Understanding the nature of financial institutions and their operation is essential to making informed decisions about your finances. This insight will explore a frequently posed question:
Does Revolut count as a bank? We will delve into Revolut's services, its regulatory status, and how it compares to traditional banks.
As of 2023, Revolut is not classed as a bank in the UK. Instead, it operates as an e-money institution under the Electronic Money Regulations 2011. It holds a full banking license in Lithuania and has pending applications for banking licenses in the US and Australia.
To understand whether Revolut is classed as a bank, we must first comprehend what constitutes a bank. Traditional high-street banks offer several services that set them apart from other businesses. These include safeguarding money, lending money, and facilitating payments.
Banks have been trusted entities for safekeeping money since ancient times. They provide security against the risk of money getting lost or stolen. In return for this service, banks utilise the deposited money to generate profits by lending it to others.
Moreover, banks provide loans for various purposes, enabling families to buy houses or businesses to expand. However, lending money involves an inherent risk. If a borrower defaults on their loan, the bank faces a loss. Therefore, banks charge more interest for lending money than they pay out in interest on people's savings.
Banks also help facilitate payments. They provide debit and credit cards for in-store and online payments. Over £500 billion moves between bank accounts every day in the UK alone, highlighting the importance of these transactions for the economy.
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Revolut, founded in 2015 by Nikolay Storonsky and Vlad Yatsenko, is a globally recognised neobank and a pioneer in financial technology. The company is headquartered in London and is regulated by the Bank of Lithuania within the European Union. Revolut offers an array of services, such as currency exchange, debit cards, virtual cards, Apple Pay, interest-bearing "vaults", stock trading, cryptocurrency, commodities trading, and more.
By 2020, Revolut had expanded its reach to Japan and the USA, and its staff grew from 1,500 to an impressive 6,000. In January 2021, Revolut submitted its application for a UK banking license, though the outcome was still pending as of December 2022.
Revolut offers a broad range of services that mirror those provided by traditional banks, such as:
However, unlike traditional banks, Revolut cannot offer lending products like mortgages in the UK without a full banking license.
As of 2023, Revolut is not classed as a bank in the UK. Instead, it operates as an e-money institution, regulated by the Financial Conduct Authority under the Electronic Money Regulations 2011. This means that while it can hold and transfer money on behalf of customers, it cannot offer some services that traditional banks can, such as lending and deposit protection.
However, Revolut holds a full banking license in Lithuania, which allows it to offer full banking services across the European Union. It also has applications for banking licenses pending in the US and Australia.
It should be noted that the UK banking license application process is intricate and comprehensive. The delay in Revolut's license approval is due to its broad range of services, which necessitate a thorough review by regulators.
Without a UK banking license, Revolut's ambition to become a global banking provider could face obstacles. While it has successfully established itself as a major player in the digital banking sector, the lack of a banking license limits its ability to expand its services and earn more revenue.
Moreover, without a banking license, Revolut cannot offer customer deposit protection, which can hinder its efforts to become a primary bank account for UK customers.
Nonetheless, if its UK license application were rejected, Revolut could potentially shift its focus to other regions where it has better prospects with regulators. For instance, Revolut's European operations have proven lucrative, with its 2021 European revenues more than doubling its UK revenues.
Revolut's journey thus far has shown that it can compete with traditional banks on many fronts, despite not being classed as a bank in the UK. Its innovative approach to finance, coupled with its wide range of services, has attracted millions of customers worldwide.
However, the question remains: Does Revolut count as a bank? As of now, the answer depends on the region. In the European Union, where it holds a banking license, it does. In the UK, it does not. The future may hold changes, particularly if Revolut's application for a UK banking license is approved.
Regardless of its banking status, Revolut's commitment to providing innovative, customer-centric financial services remains unwavering. As such, it continues to be a significant player in the financial technology sector, shaping the future of digital banking.
To open an account with Revolut, click here.
For more information on Revolut, read:
Stuart is an expert in Property, Money, Banking & Finance, having worked in retail and investment banking for 10+ years before founding Sunny Avenue. Stuart has spent his career studying finance. He holds qualifications in financial studies, mortgage advice & practice, banking operations, dealing & financial markets, derivatives, securities & investments.
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