Alarm has been raised for Revolut, as the Bank of England (BoE) places its internal controls and approval procedures for new financial products under the microscope. The development comes as the company, having secured a full banking license in Britain, prepares to expand dynamically into the personal loans market, broadening competition with traditional banks. Specifically, according to information from the Financial Times, the Prudential Regulation Authority (PRA), the supervisory arm of the Bank of England, issued a so-called Section 166 order earlier this year to examine risks associated with the rapid rollout of new financial products by Revolut. The order was issued around the time Revolut finally secured a full banking license in March, according to the same sources, aiming to better assess the reliability and effectiveness of the group's internal systems.
In little more than a decade, Revolut has grown into a business with more than 80 million customers and a valuation of $115 billion, surpassing in value three of the four largest retail banks in its home market. The approval of its banking license, following years of waiting during which the fintech firm struggled to convince regulators that it could handle its rapid growth, was considered crucial for realizing Revolut's ambition to expand into 70 countries by 2030, up from roughly 40 where it operates today. The license also permitted Revolut's British bank to accept deposits and enter the lending market, which has traditionally been dominated by conventional banks.
Internal systems under the microscope
The Section 166 order, also known as a skilled person review, obliges a supervised firm to appoint expert advisors who examine its internal systems and control mechanisms. The process usually involves an investigation by an accounting firm or legal advisors and concludes with a report featuring recommendations for potential improvements required. This specific order is used as a fact-finding tool. If deficiencies are identified, supervisory authorities can impose sanctions or take other enforcement measures for any rule breaches.
Plans for expansion into loans
On Monday, Revolut announced plans to provide unsecured personal loans ranging from 2,000 to 25,000 pounds. Concurrently, it presented a partnership with asset management firm Carne, through which its customers will be able to invest in private technology companies. As part of its ultra-rapid growth, Revolut has adopted a multifaceted business model that includes cryptocurrency transactions, card payments, and subscription services.
The company's chief executive officer, Nik Storonsky, urges employees to operate like "self-guided missiles," receiving limited supervision in order to develop new products. However, this approach has also led to clashes with regulatory authorities. Last year, the European Central Bank imposed restrictions on Revolut's growth after identifying "deficiencies" in its approval procedures for new products. The ECB ordered Revolut to undergo a third-party independent evaluation to examine risk management, regulatory compliance, and legal support functions governing the launch of new products in Europe.
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