Last week I explained why we should not neglect the fact that Revolut will be made physically available in Belgium: they announced a country manager offices in both Antwerp and Brussels.

Until last week Revolut had an e-money licence. This is sufficient for what they offer today, insufficient when playing in the Premier League of banking.

So I warned for the day that they get a banking license. Because that will open the door to a whole new set to possibilities.

Well… last week they got their license.

The Bank of Lithuania helped Revolut to get a European banking licence. This gives them access to the whole EU, by the passporting rules, to start with the UK, France, Germany and Poland. These will be the first to enjoy banking new features, like a local IBAN + a proper debit card, instead of the prepaid card, on which Revolut is built today.

Other countries will likely follow quickly. This should scare banks, also in Belgium. With a local IBAN it will be possible for Revolut customers to get their salary paid on the Revolut account.

Revolut has the banking licence now, so customers are protected by the European Deposit Insurance Scheme. With 8,000 to 10,000 consumers that open an account per day, and the lack of pressure on profitability, this should be concerning for the incumbents.

Marcus in UK showed how fast a well priced savings account can grow. This product of Goldman Sach (a online-only bank) claims to have attracted +100.000 since its launch end September, with an interest fee of 1,5%.

What holds Revolut back from not doing the same? They have one ambition today and that is growth.

Why Lithuania?

Why didn’t they just apply in UK for a banking licence? Brexit is your answer. If Brexit would happen, it may no longer be possible to passport the licence to other countries. Result: Revolut investigated other options, and found a ‘partner-in-crime’ in the Bank of Lithuania.

To avoid any surprise, Revolut is also applying for a UK banking licence, just in case the passporting would no longer work post-Brexit.

For those who read my post “When Regtech meets payments”, know Lithuania doesn’t give a lean license approval for free. There are conditions:

- Or it should enable more competition in their banking market

- Or it there should be some job creation involved

Of course a larger Lithuanian customer portfolio for Revolut will increase competition of the overall Lithuanian banking market. According to the Financial Times Revolut has a portfolio of 150.000 customers there already today.

Another important element played as well, according to Andrius Bičeika, Revolut Country Manager for the Baltics:

Lithuanian talent has been building Revolut from the very beginning. The company has always had close ties with the country and the launch of our local team is another step towards strengthening our relationship.

At first, Revolut will focus on the lending and overdraft opportunities. The higher margin products, where very often still a lot of paper work and time is involved at the incumbents. Revolut’s ambitions are to reduce the whole process of applying for a loan in only 2 minutes.

Lending and overdraft is where today incumbents still can, and need, higher margins to cover the cost of administration. Revolut can kill 2 birds with one stone here:

- use their AI expertise to automate the process as much as possible and create scale to minimise the cost of onboarding

- offer better prices compared to incumbents to take market share