Revolut: Could allegations of Russian involvement sidetrack a fintech revolution?
Revolut has been one of the biggest disruptors to the banking industry in recent years. The fintech company is intent on revolutionizing international payments – and it has.
With traditional banks, international payments are monopolized by the Swift system. Customers pay a hefty fee for transfers, which very often do not require any effort on the part of a bank. Instead, Revolut offers an easy-to-use wallet which enables a customer to transfer money between currencies, free of charge. A wallet can include US dollars, UAE dirhams, as well as cryptocurrencies like bitcoin and ethereum.
In the short time since it was founded, Revolut has attracted more than 3m customers. It now has an EU banking license, which means it can start offering current accounts and loans to clients across the EU. But politics in Lithuania, where Revolut gained its banking license, could cause some serious issues for the new bank.
Founded in the UK in 2015 by Nikolay Storonsky and Vlad Yatsenko, Revolut was originally regulated by the UK’s Financial Conduct Authority. Under its rules, Revolut was not classified as a bank and any money deposited had to be ring-fenced in an account with a regulated bank. But amid the prospects of a hard Brexit, and the opportunities provided by a larger EU banking market, Revolut started looking for a eurozone-based banking license.
Lithuania was an obvious candidate. An EU member since 2003, it started its campaign to attract fintech companies in early 2016 and has made considerable progress in creating a proper environment for the development of the fintech industry.
The Lithuanian government simplified procedures for obtaining licenses to operate e-money and payments services. Start-ups can obtain an e-money or payment license in just three months (four if the preparation stage is included), which is two to three times faster than in other EU jurisdictions. Plus, the government passed laws to regulate peer-to-peer lending platforms and crowdfunding. Initial capital requirements for bank licenses are also five times lower than in other EU countries.
With its Lithuanian-issued EU banking license, Revolut will start accepting deposits and offering retail and business lending in 2019, making it an even bigger rival for traditional banks. Meanwhile, Lithuania benefits from the supply of very well-trained IT personnel, stable government policies and digital-friendly society.
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