UK-based challenger bank Revolut is reportedly on the cusp of applying for a banking licence in California.
If successful, the licence would empower the neobank to operate across the US via interstate agreements, according to sources familiar with the matter speaking with CNBC.
The sources said that Revolut is planning on applying for a charter with the Federal Reserve Bank of San Francisco and California’s Division of Financial Institutions within the next few weeks.
However, some industry experts CNBC spoke to questioned why Revolut applied for a state charter rather going through the national regulator the Office of the Comptroller of the Currency.
Nevertheless, this highlights just how fragmented the road towards accessing the US market can be for FinTech companies.
Some banks, like Current and Monzo have done it by partnering with existing banks. This was also the preferred method of Chime, which became the biggest challenger bank in the US in September after achieving a $14.5bn valuation on the back of a $485m Series F funding round.
It should be mentioned that Monzo did apply for a banking licence in the US via the Office of the Comptroller of the Currency in April 2020.
Square, on the other hand, will launch its banking solutions by setting up an industrial loan company based in Utah, which would be supervised by the Utah Department of Financial Institutions and the Federal Deposit Insurance Corp.
The Californian banking licence would be the latest step in Revolut’s ambitious plan to expand beyond its European origins and to make it across the pond. The neobank has been talking about going stateside since at least 2018, but it took until March 2020 for it to go live in the US. Revolut set up in the country through an arrangement with Metropolitan Commercial Bank.
It is not the only European digital bank to try to do so. As we mentioned above, Monzo has also tried to launch in the country and German rival N26 set up shop in the US in August 2019 and claimed to have over 250,000 customers in the nation in January 2020.
Still, successfully expanding to the US is a challenging endeavour for European neobanks. Not only do they have to cut through a lot of red tape, but they also have to compete with a thriving domestic FinTech industry.
Covid-19 has made matters worse. Revolut achieved a $5.5bn valuation earlier this year on the back of a $500m Series D round in February, making it Europe’s most valuable neobank. Nevertheless, it revealed in August that its losses had trebled from £32.8m in 2018 to £107.4m in 2019.
Around the same time, its UK rivals Starling Bank and Monzo reported that their losses had doubled within the last year.
For industry stakeholders, the reports raised concerns of how much trouble the UK neobanks are really in.
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