Revolut’s recent acquisition of a full UK banking licence is poised to disrupt the established financial order, triggering what analysts are calling a “deposit war” with incumbent lenders NatWest and Lloyds. The fintech firm, valued at $75 billion, secured the permit earlier this month after a four-year regulatory process, a move that allows it to accept cash deposits and offer a wider range of lending products, including mortgages and business credit.
The approval marks a “strategic inflection point” for Revolut, according to Tomasz Noetzel, a senior industry analyst at Bloomberg Intelligence. He stated that the licence enables “far more aggressive retail-deposit gathering and posing a direct threat to incumbent profitability, notably Lloyds and Natwest.” The UK’s largest banks – NatWest, Lloyds, HSBC, and Barclays – collectively control approximately 60 per cent of the nation’s £2.5 trillion deposit market, and Revolut’s entry is expected to intensify competition.
Bloomberg Intelligence estimates that a £10 billion outflow of current accounts from major UK lenders could erode annual net interest income by as much as £375 million, representing a four per cent reduction in projected profits for Lloyds and NatWest this year. Revolut’s UK deposit base is projected to increase by £40 billion over the next three to four years, rising from its current level of under £10 billion. This growth is predicated on an anticipated surge in UK customers to 25 million, with average balances per user projected to reach £1,300, aligning with competitors like Monzo, which obtained a full banking licence in April 2017.
Monzo serves as a precedent for the potential impact of a banking licence on a fintech’s financial model, having seen its deposits jump from £71 million in 2018 to £16.6 billion by 2025. Noetzel suggests that the ultimate impact on the “big four” banks will depend on Revolut’s strategy – whether it prioritizes low costs through lower interest rates or attracts customers with competitive savings account rates. “Each pathway implies a different margin outcome, but all point to rising funding pressure as Revolut accelerates deposit scale,” he said.
The looming competition has already prompted responses from traditional banking leaders. In December, Barclays CEO C.S. Venkatkrishnan acknowledged that fintech firms had “laid the gauntlet down” regarding valuation, but also questioned Revolut’s adherence to consumer protection standards due to its previous lack of a full licence. Revolut responded, asserting its compliance with the same regulatory and consumer protection standards as established banks. NatWest chief Paul Thwaite has also recognised the increased standards set by companies like Revolut in terms of retail offerings.
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