As Revolut struggles to get a banking license in the UK for the third year, company leaders are growing frustrated with its lack of progress .
British fintech's largest company sought a meeting with ministers amid fears that the government's stated goal of becoming a «science and technology superpower» is not backed up by reality.
Leaders, including including Nick Storonsky, founder and chief executive officer of Revolut, and Martin Gilbert, its chairman, will be meeting with representatives of the Treasury in the coming weeks to discuss the UK's growth agenda. Business secretary Kemi Badenoch will meet with the company next week.
It comes after The Telegraph reported on Thursday that the Bank of England had informed the government that it plans to reject Revolut's bid. It is understood that Revolut has not received official notice from the PRA and the company says the application is ongoing.
Revolut is said to be at odds with SoftBank, one of its biggest investors, as it seeks to simplify its ownership structure. The business has been told it must simplify it as a condition of any banking license, according to the Financial Times.
However, even at Revolut's best, the process took longer than its leader could have imagined. .
Ministers insisted that no discussion of the company's current application for a banking license be discussed. The licenses are issued by the Bank of England's Prudential Regulation Authority (PRA), which is independent.
However, the gap between government rhetoric about technology and reality is becoming increasingly difficult to ignore.
< img src="/wp-content/uploads/2023/05/1a4b53f1c4812c82b230584a7b052baf.jpg" />Jeremy Hunt called Revolut «a shining example of our best fintech sector in the world.» Photo: LinkedIn
Things were coming together for Storonsky when his fast-growing banking app, Revolut, finally filed for a license two years ago. The former banker for Lehman Brothers and Credit Suisse, who moved to the UK from Russia at age 20, has assembled a powerful board that includes Gilbert, founder of Aberdeen Asset Management, and Michael Sherwood, veteran Goldman Sachs executive.
Revolut, founded in 2015, was on the cusp of a giant fundraising round that made it the UK's largest fintech company. The investment earned the company a $33bn (£27bn) valuation and earned Revolut vociferous support from then Chancellor Rishi Sunak. to tech giants early on or by limiting yourself to local markets.
However, Revolut quickly went international. He spearheaded a wave of British fintech that seemed immune to the challenge of Silicon Valley, which has traditionally struggled to crack finance.
A banking license that shows approval from the Bank of England will be his crowning achievement. However, the experience was painful.
«You wait for emails or letters for months,» Storonsky said earlier this month, speaking out against the PRA. “This is not the kind of business environment in which you can work in the modern world.”
The comments come weeks after Revolut released financial statements that included a qualified audit opinion.
The incident not only undermined Revolut's plans, but also exacerbated an increasingly heated debate about British regulators and whether whether their actions conflict with the government's growth objectives.
Sunak pushed for plans whereby ministers could reverse the Bank of England's decision if they disagreed with the decisions.
Meanwhile, Ron Khalifa, the former head of Worldpay, published a government-commissioned review recommending an easing of stock market rules to stimulate the UK fintech sector.
But instead of opening the doors, regulators are being accused of blocking investment and innovation. Storonsky's complaints, in which he also railed against an «overwhelmingly bureaucratic» stock market regulator, are just the latest lashing out at British observers. «/>Nick Storonsky, chief executive of Revolut, said he would never choose the UK as the location for the company's listing. Credit: Piaras à MÃdheach/Sportsfile
Last month, the Competition and Markets Authority (CMA) blocked Microsoft's $69 billion takeover of video game giant Activision Blizzard, prompting Activision's claims that the UK is «closed for business».
Financial Supervision Authority cracked. on crypto companies, which drew criticism from the Blockchain.com exchange that its approach to security in the first place «came through innovation.»
«It's hard to judge regulators based on individual cases,» says Dominique Hallas, executive director of tech lobbying group Coadec. “But having problems with one regulator is unfortunate, and having many is much more problematic.
“Obviously, there is a growing gap between political intent and implementation that needs to be addressed.”
One fintech executive says: “It doesn’t seem to be the case. You have one arm of the government that is really moving forward and a regulator that hasn't used a product that is supposed to regulate.»
The worry is that regulators, thought to be blocking innovation, have become more powerful . Sunak was forced to backtrack on plans to let ministers revoke the Bank of England's powers in November to boost confidence in Britain in the wake of market turmoil.
A former Revolut executive said the fintech company was unable to develop a positive relationship with the regulator, in part because there were too many personnel changes in key positions.
However, there are concerns that the PRA has become too cautious in issuing banking licenses to companies.
A former Revolut chief added: «I've heard from several other startups in the UK looking for [banking] licenses that are much smaller than Revolut's that they're running into problems.» .
«On the PRA side, they seem very, very cautious for reasons I don't understand.»
1603 Business investment falls
David Jarvis, CEO of Griffin, a fintech start-up that recently got a banking license , says the process is «undoubtedly complex», but in the case of Revolut, «you can't really run a regulated business effectively if you go around 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 getting tougher as well. New competition legislation gives the CMA the power to rein in tech giants deemed to have «strategic market status», meaning the authorities are likely to intervene more often than today.
This week the Chancellor Jeremy Hunt carefully reminded regulators that they should not discourage investment.
“We have independent regulators that are not controlled by politicians, so they can be sure that the rules of the game will be level,” said he.< /p>
“I don’t want to undermine that at all, but I think it’s important that all of our regulators understand their broader responsibility for economic growth.”
Hunt said he had «several discussions» with Revolut and invited the company to «come and talk to me.»
The business seems to have accepted the chancellor's offer. But this is unlikely to make it easier to defeat the regulator.
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