As Revolut’s quest for a UK banking licence drags on into its third year, executives at the company have become increasingly frustrated at its lack of progress.
Britain’s biggest fintech company has sought meetings with ministers amid concerns that the Government’s stated aim of becoming a “science and technology superpower” is not backed up by reality.
Executives including Nik Storonsky, Revolut’s founder and chief executive, and Martin Gilbert, its chairman, are expected to meet Treasury officials in the coming weeks to discuss Britain’s growth agenda.
It comes after The Telegraph revealed on Thursday that the Bank of England had informed the Government that it planned to reject Revolut’s application. It is understood that Revolut has not been issued a formal notice by the PRA, and the company says the application is ongoing. However, even in Revolut’s best case scenario, the process has taken longer than its chief would have imagined.
Ministers have insisted that any discussion of the company’s ongoing banking licence application is off the table. Licences are granted by the Bank of England’s Prudential Regulation Authority (PRA), which is independent.
However, the gap between the Government’s rhetoric on tech and the reality is becoming harder to ignore.
Everything was falling in place for Storonsky as his rapidly growing banking app Revolut finally put in the paperwork for a licence two years ago. The former Lehman Brothers and Credit Suisse banker, who had moved to the UK from Russia at 20, had assembled a heavyweight board including Gilbert, the founder of Aberdeen Asset Management, and Michael Sherwood, the veteran Goldman Sachs executive.
Revolut, founded in 2015, was on the cusp of a giant fundraising round that made it Britain’s biggest fintech company. The investment bestowed a $33bn (£27bn) valuation on the company and earned Revolut a ringing endorsement from then-chancellor Rishi Sunak.
Many of the UK’s top start-ups have seemed to lack ambition, selling out to tech giants early on or limiting themselves to local markets.
However, Revolut expanded internationally at a rapid clip. It led a British fintech wave that seemed immune to a challenge from Silicon Valley, which has traditionally struggled to crack finance.
A banking licence – signalling approval from the Bank of England – would be its crowning achievement. Yet the experience has been painful.
“You wait for emails or letters for months,” Storonsky said earlier this month as he hit out against the PRA. “This is not the business environment to operate in the modern world.”
The comments came weeks after Revolut published financial accounts that included a qualified opinion from its auditors.
As well as holding up Revolut’s plans, the incident has added to an increasingly bitter debate about Britain’s regulators, and whether their actions conflict with the Government’s growth aims.
Sunak pushed for plans that would see ministers able to overrule the Bank of England if they disagreed with decisions.
Meanwhile, Ron Kalifa, the former Worldpay boss, published a Government-commissioned review recommending a relaxation of stock market rules to boost Britain’s fintech sector.
But instead of opening the doors, regulators have been accused of blocking investment and innovation. Storonsky’s complaints, in which he also railed against an “extremely bureaucratic” stock market regulator, are only the latest broadside against Britain’s watchdogs.
Last month, the Competition and Markets Authority (CMA) blocked Microsoft’s $69bn takeover of the video game giant Activision Blizzard, provoking claims from Activision that Britain was “closed for business”.
The Financial Conduct Authority has cracked down on cryptocurrency companies, prompting criticism from the exchange Blockchain.com that its safety first approach “came at the expense of innovation”.
“It’s hard to judge regulators based on individual cases,” says Dominic Hallas, executive director of the tech lobby group Coadec. “But to have one regulator causing issues is misfortune, to have many is much more problematic.
“There’s clearly a growing gap between policy intention and delivery that needs addressing.”
One fintech executive says: “It doesn’t feel like it’s joined up. You’ve got one arm of the Government really pushing forward, and a regulator who hasn’t used the product they’re supposed to be regulating.”
Worryingly, the regulators seen as blocking innovation have become more powerful. Sunak was forced to drop plans to let ministers overrule the Bank of England in November to shore up confidence in Britain after market ructions.
One former senior executive at Revolut said the fintech company had failed to build positive relations with the regulator, in part because of too many staffing changes in key positions.
However, there are also concerns that the PRA has become overly cautious in granting banking licences to companies.
The ex-Revolut executive added: “I hear from a couple of other start-ups in the UK seeking [banking] licences, which are far smaller than Revolut, that they are facing challenges.
“On the PRA side, they appear to be very, very cautious for reasons I don’t understand.”
David Jarvis, the chief executive of Griffin, a fintech start-up that recently received a banking licence, says the process is “unquestionably challenging” but that in Revolut’s case “you can’t really run a regulated business effectively if you go and badmouth the regulator every couple of weeks”.
He adds: “You don’t have a god given right to be a bank.”
Other regulators are also becoming more forceful. New competition legislation is giving the CMA powers to rein in tech giants that are deemed to have “strategic market status”, meaning the authority is likely to intervene more often than it does today.
This week, Chancellor Jeremy Hunt carefully reminded regulators that they should aim not to discourage investment.
“We have independent regulators that are not controlled by politicians and therefore they can be confident there will be a level playing field,” he said.
“I would not want to undermine that at all, but I do think it’s important all our regulators understand their wider responsibilities for economic growth.”
Hunt said he had had “a number of discussions” with Revolut and invited the company to “come and talk to me”.
The business seems to be taking the Chancellor up on his offer. But that is unlikely to make it any easier to win over the regulator.