Obstacles Arise as Revolut Aims to Transform from Fintech to Banking Institution
Revolut's US Expansion Strategy Shifts Amid UK Banking Delay
Revolut, the UK's most valuable fintech company with a $45 billion valuation, is facing a delay in its transition to a fully regulated bank due to the unprecedented complexity of the application process. This delay has prompted the company to consider alternative strategies for expanding into the US market.
Revolut currently operates as an e-money unit, with a limit of £50,000 in total customer deposits. With over 10 million customers in the UK alone and operations in over 40 countries, Revolut is larger than any other organization that has pursued the UK's banking license process. However, the company's e-money status means that its customers are not protected by the UK's Financial Services Compensation Scheme.
The delay in full banking authorisation stems from the scale and complexity of meeting regulator demands within the set timeframe. Revolut was the first fintech with over 500,000 UK customers to enter this authorisation path, leading to unique challenges for both the company and regulators in meeting required operational systems, compliance, capital, and leadership standards. The 12-month mobilisation period granted after receiving a restricted banking licence in 2024 has proven insufficient to complete all necessary regulatory requirements, causing Revolut to likely miss the provisional July 25, 2025 deadline for full authorisation.
The concerns about Revolut's scale and compliance measures have made its transition into a bank a challenging process for regulators. These concerns have been further exacerbated by a high incidence of fraud complaints. The fraud complaints against Revolut were mostly automated push payment frauds, which have called into question the company's fraud defenses.
Given the UK's regulatory hurdles, Revolut is likely considering partnerships with existing U.S. banks or leveraging fintech charters as interim solutions to expand in the US, rather than immediately applying for a full banking license. This approach allows Revolut to offer banking-like services (such as payments and card issuing) while circumventing lengthy regulatory licensing processes.
The acquisition strategy being considered by Revolut could unlock a substantial new customer base for the company in the US. Such a deal could provide the funds needed for global expansion and substantially increase Revolut's valuation. However, it's important to note that the specifics of this strategy are not yet publicly known.
Regulators’ cautious approach and insistence on thorough compliance—amid concerns over fintech regulatory standards—have contributed to the delay, prompting criticism that the UK risks stifling innovation and fintech competitiveness. The acquisition strategy could be a real possibility as Revolut seeks to bypass the lengthy banking charter application process and expand its operations in the US market.
Revolut, in response to the delay in becoming a fully regulated bank, is considering alternatives for expanding into the US market, such as partnering with existing US banks or leveraging fintech charters. Such strategies would allow Revolut to offer banking-like services while avoiding lengthy regulatory licensing processes.
Given the challenges in obtaining full banking authorisation in the UK, investing in partnerships or acquisitions could provide a viable solution for Revolut to expand its customer base in the US, potentially increasing its valuation and funding its global expansion.
