its UK customers.
Revolut’s Global Expansion and Future Plans
Revolut’s ambitions extend far beyond the UK market. With a customer base of 45 million globally, the fintech has been actively expanding its footprint.
In the European Union, Revolut operates as a bank under a licence from Lithuania, and it recently secured a banking licence in Mexico. These moves are part of a broader strategy to establish a strong presence in key international markets.
The company is also exploring new avenues for growth. Revolut is considering a secondary share sale round for its employee shareholders, aiming for a valuation of $45 billion. This financial maneuver will provide the necessary capital to fuel further expansion and innovation.
Moreover, Revolut continues to enhance its service offerings.
The partnership with CMC Markets to offer CFDs and the introduction of new lending products in the UK are just the beginning. As Revolut navigates the mobilisation stage, it remains committed to delivering cutting-edge financial solutions to its global customer base.
Conclusion
Revolut’s acquisition of a UK banking licence marks a pivotal moment in its journey. As the company navigates the mobilisation stage, it can expand its product offerings and solidify its market presence. With global ambitions and innovative services, Revolut has the potential to redefine the banking landscape.
