“We are incredibly proud to reach this important milestone.”
If you’ve ever spent an hour in the company of Nik Storonsky, it’s hard to imagine the dead-eyed founder of fintech phenomenon Revolut getting excited about anything.
Yet Storonsky and his team have been waiting three and a half years for the finance upstart to be awarded a UK banking licence – so perhaps the Russian-born entrepreneur felt able to let go on this occasion.
“We will ensure we deliver,” he went on, after the Prudential Regulation Authority (PRA) finally put Revolut on the path to the status it has long sought.
Revolut may not have been around for long compared to its traditional high street rivals – it was only set up nine years ago – but the PRA’s decision must surely count as the biggest and most significant moment in its history. It comes with restrictions until the company has built up its systems to the level at which a full deposit-taking licence can be awarded. But still, the direction of travel is firmly set.
It promises to bring to an end what was not only a gruelling ordeal, but at times a thoroughly humiliating saga that threw up a series of red flags and raised doubts about whether Revolut would ever win over UK regulators.
In the plainest terms, it means Revolut is officially a bank. However, it must also start acting like one, which hasn’t always been the case and seems to at least partly explain the inordinate wait for approval.
Storonsky should start by clarifying why it took so long to get to this stage in the first place. The guidance from UK regulators is that banking licences are typically awarded within 12 months of an application being submitted – so why has it taken more than three times as long for Revolut to get one?
There was certainly no shortage of reasons for the PRA to be concerned. Revolut encountered numerous problems during the application process, not least a warning from auditors that they could not fully verify key yet basic financial figures in the company’s 2021 accounts. It was also late filing its accounts for two consecutive years and was the recipient of several EU fines for regulatory breaches.
Meanwhile, questions were raised about Storonsky’s Russian ties and reports emerged of an aggressive work environment that allegedly resulted in several key employees leaving the company. It is assumed at least some of these were factors, but did the watchdog raise other concerns that may have contributed to the delay? Nothing less than full transparency is needed if Revolut is to fulfil Storonsky’s stated ambition to become “the bank of choice for UK customers”.
Storonsky’s firm also needs to show that its hard-charging culture has been tempered. Past form suggests there is probably a lot of work to be done. After all, it’s hard to take any organisation whose informal motto is “get s--- done” seriously, never mind one that has seen fit to plaster those words across its London office walls in bright neon lights.
To Storonsky and his venture capital backers, it probably sounds edgy and befitting of a company that considers itself more Silicon Valley than Canary Wharf. But what the slogan really does is create the impression of an organisation that is too single-minded in its pursuit of growth.
Revolut needs to demonstrate the opposite: that it can act as a mature banking institution, behave responsibly and be trusted with large deposits. To some that remains some way off.
Consumer champion Which? claims that Revolut has taken “a seemingly lax approach to tackling scams on its platform”.
“The company needs to step up and show how it will improve its approach to stamping out fraud and protecting customers’ money before it can truly earn people’s trust,” it said.
Revolut also needs to ditch the more speculative business areas that it has dabbled in. These include “Stays”, a hotel booking service billed as a rival to Airbnb; a move into precious metals trading; and a highly lucrative operation as a cryptocurrency trading hub.
It has also launched something called “Payday”, marketed as a salary advance scheme that allows people to have up to half of their salaries drip fed to them instead of waiting until the end of the month.
The premise is nothing more than a scheme that helps workers to smooth out their monthly cash flow without having to turn to high-cost credit, but campaigners have warned it risks encouraging overspending and exacerbating cash flow problems that people may already be experiencing.
Not only does competing in the bottom end of the loan market seem like an unlikely path to riches, it is also an area that is fraught with reputational and financial risk, which is the very opposite of what Revolut needs.
The ultimate goal for the company is a full licence that will allow it to make loans and hold protected deposits, but first it must first spend some time in the Bank of England’s “mobilisation” stage. This allows it to build up its IT systems and other processes in preparation for becoming a fully-authorised bank.
That means even more scrutiny for an organisation that has too often looked uncomfortable under the spotlight.
Questions may also be asked as to whether Storonsky is the right person to continue running Revolut. Trailblazing entrepreneurs like to build dreams fast and without them many of the most successful and exciting companies of the 21st century such as Tesla, Meta and Amazon wouldn’t exist. But forceful personalities are not necessarily the best people to run a bank.
Perhaps Storonsky should step back and allow a more hands-off, passive outsider to take the reins. As the world realised after the financial crisis, banking is meant to be boring.
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