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Revolut sets sights on full UK banking license to solve the profitability conundrum

Published by Business Insider on Tue, 12 Jan 2021


<bi-shortcode id="summary-shortcode" data-type="summary-shortcode" class="mceNonEditable" contenteditable="false">Summary List Placement</bi-shortcode><p>The UK neobank applied for a full banking license in the UK, which would allow it to offer overdrafts, loans, and deposit accounts, Bloomberg&nbsp;<a href="https://e.insiderintelligence.com/click/22625421.4/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9uZXdzL2FydGljbGVzLzIwMjEtMDEtMTEvcmV2b2x1dC1hcHBsaWVzLWZvci11LWstYmFua2luZy1saWNlbnNlLWluLXNlYXJjaC1mb3ItZXhwYW5zaW9u/5d233c18f730436f2414784fB403e342a" target="_blank" rel="noopener" data-saferedirecturl="https://www.google.com/url'q=https://e.insiderintelligence.com/click/22625421.4/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9uZXdzL2FydGljbGVzLzIwMjEtMDEtMTEvcmV2b2x1dC1hcHBsaWVzLWZvci11LWstYmFua2luZy1saWNlbnNlLWluLXNlYXJjaC1mb3ItZXhwYW5zaW9u/5d233c18f730436f2414784fB403e342a&amp;source=gmail&amp;ust=1610539236675000&amp;usg=AFQjCNETAX3r1FEWrTB7m3C4pImwYu4UhA"><u>reports</u></a>. The license would also guarantee Revolut is covered by the UK's Financial Services Compensation Scheme, which protects customer deposits of up to 85,000 ($109,000). Revolut currently has an emoney license in the UK, holding customers' funds in big banks, and a banking license in the EU.</p><p><img class="center" src="https://static4.businessinsider.com/image/5ffdadd4d184b30018aae410-1149/revolut bank account holders and penetration.png" border="0" alt="revolut bank account holders and penetration" data-mce-source="insider intelligence"></p><p>This mirrors a trend in the US, where fintechs are seeking more operational autonomy via banking licenses.&nbsp;In 2020, Varo became the&nbsp;<a href="https://e.insiderintelligence.com/click/22625421.4/aHR0cHM6Ly93d3cuZm9yYmVzLmNvbS9zaXRlcy90b21ncm9lbmZlbGR0LzIwMjAvMDkvMTYvdmFyby1nZXRzLWEtYmFua2luZy1saWNlbnNlLWFuZC1tb3Zlcy1vcGVyYXRpb25zLXRvLXRlbWVub3MtdHJhbnNhY3QtcGxhdGZvcm0v/5d233c18f730436f2414784fBcaa436b2" target="_blank" rel="noopener" data-saferedirecturl="https://www.google.com/url'q=https://e.insiderintelligence.com/click/22625421.4/aHR0cHM6Ly93d3cuZm9yYmVzLmNvbS9zaXRlcy90b21ncm9lbmZlbGR0LzIwMjAvMDkvMTYvdmFyby1nZXRzLWEtYmFua2luZy1saWNlbnNlLWFuZC1tb3Zlcy1vcGVyYXRpb25zLXRvLXRlbWVub3MtdHJhbnNhY3QtcGxhdGZvcm0v/5d233c18f730436f2414784fBcaa436b2&amp;source=gmail&amp;ust=1610539236675000&amp;usg=AFQjCNHY_jsYO0gexoQ4o1DlGs_GerBr_A"><u>first</u></a> fully licensed US neobank. And later in the year, Square <a href="https://e.insiderintelligence.com/click/22625421.4/aHR0cHM6Ly93d3cucHltbnRzLmNvbS9uZXdzL2JhbmtpbmcvMjAyMC9mZGljLWFwcHJvdmVzLXNxdWFyZS1mb3ItYmFua2luZy1saWNlbnNlLw/5d233c18f730436f2414784fB5d356219" target="_blank" rel="noopener" data-saferedirecturl="https://www.google.com/url'q=https://e.insiderintelligence.com/click/22625421.4/aHR0cHM6Ly93d3cucHltbnRzLmNvbS9uZXdzL2JhbmtpbmcvMjAyMC9mZGljLWFwcHJvdmVzLXNxdWFyZS1mb3ItYmFua2luZy1saWNlbnNlLw/5d233c18f730436f2414784fB5d356219&amp;source=gmail&amp;ust=1610539236675000&amp;usg=AFQjCNHzG5FGkjqASq4OdVv-t1qHp09oyA"><u>obtained</u></a> FDIC