Fintech firm Revolut has been given a UK banking licence after a three-year wait for approval.
The London-based company, which has nine million customers in the UK and 45 million globally was classed as an electronic money (e-money) institution in the UK until now.
Its licence, which does come with some restrictions, means it it can now offer new products and also offers extra protection to customers.
We run through the full details on what it means for you, below.
How long has it waited for a UK licence?
Revolut already has a European banking licence after approval from authorities in Lithuania, allowing it to offer loans in France, Germany and Spain.
But it has been waiting for approval in the UK since it first filed an application to the Prudential Regulation Authority (PRA) – the financial services regulatory body – in 2021.
In March 2023 it said it would be given the green light “any day now,” though approval was delayed until now.
What does having a banking licence mean?
A company needs a banking licence to be able to hold customer deposits, and offer lending products like credit cards, personal loans, or mortgages.
But Revolut will not actually be able to do this just yet, as the licence comes with restrictions, meaning it will not yet be able to launch new products in the market.
During this time, it is in a “mobilisation” stage in the UK, during which it can hold only £50,000 of total customer deposits.
It is not yet clear how long this period will last.
You can continue to use your account as normal, with little change for now.
Licence will mean a change to how money is protected
The UK has a financial protection scheme called the Financial Services Compensation Scheme (FSCS). This entitles customers compensation of up to £85,000 if their financial services firm fails.
FSCS protection means customers get back their money whether or not the bank actually has that money itself to pay customers back, as the money comes from the FSCS itself.
Until now however, because Revolut was not a bank, deposits were not protected by FSCS. They were instead protected by something called “safeguarding”.
With e-money institutions, funds instead are kept in a safeguarding account, meaning the provider – in this case Revolut – cannot lend it out to others and you should get your money back in case of a collapse, though MoneySavingExpert.com has warned that this “could be minus some admin fees”.
The exception to this was to Revolut customers who had money put in a Revolut Savings Vault – that money was deposited with a third party bank, which held it on a saver’s behalf and was FSCS protected.
For now, nothing will change with regards to how customer deposits are protected. FSCS has told i that cannot immediately deposit funds with Revolut as a bank, so for now, protection will remain as it is.
This is likely to change in the future, though Revolut needs to exit its mobilisation period first.
What does Revolut say?
Chief executive Nik Storonsky said on Thursday: “We are incredibly proud to reach this important milestone in the journey of the company and we will ensure we deliver on making Revolut the bank of choice for the UK.”
UK boss Francesca Carlesi said : “It is a tremendous responsibility to be a bank in the UK and we will work relentlessly to offer products and services that improve the financial lives of everyone who uses Revolut.”