UK regulators are currently withholding the full banking licence for a prominent fintech company due to concerns about its risk management practices amid its rapid international growth, as reported today.
The Prudential Regulation Authority (PRA) issued a restricted banking licence to the fintech after a lengthy three-year application process. During the “mobilisation” phase, which is typically designed to last around 12 months, the company is limited to holding no more than £50,000 in customer deposits. However, it has been in this phase for over 14 months.
Bank of England officials are now requesting the fintech’s input on its risk management strategies, particularly how it plans to scale its infrastructure to support its expansive growth ambitions. The PRA has a mandate to assess the bank’s ability to mitigate money laundering risks and evaluate the effectiveness of its controls in both the UK and international markets before granting a full banking licence.
Currently, the fintech has approximately 65 million customers across 40 nations, with the UK being its largest market, serving around 12 million users. Its goal is to expand its customer base to 100 million by mid-2027, fueling ambition for future valuation.
Despite facing challenges regarding its UK banking licence, the fintech is operational in the European Union via a banking licence obtained in Lithuania. Additionally, it has recently acquired a banking licence in Mexico and is pursuing one in New Zealand. A significant investment of over €1 billion (approximately $1.1 billion) is planned for France, where it aims to apply for another banking licence.
The fintech is also turning its attention to the American market, considering the acquisition of a local bank to secure a banking charter.
At present, it functions in the UK with a payment licence. Achieving a full banking licence would enable it to utilize customer deposits in a manner akin to traditional banks. Recent reports indicate that the company’s pre-tax profits for 2024 were estimated at £1.1 billion, bolstered by earnings from cryptocurrency activities, against global revenues of £3.1 billion.
There is also a commitment to investing $13 billion over the next five years, with plans to enter 30 new markets by 2030, covering regions such as Latin America, Asia, and the Middle East. The fintech’s ambitious growth strategy raises questions about whether its rapid expansion could be a liability in managing the risks associated with banking operations, particularly as it continues to scale operations globally.