insurance, and SoFi received preliminary Office of the Comptroller of the Currency (OCC) <a href="https://e.insiderintelligence.com/click/22592642.1889/aHR0cHM6Ly93d3cucmV1dGVycy5jb20vYXJ0aWNsZS91cy1zb2ZpLWJhbmstY2hhcnRlci9maW50ZWNoLXN0YXJ0dXAtc29maS1nZXRzLXByZWxpbWluYXJ5LWFwcHJvdmFsLWZvci11LXMtYmFuay1jaGFydGVyLWlkVVNLQk4yN0QyN1c/593e245ecbcf487e6c8b4567Ba2046cf8" target="_blank" rel="noopener" data-saferedirecturl="https://www.google.com/url'q=https://e.insiderintelligence.com/click/22592642.1889/aHR0cHM6Ly93d3cucmV1dGVycy5jb20vYXJ0aWNsZS91cy1zb2ZpLWJhbmstY2hhcnRlci9maW50ZWNoLXN0YXJ0dXAtc29maS1nZXRzLXByZWxpbWluYXJ5LWFwcHJvdmFsLWZvci11LXMtYmFuay1jaGFydGVyLWlkVVNLQk4yN0QyN1c/593e245ecbcf487e6c8b4567Ba2046cf8&amp;source=gmail&amp;ust=1610539236675000&amp;usg=AFQjCNFOeHtMsoQ8n1lEQ3ua5VOaV9qpNw"><u>approval </u></a>for a bank charter, pushing them both a step closer to bank charter eligibility.</p><p>A charter from the OCC enables nonbank financial services firms to expand their range of products and eliminate the costs of partnering with a sponsor bank to hold the deposits, which could be particularly beneficial as the pandemic has diminished the use of physical branches and digital banking penetration is on the rise.</p><p>Revolut is betting that the license will help it unlock primary account status, which is a key driver of profitabilitybut a license won't be a silver bullet.</p><ul><li>A license could give Revolut users the confidence to increase their deposits and conduct more financial activities through the neobank.&nbsp;To lessen their dependence on interchange fees, neobanks are looking to&nbsp;<a href="https://e.insiderintelligence.com/click/22625421.4/aHR0cHM6Ly9jb250ZW50LW5hMS5lbWFya2V0ZXIuY29tL3RoZS1nbG9iYWwtbmVvYmFua3MtcmVwb3J0LWhvdy1uZW9iYW5rcy1hcmUtdGFraW5nLWFkdmFudGFnZS1vZi1vcHBvcnR1bml0aWVzLWluLWtleS1tYXJrZXRzLXRvLWluZm9ybS10aGVpci1wcm9maXRhYmlsaXR5LXN0cmF0ZWdpZXMtMjAxOS0xMQ/5d233c18f730436f2414784fBe33462b5" target="_blank" rel="noopener" data-saferedirecturl="https://www.google.com/url'q=https://e.insiderintelligence.com/click/22625421.4/aHR0cHM6Ly9jb250ZW50LW5hMS5lbWFya2V0ZXIuY29tL3RoZS1nbG9iYWwtbmVvYmFua3MtcmVwb3J0LWhvdy1uZW9iYW5rcy1hcmUtdGFraW5nLWFkdmFudGFnZS1vZi1vcHBvcnR1bml0aWVzLWluLWtleS1tYXJrZXRzLXRvLWluZm9ybS10aGVpci1wcm9maXRhYmlsaXR5LXN0cmF0ZWdpZXMtMjAxOS0xMQ/5d233c18f730436f2414784fBe33462b5&amp;source=gmail&amp;ust=1610539236675000&amp;usg=AFQjCNHynMAVKVjgNWrhHtOFDzXgCV7H6Q"><u>become</u></a>&nbsp;the primary bank for their customers' day-to-day expenses, rather than just being used for their debit cards. Revolut believes the deposit protection promised with a full banking license would encourage consumers to do just that: In a&nbsp;<a