Revolut, Europe’s most downloaded financial app, tackles regulatory barriers in cross-border payments while expanding its services, including mortgages and business loans.
Revolut, which reached 50 million customers globally earlier this month, continues to lead as Europe’s most downloaded financial app since its launch in 2015. However, the company’s CEO for Europe, Joe Heneghan, emphasized that the rapid growth of fintechs in the region is being hindered by fragmented regulations, particularly in cross-border payments.
Fragmented Regulations Slow Down Fintech Growth
Heneghan explained that the varying laws across different European countries create significant challenges for fintech companies trying to scale beyond national borders. “In each country, you encounter different local laws, and that’s a real challenge for companies trying to be successful in one market and expand into others,” he said at an event in London hosted by Revolut. He pointed out that these regulatory inconsistencies prevent the emergence of “European champions” in the global fintech space.
Despite these obstacles, Revolut has made notable progress, particularly with its international money transfer services, which offer competitive exchange rates and no fees for transactions within the SEPA (Single Euro Payments Area) region. The SEPA region includes EU member states and a few additional countries such as Iceland, Switzerland, and the United Kingdom.
Overcoming IBAN Discrimination
However, Heneghan highlighted that challenges remain, especially with IBAN discrimination. This issue arises when companies or employers refuse to accept IBANs from foreign banks, despite it being illegal within the SEPA zone. Many Revolut users have Lithuanian IBANs due to the company’s Lithuanian banking license. To address this, Revolut has expanded its operations by establishing local branches in various EU countries to issue local IBANs, though this expansion comes at a cost.
Calls for Regulatory Unity in Europe
Heneghan’s comments align with the recent recommendations from Mario Draghi, former Prime Minister of Italy, who called for more regulatory unity within Europe to boost the region’s competitiveness on the global stage. Draghi also stressed the importance of completing the Capital Markets Union (CMU) and rolling out the digital euro, both of which could strengthen Europe’s financial infrastructure.
The Digital Euro: Opportunity or Competition?
While some view the digital euro as competition for fintech companies, Heneghan sees it as an opportunity. “It’s another service we would look to integrate and offer to our customers,” he explained. Revolut’s Chief Growth and Marketing Officer, Antoine Le Nel, also stated that the digital euro would not pose a threat to Revolut’s services. Instead, he believes the company’s offerings continue to inspire both traditional financial institutions and fintech competitors alike.
Expanding Services and Global Plans
At the same event, Revolut revealed plans to launch mortgage products in Lithuania, Ireland, and France by 2025, along with business lending services expected next year. The company also aims to expand its banking licenses, with plans to apply for a banking license in the US. Heneghan confirmed that Revolut is committed to obtaining a banking license in every country where it operates.
Revolut’s CEO, Nik Storonsky, acknowledged at a recent event that the company’s earlier approach of scaling without banking licenses was a mistake. Despite these regulatory challenges, Revolut remains a dominant player in the neobank sector, with a valuation of $45 billion (€43.19 billion) following a share sale in August.