This year was should be one big win for Revolut, the UK’s largest fintech. The company preached its first-ever year of profitability in March, after tripling its year-over-year profit, and continues to hire at a breakneck pace despite upheavals elsewhere in the industry.
This was also the year Revolut hoped to earn its UK banking license. Since it started offering prepaid cards in 2015, the company has amassed 25 million customers and moved into services from crypto trading to international money transfer. It is now valued at $33 billion. Getting the license would allow it to expand further, into insured deposits and lucrative credit products such as mortgages and credit cards – in short, to act like a real bank.
However, the latest indication is that Revolut will miss. on May 18 The Telegraph reported that the Bank of England is preparing to reject the company’s license application, bringing an unfortunate end to a process that has now dragged on for more than two years.
The Bank of England, which declined to comment, has not made a formal decision. But a denial, says Stephen Kingsley, a seasoned non-executive director and chair of multiple audit committees at financial institutions, would raise a “red flag” to Revolut that would hurt its growth prospects at home and abroad. “It’s pretty serious,” he says.
A rejection, should it eventually come, is likely to be the result of an unflattering “series of own goals” scored by Revolut, says Kingsley. Against the backdrop of the pandemic and the current slump in the banking industry, the application would undoubtedly face administrative delays and additional scrutiny, but some of Revolut’s wounds have been self-inflicted, he says.
The company was criticized for its latest financial data, reviewed by accountant BDO. When the report arrived on March 1, five months late, it described shortcomings in the company’s IT practices that prevented three quarters of its revenue – £476.9m ($591.6m) – from being fully met. verified.
While far from ideal, neither an audit qualification nor a delay in reporting is in itself a reason to reject an application for a banking license, says Kingsley. But Revolut’s response to the report may have given the regulator pause. The company made a mistake, he claims, in instructing its law firm to explain away the findings in a way that “amounted to a challenge to the audit report” – a move likely to be interpreted by the Bank of England as a lack of respect for supervision. “It’s unheard of,” says Kingsley. “The problem is that Revolut hasn’t hired [the report] serious. It was offensive; as if it were an insult rather than a professional observation.”
According to Devin Kohli, co-head of fintech-focused venture capital firm Outward VC, concerns about Revolut’s organizational and capital structure are likely to add to concerns over the audit report.
A string of outgoing executives since the start of the year, including the company’s CFO, group COO and head of UK banking, will not have helped matters, he says, and will have the Bank of England speculate on the cause of this. marketing. “There’s a concern why people can’t stay in senior positions for long periods of time,” says Kohli.
