Will Revolut ever get a British banking licence?

There was no escaping Revolut during the recent UK party political conference season. The fintech co-sponsored Labour’s opening reception earlier this month and hosted events at the Conservatives’ convention the week before.

The payments-to-crypto provider told the Financial Times that its high profile at the conferences was “entirely unrelated” to its longstanding bid for a UK banking licence, which its chief executive, Nik Storonsky, has previously lobbied the prime minister on.

Political support of whatever stripe could prove invaluable for the licence Revolut needs to turbocharge growth in its home market and to instil confidence in overseas regulators; a prize that remains elusive, almost eight months after one of its senior executives promised it was coming “any day now”.

And while the recent resolution of Revolut’s messy share structure with its biggest investor, SoftBank, will assuage some regulatory misgivings, the fintech must cross several more hurdles before it will be allowed to become a UK bank, according to people familiar with the situation.

Banking licences are typically granted within 12 months of application, the UK regulators’ guidance says. Revolut’s application, which has been on regulators’ desks since January 2021, was always going to be a longer journey, former insiders and experts told the FT.

With close to 8mn customers in the UK, Revolut is far bigger than any of the 36 new lenders that the Bank of England’s Prudential Regulation Authority and Financial Conduct Authority have jointly approved since 2013.

That size means “it would be attracting senior attention” within the regulators, said Gavin Stewart, a former FCA official who is now a regulatory consultant. “That will effectively double [officials’] workload: everyone will want to chip in.”

Still, Revolut’s application has been hindered by many factors beyond nervousness about licensing a bank that could swiftly take a significant part of the UK retail-banking market, according to insiders at the fintech and others familiar with its troubled regulatory journey.

After being forced to issue qualified and late accounts for 2021, Revolut recently admitted to a delay to its 2022 accounts.

Revolut thought it was “not a big problem” that the auditors stated that they could not properly apportion all of the company’s revenue for the 2021 accounts, one former insider said, adding that the issue arose in part because Revolut built its own accountancy software package rather than buying one as most companies do.

Regulators repeatedly raised concerns about the delays and qualifications to the 2021 accounts, as well as about Revolut’s public downplaying of the issue, according to two people familiar with discussions. Revolut’s bullish stance sparked criticism from the fintech’s own board. The fintech was admonished for the latest delay by regulators in recent weeks, two people familiar with the situation said. They added that the company has reassured regulators that the accounts will be finalised imminently.

Revolut declined to comment on the specifics of its talks with the PRA and FCA. “We work closely with regulators around the world . . . Revolut has obtained over 70 licences across a range of financial services,” said the fintech, which was granted an EU banking licence by the Bank of Lithuania in 2021.

The FCA and PRA declined to comment on the accounts issue, or on any other aspect of their dealings with Revolut.

Revolut’s issues have not been limited to its accounts. In early 2022, a flaw in its payment system meant US criminals could steal more than $20mn. In another recent case, the fintech allegedly allowed as much as £1.7mn to be paid to accounts that had been red-flagged by the UK’s National Crime Agency.

Every bank has cases that slip through the gaps. Stewart said regulators generally take a tough approach to banks during application processes because “once they get a licence, it’s much harder to take it away”.

A series of departures has not helped Revolut’s cause with regulators, who generally prefer stable management teams. In the two and a half years since it submitted its first application for a UK licence, it has lost five senior UK executives, including its UK banking chief, James Radford.

The FCA, which oversees Revolut’s existing UK payments business and ordered a review of its culture in 2021, carries out exit interviews with departing staffers. Several told the FT that they have given negative feedback to the watchdog on their time at the fintech. Revolut said 80 per cent of its internal exit interviews this year “rated their experience at Revolut as ‘positive’.”

Two ex-Revolut insiders involved in regulatory applications said they had left, in part, because they were not comfortable with how they were asked to present information to officials.

Supervisors have also questioned Revolut’s governance arrangements, according to people familiar with the discussions, and the level of challenge presented by the board to Storonsky.

The PRA has told Revolut it wants to see the board expanded, ideally to include directors with more technology and banking expertise able to challenge executives on operational and compliance issues, according to two people familiar with the request.

Revolut is in the process of adding two more non-executives to expand the board to seven, alongside the chief executive and chief technology officer, the people said. Current non-executive directors include the chair, Martin Gilbert, who co-founded Aberdeen Asset Management, and Michael Sherwood, a former Goldman Sachs co-head for Europe.

Regulators previously flagged concerns about the board’s ability to robustly challenge management, given the wealth that certain non-executive directors had amassed from Revolut shares — mostly granted before a 2021 funding round that then increased the company’s value fivefold. The fintech then responded to these concerns by remunerating board members in cash rather than shares, according to people familiar with the situation.

Insiders describe incidents where Revolut’s board has been wrongfooted by public announcements by Storonsky. The fintech’s Russian-born 39-year-old co-founder retains a “big say” in how Revolut is run, according to one former employee.

Meanwhile, a spate of banking collapses in March has made regulators more cautious generally, while soaring interest rates and slowing economies that have depressed fintechs’ valuations make banking supervisors fret over the difficulty of raising more capital if companies need to shore up losses.

Against that backdrop, the licence that Storonsky said he would “love to have . . . as a Christmas present” last year might not be ready by this festive season either.