Revolut, with 50 million global customers, is Europe’s most downloaded financial app since its 2015 debut. Despite this success, Joe Heneghan, CEO of Revolut Europe, warns of regulatory fragmentation. He highlights how inconsistent laws hinder fintech growth, especially in cross-border payments.
Regulatory Fragmentation Stifles Fintech Growth
Heneghan emphasizes the challenges caused by varying regulations across Europe. “Different countries have their own rules, creating issues for businesses expanding internationally,” he explained at a Revolut event in London. This lack of unity prevents “European champions” from emerging and thriving in the fintech sector.
Revolut leads in financial technology by offering diverse services. However, its standout feature remains fast, cost-effective international money transfers. Competitive exchange rates and no SEPA transaction fees make Revolut an appealing alternative to traditional banks. The SEPA zone includes EU countries and others like Iceland, Norway, Switzerland, and the UK.
Cross-border payment barriers persist, with IBAN (International Bank Account Number) discrimination being a major issue. Some employers or businesses refuse IBANs from foreign countries, complicating transactions. This affects Revolut customers using foreign IBANs tied to its Lithuanian banking license. While SEPA prohibits such practices, authorities have yet to prioritize enforcement. To address this, Revolut is opening local branches in EU markets to issue domestic IBANs, but this strategy increases costs.
Opportunities Amid Challenges
Heneghan’s concerns align with Mario Draghi’s call for a unified European approach. Draghi’s report on competitiveness urges completing the Capital Markets Union (CMU) and advancing the digital euro.
Though some view the digital euro as competition for fintech, Heneghan sees it differently. “We’d integrate it as another service for our customers,” he noted. Antoine Le Nel, Revolut’s Chief Growth and Marketing Officer, added that the digital euro would complement, not threaten, Revolut’s offerings.
Revolut is also expanding its services. By 2025, it plans to launch mortgages in Lithuania, Ireland, and France, along with business lending in 2024. The company is keen to grow its banking licenses, particularly in the US. Heneghan affirmed Revolut’s goal of securing a banking license in every market it operates.
Revolut’s CEO, Nik Storonsky, admitted the company’s earlier mistake of scaling without banking licenses. Despite these challenges, Revolut remains a leader in neobanking, with a valuation of $45 billion (€43.19 billion) following an August share sale.
