Revolut battles growing pains: Inside a banking licence, a Canary Wharf HQ and a superapp

Revolut’s decision to move into a shiny new Canary Wharf HQ in June came shortly before it won its years-long battle with regulators for a UK banking licence. 

The switch to the heart of London’s financial district is symbolic — the fast-growing fintech startup that urged staff to “get sh*t done” is now a respectable name aiming to compete with more established firms.

The firm’s founders, Nik Storonsky and Vlad Yatsenko, have experience of big institutions. Both worked at Credit Suisse until they left together in 2015 to kick off Revolut. Storonsky claimed at the time that the fun — and opportunities to earn big money — had largely faded at mainstream institutions in the aftermath of the 2008 financial crisis. 

While the awarding of Revolut’s banking licence can hardly be described as Storonsky coming full circle, the firm has rolled out a range of offerings that will see it compete with traditional banks. The firm that started out as a solution to expensive FX charges now also has banking, wealth management, crypto and even lifestyle services.

Revolut’s rapid expansion has been fruitful for both it and its investors — it achieved a $45bn valuation in August. However, it faces complex challenges as it looks to establish itself as the next fintech ‘superapp’.

“Becoming a superapp that offers multiple services such as banking, insurance, eSIMs, travel plans and crypto wallet through a single platform ultimately results in higher costs for users,” said Neeraj Baid, CEO of Atlantic Money. “This occurs because high-performing services end up subsidising underperforming ones.”

Sushil Kuner, a financial services regulatory lawyer at Gowling WLG, said firms also need to “ensure consumer understanding about the regulated nature of each service through one platform and the rights and protections that consumers have in respect of those separate services”.

A big banking licence

Regulation has proven a challenge for Revolut. The company has pushed for growth at breakneck speed since it kicked off nine years ago, but it has encountered some regulatory roadblocks along the way.

Revolut first applied for a UK banking licence in 2021, and received it after a protracted battle with regulators in July this year. But the licence came with restrictions from the Prudential Regulation Authority. It is now in the “mobilisation” stage, which could last up to 12 months. Only then can it start to operate as a bank in the UK.

“Now we enter a mobilisation period, where we’ll complete the setup of our banking processes before starting to operate as a bank in the UK,” a Revolut spokesperson told Financial News.

Revolut’s aim with the authorisation is to compete directly with some of the world’s largest banks. While regulation is typically viewed by fast-growing fintech and crypto firms as a necessary burden, mainstream banks employ an army of experts to navigate them through complex requirements.

“Integrating financial services like banking and trading introduces substantial regulatory hurdles,” said Baid. “Each of these sectors is heavily regulated, often with different requirements across jurisdictions. Navigating this complex regulatory landscape while ensuring compliance across all services is a tough challenge, as could be seen from Revolut’s extensive battle for a banking licence in the UK.”

Can you do it all?

The basic concept of a superapp sounds convenient for users as it brings multiple services under one roof. But there are many risks associated with superapps, ranging from security, technical complexities and regulatory issues.

“Building a superapp that combines banking, FX, and crypto trading could offer unbeatable customer stickiness and convenience. But in a crowded market, it is not enough to be a jack-of-all-trades — your product needs to be a master of each,” said Laurent Descout, CEO of digital bank Neo.

“When an app expands beyond its core functionality, it becomes bloated and confusing for users who initially downloaded it for a specific purpose,” Baid said. “Western users, in particular, crave simplicity. They download an app for a specific purpose, not to navigate a labyrinth of features. When you start throwing in every idea under the sun, you’re not adding value, you’re adding frustration.”

When it comes to providing multiple services to their users, traditional banks have taken an approach different to that of emerging fintech firms. 

“ In a crowded market, it is not enough to be a jack-of-all-trades”— Laurent Descout