Revolut seeks to challenge Swiss banking sector

Revolut is seeking a banking licence: a threat to the Swiss banking sector? Keystone-SDA

Digital bank Revolut already has a million customers in Switzerland. Now the company is applying for a Swiss banking licence. Why?

A new player could soon make its mark on the Swiss banking sector – one that already has 1.3 million customers here. Revolut is regarded as the largest “neo-bank” in Switzerland. It’s a financial services provider that does not operate any branches but handles all payment transactions via its app and website.

+ Neo-banks challenging Swiss financial sector

Revolut is now applying to the Swiss Financial Market Supervisory Authority (FINMA) for a Swiss banking licence. In Switzerland, most people have so far used Revolut as a secondary account or often as a “holiday bank” for payments abroad to take advantage of Revolut’s comparatively low fees.

“A banking licence brings trust and prestige,” explains SRF business editor Charlotte Jacquemart. This is partly because of the deposit guarantee scheme. If a licensed bank goes bankrupt, account balances of up to CHF100,000 ($121,110) are protected by law.

“A Swiss banking licence makes it possible to offer products tailored to the local market,” added Jacquemart. Revolut currently operates in Switzerland with a Lithuanian banking licence.

With a Swiss banking licence, the company could offer new financial services such as pension products or access to the Twint digital payments network. And, in theory, it could also grant loans – although, according to Revolut, this is not currently a priority.

Revolut’s expansion strategy

Switzerland is not the only country where Revolut is currently expanding. The company applied for a United Kingdom banking licence back in 2021, but had to wait until this year to obtain it.

In August, it also secured a second European Union licence, in France. The process is also underway to upgrade Revolut’s provisional licence in the United States.

But banking licences come at a cost, partly due to stricter regulation. As a result, Revolut’s operating costs will rise initially.

Revolut is already compting with Swiss banks, according to Jacquemart. “Of course, a fully-fledged bank is an even bigger competitor, although, initially, this will probably be more of a challenge for the other neo-banks,” she said.

Swiss neobanks such as Neon, Yuh and Zak are subsidiaries of traditional banks – and therefore already operate under a Swiss licence. They could now lose this competitive advantage over Revolut.

Traditional banks offer a wider array of products than their digital competitors. These include advisory services, wealth management for rich clients, mortgages and corporate services.

It remains to be seen whether other neo-banks will follow suit in these areas in the medium or long term.

Negative press surrounding Revolut

In recent years, Revolut has made headlines not only for its breathtaking growth, but also for some unwelcome news.

The company is currently in the headlines because of its licence application, and because of a data breach. Revolut disclosed personal data belonging to at least 700 customers to unauthorised parties. According to Revolut, these individuals posed as public authorities, using genuine email addresses.

In April this year, Revolut was fined millions of euros in Italy for misleading business practices. The financial services provider has lodged an appeal against this decision.

In recent years, Revolut accounts have been hacked or blocked for no reason – as have those of other neobanks. Furthermore, the smartphone apps are seen as a catalyst for financial crime, money laundering or identity theft due to often lax regulation.

“FINMA will therefore be keeping a close eye on Revolut,” said Jacquemart.

In Paris, Revolut is building a new headquarters for Western Europe with around 600 employees. In Switzerland, Revolut plans to invest CHF150 million over five years.

Revolut currently employs around 30 staff and by the end of next year that figure is set to rise to just under 100. There is also an initial public offering (IPO) in the pipeline, even though it has already been postponed several times.

Private investors currently value Revolut at $115 billion. But could the neo-bank eventually be a peer of major Swiss banks? Jacquemart does not venture a definitive prediction. “But I think that’s more of a project spanning decades,” she said.

Translated from German, sub-edited by Matthew Allen/gw