Revolut secures restricted banking licence: what you need to know

Revolut finally has a UK banking licence in its sights, more than three years after its application in January 2021. 

While it typically takes around a year to get approved, regulators held off giving Revolut the green light.

Various accounting and reputational concerns have been a major stumbling block, but Which? has been equally concerned about the way it treats fraud victims. 

Here we explain what happens next and why we still don't recommend putting significant sums in a Revolut account.

What does this mean for Revolut customers?

For now, nothing changes until Revolut exits a period known as 'mobilisation', a standard process and one completed by other fintechs such as Monzo and Starling. 

During this time – which can take up to a year – it can only hold £50,000 of customer deposits in total and must work with the regulators to complete the expansion of its banking operations.

This means it is still operating as an e-money institution (EMI) and continues to protect UK customers' money through safeguarding (where funds are ring-fenced with a third party).

However, once it is a fully fledged bank, it can hold deposits directly and offer its nine million UK customers lending products such as overdrafts, credit cards and mortgages. These new income streams are likely to accelerate its growth, but it will also face greater scrutiny from regulators. 

A full licence also means Revolut customers will benefit from the Financial Services Compensation Scheme, which protects up to £85,000 if a firm goes bust. 

Why we still have concerns about Revolut

Revolut has been riding high, announcing group revenues of more than $2.2bn and record profits before tax of $545m for 2023. It was also highly rated by customers in our latest annual survey, yet we have deep concerns about the way it handles fraud. 

Earlier this year, we warned about account takeover attacks on Revolut business customers, none of whom were reimbursed despite having their accounts drained in minutes. 

Shortly after, we revealed that a deluge of Revolut fraud complaints reached the Financial Ombudsman Service (FOS) in 2023, outstripping all other banks and e-money firms. 

We continue to hear of too many fraud cases involving Revolut customers who are told they won't be reimbursed. For now, we don't recommend trusting it with significant sums of money. 

Revolut previously told Which?: 'Revolut takes fraud and the industry-wide risk of customers being coerced by organised criminals, incredibly seriously. We have robust protections in place for our millions of customers and analyse over half a billion transactions a month. 

'Our security features include AI models, over 4,000 trained anti-financial-crime professionals as well as experienced data scientists. We are also constantly building on our existing protections, recently announcing the launch of Wealth Protection, a new biometric identification feature designed to prevent thieves from accessing customer savings within the Revolut app.

'In 2023, we cut the number of fraudulent transactions in the UK through Revolut by over 20%, in addition to preventing over £475m of potential fraud losses to our customers globally. This, despite more than a million new customers joining Revolut every month.'

• Find out more: is your money safe with Revolut?

'Regulators must continue to monitor Revolut'

Sam Richardson, deputy editor of Which? Money, said: 'Which? has raised the alarm about Revolut taking a seemingly lax approach to tackling scams on its platform and not reimbursing victims who have lost life-changing sums of money to fraud, so despite the e-money firm getting the green light for a banking licence, we don’t currently recommend putting significant sums in a Revolut account.

'Revolut’s banking licence would have some benefits for its customers, for example their money being protected by the Financial Services Compensation Scheme up to £85,000. However, 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. Regulators have issued the licence subject to restrictions and must continue to monitor Revolut particularly carefully going forward.

'If the government is serious about addressing the fraud epidemic gripping the UK, it must support the full implementation of the Payment System Regulator's new reimbursement rules as planned in October, which will crucially give banks and payments firms a financial incentive to put in place proper security measures.'

• Find out more: bank transfer scam redress for 2024 confirmed