Revolut, the UK payments app, is exploring applying for a bank licence to compete in the mainstream retail banking market, as it raises equity from thousands of investors including tennis player Andy Murray.
The company, which uses the strapline “beyond banking”, is considering a licence in order to expand into full-service current accounts, allowing people to set up direct debits and standing orders.
The move would catapult Revolut into the new “challenger” bank market of digital apps such as Monzo and Starling.
These start-ups are seeking to compete in the retail banking sector by offering current accounts through mobile apps, offering money management tools such as spending updates and wholesale currency conversion rates.
Nikolay Storonsky, founder and chief executive of Revolut, told the Financial Times: “At this stage, we have not applied for a banking licence.
“However, as part of our mission to be a leader in the payment services industry, we are always open to exploring opportunities that would enable us to provide additional value add services to our loyal customers who share our vision to shape the future of this industry.”
The payment app’s move comes as the company announces it has 40,000 people — including the world’s top-ranked male singles tennis player Andy Murray — signed up to take part in an equity crowdfunding round on Monday, with more than £17m pledged.
Moving into the current account market has proved challenging for some of the newer banks. Atom, the UK’s first digital-only lender, recently revealed that it had postponed its current account launch until 2018 at the earliest, as a result of the costs involved and the burden of regulation.
There is still uncertainty over rules coming into force next year under a European directive, which have yet to be finalised. So-called open banking will require traditional banks to provide access to customers’ transaction data — with their consent — to fintechs such as Revolut so that they can offer better services and boost competition in the market.
At the moment, Revolut customers can open an account and pay in a salary under its e-licence. Gaining a full-banking licence would provide customers with protection under the Financial Services Compensation Scheme.
The start-up originally focused on offering pre-paid travel cards, allowing people to spend money abroad without incurring high fees. Users load money on to the card using the app and then can spend it overseas, gaining the best rates on offer from MasterCard.
Earlier this year, Revolut started offering free international money transfers, including an option to send money overseas in one to two business days for a flat fee of £5 per transaction.
Consumers sending money to overseas bank accounts are usually hit with high charges, frequently being offered poor exchange rates alongside transaction fees.
According to recent TransferWise research, NatWest would charge 1.9 per cent for changing £5,000 to euros in an overseas transfer, while Lloyds would charge 3.4 per cent. TransferWise estimates the charges by combining the banks’ stated fees and the mark-up on their exchange rate.