Banks thrive on trust, which must be built on full transparency in the communication of relevant information by the custodians of clients’ money.
When a bank fails to explain why it cannot take on new customers, there is a risk that speculative explanations are given for the motivation behind this decision. Such speculation could dent the trust that the public has in a bank.
Nikolay Storonsky, the British-Russian founder of the fintech and bank Revolut, knows how important the trust issue is for a bank.
He spoke about the importance of obtaining a full UK licence for Revolut to win consumers’ trust, telling a conference last year that “a lot of customers trust banks rather than fintechs”.
More recently, he criticised the UK regulators for delaying the issuing of a full banking licence for Revolut.
The popular app-based banking service has recently announced it is not accepting new clients from Malta “for the moment”.
A Revolut spokesperson told Times of Malta: “We have temporarily paused onboarding for customers based in Malta. Anyone wishing to create an account from Malta will be added to a waiting list.”
But the company failed to give a reason for this decision. Existing customers have not been affected by it.
Revolut’s rise as a fintech company and then a bank has been remarkably fast. It launched in 2015 as a pay-as-you-go card issuer providing low-cost foreign-exchange charges that challenged the strong market dominance of legacy banks in Europe.
The regulatory and political realities have changed substantially since 2015. Revolut now offers crypto buying and selling services in some countries. Cryptocurrencies are generally not viewed positively by banking regulators as upstart banking apps are suspected of facilitating cash launderers and fraud.
Storonsky has some Russian parentage links, which may be instigating stricter regulatory oversight in the present political situation resulting from the war in Ukraine. Revolut is reportedly closing its corporate Moscow offices and Storonsky, who has a British passport, has been unequivocal in condemning the Ukraine warfare.
While Revolut can operate in the EU thanks to its licence issued by Lithuania, the UK Financial Conduct Authority has still not given a full banking licence to the company.
It wants to ensure that Revolut has proper compliance and fraud-busting instruments for a totally licensed financial institution. This is a costly and onerous responsibility for a financial operator that run a low-cost business model.
Malta’s regulatory challenges in the last few years have been extensively discussed in local and international political and institutional fora. The FATF greylisting issue may be formally behind us but this does not mean that Malta’s tarnished reputation in enforcing anti-money laundering regulations has been wiped clean.
Revolut must communicate better with its existing and potential customers to gain the local community’s complete trust. The Malta Financial Services Authority, the local banking regulator, is unlikely to explain why the challenger bank is “temporarily” refusing to take on local customers.
Local private and business customers should not expect that any new banking operator like Revolut will be more lax in enforcing strict customer onboarding regulations that apply to all licensed banks in the EU.
Still, Revolut, as indeed all other financial services operators, should be more transparent in their communication styles when explaining the operational decisions that impact the service to their customers.
Only in this way can speculative theories be nipped in the bud.