Revolut and SoftBank Resolve Share Dispute for UK Banking Licence
Revolut, the country’s most valuable fintech firm, has reached an agreement with SoftBank to simplify its ownership structure in a significant breakthrough for the UK’s financial technology sector. This long-awaited resolution paves the way for Revolut to finally obtain a coveted banking licence from the Bank of England.
The protracted negotiations between Revolut and SoftBank, internally dubbed “Project Swan,” revolved around the restructuring of shares, with SoftBank initially demanding substantial compensation for relinquishing its priority class of shares. The crux of the issue lay in the Bank of England’s regulatory requirement that Revolut collapse its complex structure of six share classes into one unified type. This condition was a crucial prerequisite for issuing a banking licence, which Revolut had applied for over two and a half years ago. The Financial Conduct Authority (FCA) must also endorse the licence.
While other investors, including Tiger Global Management, venture capital firm TCV, Balderton Capital, and Ribbit Capital, had agreed or were in the final stages of deciding to transfer their shares into a single class, SoftBank’s stance had been more resistant. SoftBank had requested twice the number of Revolut shares in exchange for relinquishing its preferential rights, making negotiations challenging.
However, the agreement reached last week does not involve any additional share issuance to SoftBank and will not have a financial impact on Revolut. This is a significant relief for the fintech company, considering SoftBank’s initial demand for a substantial number of common shares. Although the specific terms of the deal remain undisclosed, it signifies a positive step forward for Revolut’s banking aspirations.
Revolut’s pursuit of a UK banking licence has faced various obstacles and delays, including concerns raised by the FCA regarding auditing, compliance, and corporate culture issues. Earlier reports had also indicated that the FCA was investigating whether Revolut allowed funds to leave accounts flagged as suspicious by the National Crime Agency. Furthermore, the company had faced delays in filing its annual accounts, with the 2021 accounts being filed only in March and concerns raised by the auditor regarding verifying revenue due to the configuration of Revolut’s internal IT systems.
Despite resolving the share structure issue, other challenges lie ahead for Revolut. The company must still address regulatory concerns about its financial accounts and internal systems. The delay in filing accounts for 2022 has drawn admonishments from regulators, but Revolut has assured them that the 2022 accounts will be finalised and submitted without qualifications.
Revolut’s quest for a UK banking licence is crucial for its expansion plans, particularly in the US, Australia, and Singapore, where it aims to leverage the legitimacy conferred by approval from a significant national regulator. With the SoftBank hurdle now cleared, the fintech firm can focus on resolving the remaining issues and working towards securing the licence it has been pursuing for over two years.