href="https://e.insiderintelligence.com/click/22625421.4/aHR0cHM6Ly93d3cuY3Jvd2RmdW5kaW5zaWRlci5jb20vMjAyMS8wMS8xNzExMDQtZGlnaXRhbC1iYW5rLXJldm9sdXQtcHVyc3Vlcy11ay1iYW5raW5nLWxpY2Vuc2UtYW50aWNpcGF0ZXMtaGFsZi1vZi1pdHMtY2xpZW50cy10by1kZXBvc2l0LXNhbGFyaWVzLWFuZC11c2UtaXQtYXMtcHJpbWFyeS1hY2NvdW50Lw/5d233c18f730436f2414784fB45201446" target="_blank" rel="noopener" data-saferedirecturl="https://www.google.com/url'q=https://e.insiderintelligence.com/click/22625421.4/aHR0cHM6Ly93d3cuY3Jvd2RmdW5kaW5zaWRlci5jb20vMjAyMS8wMS8xNzExMDQtZGlnaXRhbC1iYW5rLXJldm9sdXQtcHVyc3Vlcy11ay1iYW5raW5nLWxpY2Vuc2UtYW50aWNpcGF0ZXMtaGFsZi1vZi1pdHMtY2xpZW50cy10by1kZXBvc2l0LXNhbGFyaWVzLWFuZC11c2UtaXQtYXMtcHJpbWFyeS1hY2NvdW50Lw/5d233c18f730436f2414784fB45201446&amp;source=gmail&amp;ust=1610539236675000&amp;usg=AFQjCNGG9ZXJ4t4-E7_VhW-b0TGq-sh79Q"><u>survey</u></a>, the neobank found that 50% of its customers would be willing to deposit their salaries in Revolut accounts if their money was covered by a deposit guarantee scheme. And CEO Nikolay Storonsky&nbsp;<a href="https://e.insiderintelligence.com/click/22625421.4/aHR0cHM6Ly93d3cudGhldGltZXMuY28udWsvYXJ0aWNsZS9yZXZvbHV0LXJldnMtdXAtZm9yLWJyaXRpc2gtYmFua2luZy1saWNlbmNlLTd6eHdka3B3NQ/5d233c18f730436f2414784fB711146d0" target="_blank" rel="noopener" data-saferedirecturl="https://www.google.com/url'q=https://e.insiderintelligence.com/click/22625421.4/aHR0cHM6Ly93d3cudGhldGltZXMuY28udWsvYXJ0aWNsZS9yZXZvbHV0LXJldnMtdXAtZm9yLWJyaXRpc2gtYmFua2luZy1saWNlbmNlLTd6eHdka3B3NQ/5d233c18f730436f2414784fB711146d0&amp;source=gmail&amp;ust=1610539236675000&amp;usg=AFQjCNEukt3DLwtIsBgrk6blb2JRkKM1xQ"><u>told</u></a>&nbsp;The Sunday Times that a license will allow it to "compete with large British banks because [Revolut] will be providing better services at better costs with deposit insurance."</li><li>Still, Revolut can't rely solely on a bank charter to spur users to primary account status, and it should continue incentivizing primary account status in other ways.&nbsp;The neobank isn't guaranteed success with its license application, and the process could be lengthy. In the meantime, Revolut should look to prime users to integrate more of their financial lives with its platform. It has already taken steps toward this by enabling&nbsp;<a href="https://e.insiderintelligence.com/click/22625421.4/aHR0cHM6Ly9ibG9nLnJldm9sdXQuY29tL2VuLXVzL2dldC1wYWlkLXVwLXRvLXR3by1kYXlzLWVhcmx5LyM6fjp0ZXh0PVdpdGglMjBSZXZvbHV0JTIweW91JTIwY2FuJTIwbm93LHRyYW5zZmVycyUyQyUyMG5vdCUyMGp1c3QlMjB5b3VyJTIwcGF5Y2hlY2su/5d233c18f730436f2414784fBa6ace03a" target="_blank" rel="noopener" data-saferedirecturl="https://www.google.com/url'q=https://e.insiderintelligence.com/click/22625421.4/aHR0cHM6Ly9ibG9nLnJldm9sdXQuY29tL2VuLXVzL2dldC1wYWlkLXVwLXRvLXR3by1kYXlzLWVhcmx5LyM6fjp0ZXh0PVdpdGglMjBSZXZvbHV0JTIweW91JTIwY2FuJTIwbm93LHRyYW5zZmVycyUyQyUyMG5vdCUyMGp1c3QlMjB5b3VyJTIwcGF5Y2hlY2su/5d233c18f730436f2414784fBa6ace03a&amp;source=gmail&amp;ust=1610539236675000&amp;usg=AFQjCNEoMVtpt47ehDDO3Q0yVgI-ev79Qg"><u>early wage access</u></a>&nbsp;for users who link direct deposit to their Revolut account. And it has broadened the platform's capabilities, including with a subscription management&nbsp;<a