Regulatory authorities in the United Kingdom are withholding a full banking license for a prominent fintech company due to concerns regarding its risk management systems in light of its rapid international expansion. This has been reported by various sources.
Previously, the Prudential Regulation Authority (PRA) granted the fintech a restricted banking license after a prolonged waiting period of three years. However, as part of this restricted phase, the company is limited to accepting a maximum of £50,000 in customer deposits. While the standard duration for this “mobilization” phase is typically 12 months, the fintech has now been in it for over 14 months.
Officials from the Bank of England are currently in discussions with the fintech to understand its strategies for enhancing its risk management framework, which is crucial as the company pursues its ambitious global growth objectives. The PRA’s primary focus is to examine the effectiveness of the fintech’s controls relating to money laundering risks, both within the UK and internationally, prior to approving a full banking license.
This fintech company boasts around 65 million users across approximately 40 countries, with the UK being its largest market, accounting for about 12 million customers. The company’s goal is to expand its user base to 100 million by mid-2027 and it is on track to achieve a valuation of $75 billion, making it the most valuable startup in the UK.
Despite facing challenges in obtaining a full banking license in the UK, the fintech operates under a Lithuanian banking license within the European Union. Additionally, it has successfully acquired a banking license in Mexico and is in the process of applying for one in New Zealand. It has also committed to investing over €1 billion in France, where it plans to seek a banking license.
Looking beyond Europe, the fintech has set its sights on the American market and is considering acquiring a local bank to obtain a banking charter. Currently, it operates in the UK under a payment license. Securing a full banking license would allow it to utilize customer deposits similarly to traditional banks.
Recent reports indicate that this fintech has achieved pre-tax profits of £1.1 billion for 2024, boosted significantly by revenue from cryptocurrency activities, amounting to global earnings of £3.1 billion. In the forthcoming five years, the company plans to invest $13 billion and aims to enter 30 new markets, including expansions into regions such as Latin America, Asia, and the Middle East.
The fintech’s aggressive growth strategy raises questions about whether such rapid expansion might undermine its ability to manage risks effectively. This situation presents a critical challenge for the company as it seeks to navigate regulatory requirements while pursuing an ambitious trajectory in both existing and new markets.