Revolut, the UK-based neobank launched in 2015, recently announced reaching 50 million customers globally, solidifying its position as Europe’s most downloaded financial app. Despite this milestone, the company continues to face challenges posed by regulatory fragmentation across the European Union.
Speaking at a London event, Joe Heneghan, Revolut’s head of Europe, criticized the lack of regulatory alignment in the eurozone. “Variations in local laws make it difficult for firms to scale across borders,” he said. This lack of uniformity, he added, hampers the emergence of “European champions” in the fintech sector.
Tackling Cross-Border Hurdles
One of the key barriers Revolut faces is IBAN discrimination, where employers or businesses refuse to accept international IBANs, even though this practice is prohibited within the Single Euro Payments Area (SEPA). Customers with Revolut accounts often have Lithuanian IBANs due to the company’s banking license in Lithuania, leading to blocked payments in some cases.
To counter this, Revolut has been establishing local branches in EU markets, enabling the issuance of country-specific IBANs. While this mitigates the issue, it comes at an added operational cost.
Aligning with EU Initiatives
Heneghan’s concerns align with broader calls for market integration in the EU. Former Italian Prime Minister Mario Draghi’s report on European competitiveness highlighted the need for a Capital Markets Union (CMU) to ensure seamless credit flows across member states.
Revolut sees opportunities in the European Central Bank’s (ECB) proposed digital euro, a digital currency initiative complementing CMU goals. “We view it as another service to integrate for our customers,” Heneghan said, dismissing notions that the digital euro poses a competitive threat to Revolut’s offerings.
Antoine Le Nel, Revolut’s chief growth and marketing officer, expressed confidence in the firm’s innovation. “I’m very happy to see that Revolut is inspiring not only fintechs but also traditional banks,” he said.
Plans for Expansion
At the same event, Revolut announced plans to expand its product offerings. The neobank aims to launch mortgage products in Lithuania, Ireland, and France by 2025, alongside business lending initiatives slated for next year.
Revolut is also pursuing banking licenses in every market it operates in, including the United States. CEO Nik Storonsky recently admitted that the company underestimated the importance of regulatory frameworks during its scaling phase. “For a long time, I wanted to be as less regulated as possible; it was the completely wrong decision,” he said at a Helsinki conference.
Despite these challenges, Revolut remains a dominant player in the fintech space, with a valuation of €43.19 billion following a recent share sale. As the firm expands its reach, it continues to advocate for regulatory alignment to foster cross-border growth in the European fintech ecosystem.
