The UK Fintech Revolut, founded by the Russian-born Nikolay Storonsky and Vlad Yatsenko, has been navigating a challenging path to secure a banking license in the UK. Through aggressive marketing, Revolut has acquired over 35 million customers and 500,000 businesses. Many of these were from the high-risk sector. Now, Revolut is trying to get rid of many of them with a de-risking strategy and is terminating their accounts, FinTelegram reports.
Account Terminations and De-Risking Strategy
Customers have been left bewildered by Revolut‘s abrupt decision to close their accounts without providing a clear explanation. This action seems to be part of Revolut’s broader de-risking strategy, where the company is distancing itself from clients it categorizes as high-risk. This approach is not uncommon among financial institutions seeking regulatory approval or looking to maintain compliance with existing regulatory frameworks.
Read here: Understanding the double-edged de-risking sword!
Implications for Revolut
For Revolut, a company striving to secure a coveted banking license in the UK, de-risking is a critical move. By disassociating from potentially risky clients, Revolut aims to demonstrate its commitment to regulatory compliance and its ability to effectively manage risks. This is crucial for gaining the trust of regulators and paving the way for the approval of its banking license.
While de-risking can be an effective tool for compliance, it also poses challenges. Customers who are abruptly cut off from financial services can face significant inconveniences and disruptions, especially if they rely heavily on the fintech for their financial transactions. Moreover, there is a risk of inadvertently affecting legitimate customers who are wrongly categorized as high-risk.
Revolut’s Regulatory Journey
The fintech industry has closely watched Revolut‘s journey towards obtaining a UK banking license. As a leading player in the digital banking sector, the company’s strategies and interactions with regulators provide insights into the evolving landscape of fintech regulation and compliance. It remains to be seen whether the current de-risking strategy will have the desired effect with the regulators and whether the banking license will be granted in the UK.
