Silke Mayr Revolut, Europe’s most downloaded financial app since 2015, recently surpassed 50 million customers worldwide. This achievement solidifies its leading position in the European fintech space. Despite this growth, Revolut’s European CEO, Joe Heneghan, warns that regulatory fragmentation is hindering fintech expansion, especially in cross-border payments.
Regulatory Challenges Facing Fintech Expansion
Heneghan explains that inconsistent laws across European countries create hurdles for fintechs seeking to expand beyond home markets. Each nation’s local regulations differ, making it difficult for companies to scale operations across borders. During a London event organized by Revolut, Heneghan emphasized that this regulatory inconsistency limits the potential for European fintechs to become global leaders.
Revolut’s service portfolio has played a vital role in its success. International money transfers, a core offering, provide competitive exchange rates and fee-free transactions within the SEPA (Single Euro Payments Area) region. This area includes EU member states and other countries like Iceland, Switzerland, and the UK. Despite these benefits, regulatory hurdles persist, slowing fintech’s growth trajectory.
A major challenge Revolut faces is IBAN discrimination. This occurs when companies reject international IBANs, even though SEPA rules prohibit such practices. Revolut’s customers often receive Lithuanian IBANs due to the company’s banking license in Lithuania. To counter this, Revolut is establishing local branches in several EU countries to offer domestic IBANs. However, this expansion strategy involves significant costs.
Path Towards Unified Regulation and Future Growth
Joe Heneghan’s remarks echo those of former Italian Prime Minister Mario Draghi. Draghi’s recent report highlighted the need for a unified regulatory approach to sustain Europe’s global competitiveness. He also advocated for completing the Capital Markets Union (CMU) and introducing the digital euro, which could streamline Europe’s financial system.
Heneghan views the digital euro as an opportunity, not a threat. He believes Revolut could integrate the digital euro into its services, enhancing the user experience. Revolut’s Chief Growth and Marketing Officer, Antoine Le Nel, downplayed concerns about the digital euro’s impact. He argued that it would not harm Revolut’s business model but instead inspire both fintechs and traditional banks.
Revolut’s ambitions extend beyond the digital euro. The company revealed new product plans during its London event. These include launching mortgage products in Lithuania, Ireland, and France by 2025. Additionally, Revolut will introduce business lending services next year and prioritize securing banking licenses in new markets, with the US as a key target.
Revolut’s CEO, Nik Storonsky, acknowledged past missteps regarding banking licenses. He admitted that the earlier strategy of operating without banking licenses was flawed. Nonetheless, Revolut’s dominance in the neobank sector remains strong. The company’s valuation reached $45 billion (€43.19 billion) following its latest share sale in August. This valuation cements Revolut’s status as a leading force in fintech innovation.