Fintech start-up Revolut applies for European banking license

British financial technology firm Revolut said on Wednesday it has applied for a European banking license, as it bids to join a growing number of digital-only banks looking to win away customers from larger, traditional lenders.

Founded in 2015 by Nikolay Storonsky and Vlad Yatsenko in 2015, Revolut is an app-based banking alternative with a multi-currency card and mobile app. An account can be created in seconds, enabling users to instantly send free money transfers in 26 currencies to banks around the globe; spend fee-free in 120 currencies with a contactless Revolut card; and exchange currencies at interbank rates in the app. It also offers peer-to-peer payments.

Financial technology firms like Revolut are trying to chip away at traditional banks by offering users slick apps, slashed fees and an instant overview of their finances. From challenger banks to digital currencies like Bitcoin, the British government regards the 'fintech' sector as a key source of growth.

Changes coming into force in Britain and across the European Union will see banks forced to open up their closely held customer data to rivals, who will be able to use it to build products and better target clients.

“We delayed applying for a banking licence because we wanted to focus all of our resources on product innovation from day one,” explained founder and CEO Storonsky.

"Even without a banking license, we have attracted over 950,000 users across Europe, many of whom consider Revolut as their primary current account and spending card," said Nikolay Storonsky, Revolut's founder and CEO.

The firm's tagline promises an experience "beyond banking", but so far it has been unable to offer some of the core services provided by banks, including current accounts, overdrafts, loans and direct debits.

The business said it had been in talks with Lithuania's central bank to prepare ahead of its EU license application. It expects to receive a license effective in the first half of 2018 and to start offering these services in select markets straightaway. It said it has applied for its license through the Lithuanian central bank and has sufficient capital in place.

Current accounts and credit will initially be available to users in Lithuania, before being rolled out to Estonia and Latvia and, as soon as possible, Britain. Next in line are France, Germany and Italy and eventually the rest of the European Union, the firm said.

Asked how the firm differentiated from its fintech competitors, Storonsky said: "We'll continue to innovate and offer great products to our users. We'll also have a higher level of regulatory oversight which we believe will build trust in our brand. Sometimes the best way to disrupt an industry is from within, so keep watching this space."

Fintech lender Cashplus said last week it was considering applying for a UK banking license, while telecoms giant Orange has launched its own bank in France in a bid to steal established lenders' market share by capitalizing on the rise of smartphones.

But incumbent banks are stepping up investment in their own digital platforms too. Last month, HSBC became the first to launch an app that allows customers to manage accounts with multiple banks in one place and offers them a similar financial overview as the app-only challengers.