To those who are interested in digital banking and areas of FinTech, Revolut secured their first foreign and EU banking license yesterday. Interestingly, this is in Lithuania of all places. It also has plans to expand out to France and Poland at a later stage. This allows them to provide current accounts and debit cards. Due to passporting rules this also means they will have a much clearer path to serving other EU clients once the Brexit deadline hits. This is because having regulatory approval in an EU member state gives them access to the wider EU market.
From a legal perspective, it will be interesting to see how these digital banks handle their Know-Your-Customer requirements as more and more start opening up current accounts (Monzo, Starling Bank, N26 etc.). No doubt in the wake of the Danske Bank money laundering scandal, the Financial Conduct Authority and European Supervisory Authorities will want to make sure that these newcomers will not create a new avenue for dirty money to be flushed through Europe. However, I imagine there will be many regulators who also do not want to impose too onerous obligations on these digital banks at the expense of innovation. It may be a possibility that as the digital banking fever spreads, a new digital banking regulatory regime may creep its way up the EU Commission's policy agenda.
From a commercial perspective this reveals quite a lot about digital banks and their current customer acquisition strategy. They are targeting places where they know they already have a customer base and are not vying for the EU financial heavyweight countries - quite the opposite to your traditional banks which are more likely to go for the richer countries where they know there will be higher customer deposits and more borrowers. No doubt a lot of incumbent banks will be eyeing the ease of digital banks movements across jurisdictions with jealousy.
Revolut also stated that they were considering moving into stock trading in the future. If you look at examples of this happening in China, FinTech's have been making movements into the financial markets space. For example, Tencent established a chat platform earlier this year to allow traders to place orders for Chinese bonds. If Revolut does make a move into this space it represents a real shift in the EU FinTech space where its Chinese counterparts have been dominating since the states slow liberalisation of their financial system. It could also present an opportunity for smaller FinTechs/ digital banks who can obtain these EU regulatory licenses a lot easier, to play an important role in facilitating UK-EU financial market interactions without a contingency plan post-Brexit.
For reference:
https://www.bloomberg.com/news/arti...t-gets-european-banking-license-via-lithuania (you get so many free articles so should be free for the most)
I would love to hear all thoughts on this
