Will Revolut ever get a British banking licence?

Good morning fellow FinTech Fanatic!

The digital payment sector is currently facing a pressing need to redefine its story.

The alarming profit warning from Worldline, I mentioned in my newsletter yesterday, underscores that their previous narrative—centered around consistent growth, industry consolidation, and the perks of network effects—has lost its allure and credibility.

Despite the considerable potential for expansion, as nearly 50% of European payments are still settled through banks, these too are under pressure to lower their fees.

The stock of this Paris-based company saw a dramatic drop, slashing its value in half. This swift and severe reaction indicates a deep crisis of confidence, extending beyond a mere numerical response to disappointing figures.

Worldline fell short on numerous financial objectives. Current projections for annual growth now hover around 6-7%, a significant reduction from the initially anticipated 10%. Operating profits are expected to suffer a decrease of approximately 12% for the entire fiscal year.

This negative trend rippled through the sector, affecting other payment stocks. Adyen, which had already experienced a substantial decline following a profit warning in the summer, saw an additional drop of 10%. Meanwhile, Italy’s Nexi, which had been riding high on recent acquisition rumors, witnessed a loss of up to 20% of its value.

From payments to digital banking:

Germany's financial regulatory authority is preparing to relax the stringent growth restrictions that were imposed on N26 two years ago. These restrictions were put in place after BaFin identified deficiencies at the Berlin-based online bank.

N26 founders Valentin Stalf and Max Tayenthal told investors on Wednesday that the start-up expected to be allowed to attract up to 60,000 new clients a month soon, compared with a previous restriction of 50,000 disclosed in October 2021.? “While this number is slightly below our own expectations, we recognise that this outcome is still a big step and sign of trust from the regulator,” Stalf and Tayenthal wrote in an email to investors seen by the?Financial Times .

Revolut Founder and CEO Storonsky's hoped-for "Christmas present" of a banking license might also not materialize this holiday season. Despite resolving share structure issues with major investor SoftBank, the FinTech still faces numerous challenges before securing a UK banking license.

Having been in regulators' hands since January 2021, Revolut's application is complicated due to its large size of nearly 8 million UK customers and previous financial and operational issues.

These include delayed accounts for 2021 and 2022, a $20 million theft due to a payment system flaw, and allegedly allowing payments to red-flagged accounts.

Former FCA official Gavin Stewart highlights the tough stance regulators take during the application process, emphasizing the difficulty in revoking a license once granted.

Do you think Storonsky will get the Banking license as a Christmas present this year?

Cheers,

Marcel

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