href="https://e.insiderintelligence.com/click/22625421.4/aHR0cHM6Ly9ibG9nLnJldm9sdXQuY29tL3Rha2UtY29udHJvbC1vZi15b3VyLXN1YnNjcmlwdGlvbnMvP3V0bV9zb3VyY2U9VHJpZ2dlcm1haWwmdXRtX21lZGl1bT1lbWFpbCZ1dG1fY2FtcGFpZ249UG9zdCUyMEJsYXN0JTIwYmlpLWJhbmtpbmc6JTIwUmV2b2x1dCUyMGRlYnV0cyUyMHN1YnNjcmlwdGlvbiUyMGNvbnRyb2xzJTIwJTdDJTIwQm9mQSUyMHVwZ3JhZGVzJTIwZmluYW5jaWFsJTIwd2VsbG5lc3MlMjB0b29scyUyMCU3QyUyME5DUiUyMHJlbGVhc2VzJTIwbmV3JTIwQVRNJTIwc29mdHdhcmUmdXRtX3Rlcm09QklJJTIwTGlzdCUyMEJhbmtpbmclMjBBTEw/5d233c18f730436f2414784fBe90c9720" target="_blank" rel="noopener" data-saferedirecturl="https://www.google.com/url'q=https://e.insiderintelligence.com/click/22625421.4/aHR0cHM6Ly9ibG9nLnJldm9sdXQuY29tL3Rha2UtY29udHJvbC1vZi15b3VyLXN1YnNjcmlwdGlvbnMvP3V0bV9zb3VyY2U9VHJpZ2dlcm1haWwmdXRtX21lZGl1bT1lbWFpbCZ1dG1fY2FtcGFpZ249UG9zdCUyMEJsYXN0JTIwYmlpLWJhbmtpbmc6JTIwUmV2b2x1dCUyMGRlYnV0cyUyMHN1YnNjcmlwdGlvbiUyMGNvbnRyb2xzJTIwJTdDJTIwQm9mQSUyMHVwZ3JhZGVzJTIwZmluYW5jaWFsJTIwd2VsbG5lc3MlMjB0b29scyUyMCU3QyUyME5DUiUyMHJlbGVhc2VzJTIwbmV3JTIwQVRNJTIwc29mdHdhcmUmdXRtX3Rlcm09QklJJTIwTGlzdCUyMEJhbmtpbmclMjBBTEw/5d233c18f730436f2414784fBe90c9720&amp;source=gmail&amp;ust=1610539236675000&amp;usg=AFQjCNFE93F8FOJd7ZmRZ7b-juEaJvsEng"><u>feature</u></a>&nbsp;and a Pockets money management&nbsp;<a href="https://e.businessinsider.com/click/22339577.10898/aHR0cHM6Ly93d3cucHltbnRzLmNvbS9uZXdzL3BheW1lbnQtbWV0aG9kcy8yMDIwL3Jldm9sdXQtcG9ja2V0cy1haW1zLXRvLWhlbHAtcGVvcGxlLW9yZ2FuaXplLXBheW1lbnRzLw/593e245ecbcf487e6c8b4567B65197394" target="_blank" rel="noopener" data-saferedirecturl="https://www.google.com/url'q=https://e.businessinsider.com/click/22339577.10898/aHR0cHM6Ly93d3cucHltbnRzLmNvbS9uZXdzL3BheW1lbnQtbWV0aG9kcy8yMDIwL3Jldm9sdXQtcG9ja2V0cy1haW1zLXRvLWhlbHAtcGVvcGxlLW9yZ2FuaXplLXBheW1lbnRzLw/593e245ecbcf487e6c8b4567B65197394&amp;source=gmail&amp;ust=1610539236675000&amp;usg=AFQjCNEWE_wsCpVXSkvci8aLsrHQIiMhEA"><u>tool</u></a>. Continuing to build out its offerings should help Revolut ensure that its UK customers are engaged with the platform and therefore more likely to make it their primary account in the future, regardless of licensing status.</li></ul><p><strong><em>Want to read more stories like this one' Here's how you can gain access:</em></strong></p><ol><li>Join other Insider Intelligence clients who receive this Briefing, along with other Banking forecasts, briefings, charts, and research reports to their inboxes each day. <a href="https://www.insiderintelligence.com/become-a-client/'IR=T&amp;itm_source=businessinsider&amp;itm_medium=content_marketing&amp;itm_campaign=briefing_post&amp;itm_content=bottom_bullets&amp;itm_term=enterprise_text_link-revolut-sees-uk-license-as-key-to-unlocking-more-deposits-2021-1">&gt;&gt;&nbsp;<strong>Become a Client</strong></a></li><li>Explore related topics more in depth. <a href="https://store.businessinsider.com/collections/banking'IR=T&amp;itm_source=businessinsider&amp;itm_medium=content_marketing&amp;itm_campaign=briefing_post&amp;itm_content=bottom_bullets&amp;itm_term=store_text_link-revolut-sees-uk-license-as-key-to-unlocking-more-deposits-2021-1">&gt;&gt;&nbsp;<strong>Browse Our Coverage</strong></a></li></ol><p><em>Current subscribers can access the entire Insider Intelligence content archive <a href="https://subscriptions.emarketer.com/">here</a>.</em></p><p><a href="https://www.businessinsider.com/revolut-sees-uk-license-as-key-to-unlocking-more-deposits-2021-1#comments">Join the conversation about this story &#187;</a></p>
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