Revolut, the London-based financial technology startup that’s raised more than $86 million in venture capital, said it’s applying for a European banking license to broaden the portfolio of services it offers customers.
It’s joining a growing roster of neobanks in Europe, which are seeking to entice clients away from traditional retail banks with slick mobile apps, budgeting tools and low-fee or no-fee services. Contenders include Germany’s Fidor Bank and N26, which recently expanded to the U.K., and London-based Monzo, along with more than a dozen others.
Revolut said it will also build its own payment processing service, separately from its banking license, in an effort to improve reliability, reduce downtime and possibly cut costs.
The company’s service was hit with a string of outtages earlier this month, according to complaints from users on social media. Revolut blamed the problem on one of its current third-party payment processors. Monzo has also announced plans to bring payment processing in-house after similar disruptions. In July 2015, Revolut launched its service with a prepaid debit card that allowed users to make international purchases without incurring expensive fees and losing out from unfavorable exchange rates. It has since branched out into a prepaid current account that offers spending notifications, transaction categorization and budgeting tools. It allows users to hold money in as many as 25 different currencies within the account and exchange between them at the current market rate without transaction fees. Users can also send money domestically and internationally for free.
Becoming a bank will allow Revolut to expand this product offering to include interest-bearing savings and consumer credit products. It will also mean that customer funds up to 100,000 euros ($115,650) are guaranteed by the European Deposit Protection Scheme, which may encourage customers to keep more money on deposit with the company. Revolut said it was applying for a banking license in Lithuania and expects to receive it in early 2018. If the license is granted, it will be able to offer banking services throughout Europe.
"Lithuania is an emerging fintech hub in Europe right now and one of our largest markets,” company spokesman Chad West said. “They have a fantastic regulatory environment that provides deep consultation during the banking application process and you can obtain a banking license much faster than in some other European markets.”
To help prepare for its license application, Revolut said it was appointing three new non-executive directors with banking experience: Peter Stevens, head of credit for SME Capital U.K., Markus Krebsz, who is an expert on risk management for the United Nations Economic Commission for Europe, and Ramunas Stankevicius, a software developer currently working for Nasdaq in Lithuania. The company said the three have a combined “85 years experience in global banking.”
Revolut said it has 950,000 users currently and has processed $6 billion worth of transactions since its founding. The company is backed by London-based venture firms Index Ventures and Balderton Capital and has received debt from Silicon Valley-based TriplePoint Capital.