Frankfurt The British neobank Revolut is growing rapidly. She puts the number of her customers at 18 million, around 70 percent of them in the EU and half a million in Germany.
The central offer of the finance start-up (Fintech) Revolut is a finance app. But only now is the company known as “Neobank” or “Smartphone Bank” starting in Germany with its own banking license, as the company has just announced. The banking license for this comes from Lithuania and can be used across the EU. So far, Revolut has only worked in Germany with approval as a payment company, a so-called e-money license.
Given the size of Revolut, however, it is unlikely to be restricted to a control by the Lithuanian supervisory authority. Oliver Schreiber, CFO of the bank, told Handelsblatt: “We expect Revolut Bank to become a systemically important bank in Lithuania after the merger with Revolut Payment. This could mean that it could come under the direct supervision of the European Central Bank (ECB) at a later date. “
The ECB directly supervises 115 banks in the euro zone – particularly large credit institutions and financial institutions that play a significant role in the home market because, for example, their total assets account for more than 20 percent of the country’s economic output. The smaller banks are primarily monitored by the national supervisory authorities.
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Preparation for direct control by the ECB
Revolut will be the first prominent fintech operating across Europe to submit to ECB supervision. “We are already preparing for it now,” said Schreiber. The Lithuanian supervision is also “very professional”.
Another special feature is that the management team at Revolut Bank mainly meets virtually. The bank has six directors in four different countries: Great Britain, Ireland, Germany and Lithuania. Schreiber himself switched from the German competitor N26 to Revolut last autumn; he previously worked for HSH Nordbank.
Revolut, founded in 2015, is considered the European market leader among neo banks. Last July, the company, headed by co-founder Nikolay Storonsky, raised $ 900 million. With a valuation of $ 33 billion, Revolut is the most valuable neo bank in Europe.
There has been speculation about an IPO of the fintech for a long time. It would probably take place in the USA. Storonsky recently said: “If a stock market in the US is a hundred times larger than in the UK, that could of course be the main reason many companies choose the US to go public.”
Revolut also wants to apply for a banking license in the USA. That has already happened for the home market of Great Britain.
Tough competition among neobanks
However, competition is tough everywhere. Traditional banks are trying to modernize apps and online banking. In addition, online banks – in Germany such as ING and DKB – as well as other neo banks such as N26 from Berlin are mainly vying for young customers.
Unlike Revolut, N26, which is valued at eight billion euros, has been working with its own banking license since 2016. At the beginning, the fintech, founded in 2013, used a license from the Wirecard bank, which at the time belonged to the now insolvent payment service provider Wirecard. Several other smartphone banks that operate in Germany use the Solarisbank banking license.
Revolut, however, only used the license as a payment company. Revolut has had a Lithuanian specialist banking license since 2018. Fintech has been using it since 2021. At the end of last year, it also received a so-called full banking license, which allows further business. The number of countries has gradually increased the use of the banking license – now across the EU.
The aim is to also offer other products in Germany and, for example, to grant loans and issue credit cards. So far, according to Schreiber, German customers have primarily used the Revolut debit card in conjunction with the app.
Revolut is to become the “super app” for finance
A German IBAN for local accounts is also to follow. In addition, Revolut can guarantee customers deposit protection with the banking license – deposits of up to 100,000 euros are protected via the corresponding Lithuanian system. With the previous e-money license, Revolut Payment claims to have to deposit customer deposits in a security account at a bank. However, this does not involve any statutory deposit insurance that is aimed at individual private customers.
When asked, Revolut stated that the bank had its own core banking system in Lithuania. In addition, you work with cloud services.
Company boss Storonsky aims to make Revolut a “super app” for financial services. This means that customers use the app constantly and for many different services – in the course of the banking license, possibly also increasingly as a salary account. The fintech offers, among other things, not only cheap multi-currency accounts, but also stocks and crypto trading. Revolut only counts as customers those who are fully registered and whose identity has been checked upon registration, as the company explains.
However, the strong growth trajectory also caused Revolut’s losses to rise. In 2020, the net loss increased by 57 percent to 168 million pounds (a good 200 million euros). This was mainly due to the significantly higher personnel and administrative costs. A similar phenomenon can be seen at other large fintechs such as Klarna from Sweden and N26. Revolut’s adjusted sales rose 34 percent to £ 222 million at the time. However, investors support the expansion course, as the large financing round in summer showed.
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