Fintechs Are Skipping Banks And Getting Licensed Themselves

Hand holding a smartphone open to the Revolut digital banking app alongside a latte and the Revolut debit card.

Digital-only bank Revolut has taken the next step in its stated mission “to turn the financial sector on its head.” It has applied for a European banking license.

Meanwhile, fintech investment in the U.S. is heating up. According to a recent KPMG report on the sector, fintech investment nearly doubled over the third quarter, from $2.6 billion to $5 billion.

London-based Revolut is expecting to be operating under a banking license within the first half of 2018. Without being a bank, though, the startup already offers many of the same products and services as a bank in the UK, like pre-paid checking accounts and recurring payments. Currently only available in select European countries, Revolut’s pre-paid card and accompanying app also lets customers buy, hold, and transfer money in multiple currencies at low rates.

But a license will allow Revolut to expand its services to include products like personal loans and interest-generating checking accounts, and the startup also believes having a license will increase customer confidence and trust. For example, through EU protections, Revolut will be able to guarantee savings deposits up to 100,000 euros, the startup’s head of communications Chad West told Fintech Untld.

And the startup believes it’s that kind of trust that will make customers more likely to use Revolut as their primary account, which is not a bad move considering the startup’s goal of becoming the ‘global banking alternative’.

Revolut co-founder Nikolay Storonsky told CNBC the company is ready to embrace the higher regulatory and reporting burden associated with banking.

“We believe [a higher level of regulatory oversight] will build trust in our brand,” Storonsky said. “Sometimes the best way to disrupt an industry is from within, so keep watching this space.”

Launched in 2015 and closing in on 100,000 customers, Revolut has processed over $6.5 billion in transactions to date.

Revolut’s application for a banking license comes as European regulation compelling the transparent disclosure of bank customer information will come into effect in 2018, potentially forcing legacy financial institutions to compete with their more nimble bank challengers. Ahead of the regulation, UK’s Starling Bank and Monzo as well as Germany’s N26 have also secured banking licenses.

Last month, HSBC signed a deal with fintech platform and service provider Bud, which itself just received £1.5 million in investment ahead of the new regulation.

While impending regulation is taking up a lot of fintech bandwidth across the pond, KPMG notes that fintech angel and seed funding volume has plateaued as the “lower hanging fruit” of fintech have been bought by larger enterprises.

Interestingly, hybrid models of automated advice platform technology —those using a combination of humans and technology—gained more traction over pure robo advisors.

“We see a lot of optimism in the U.S. Fintech market – from the maturation and adoption of early stage technologies like Big Data, Artificial Intelligence and IoT to the rapid acceleration of others, such as Insurtech, Robo-advisory, Blockchain and Regtech,” Anthony Rjeily, leader for Financial Services’ Digital and Fintech practice in the U.S. at KPMG, said.

Also, the report highlighted how, historically, fintech companies have found success by giving acute focus to improving one specific aspect of the customer experience, but activity in recent quarters demonstrates that “more mature fintechs” as well as enterprise businesses have started to push into providing products and services outside of their original intentions. Considering Revolut started out as “simply as a foreign exchange app,” it looks like we’re watching this trend play out right in front of us.


Cadence is a fintech reporter and writer at Fintech Unltd, where she covers the changing landscape of financial technologies. Previously, Cadence interned at Psychology Today, Business Insider and the Wisconsin State Journal. Cadence is interested in how science and technology intersect with power and culture and is curious about the world we are creating for tomorrow, consciously or not. She graduated from the University of Wisconsin–Madison in 2017 with degrees in Journalism and Chinese. Send tips and story ideas to Cadence at [email protected] You can also follow her on Twitter @cadencebambenek.