Matt Baxby, CEO of Revolut in Australia
ASIC is set to lift restrictions on the operations of Revolut’s Australian electronic money business after issuing a local financial services licence to the controversial UK-based company.
An ASIC spokesman confirmed last night that Revolut had been granted a licence to market non-cash payment products to retail and wholesale clients.
The licence does not permit the company to market other financial services such as share trading that are currently offered in the UK.
Revolut’s core offering in Australia is a digital money account that allows customers to transfer cash globally at market-leading exchange rates.
Account holders are able to store multiple currencies on mobile wallets and send money abroad or shop overseas without incurring transaction fees.
Customers are also able to shop online or settle instore purchases with Australian merchants.
The company is widely acknowledged as the fastest-growing fintech in the world with a customer base exceeding 12 million.
Revolut’s new Australian management headed by former Virgin Money chief Matt Baxby will be hoping that the regulatory approval marks a fresh start for the local business after a tortuous 14 month wait for the licence.
However, the Covid-19 crisis is likely to constrain the fintech’s growth aspirations.
Reserve Bank data shows the value of prepaid payment card transactions fell by 17 per cent in March to A$434 million. The value of transactions recorded in March last year was $543 million.
The lockdown measures, which have resulted in a sharp contraction in the number of Australians travelling overseas, could be expected to severely crimp demand for the Revolut card for most this year.
Revolut began operating in Australia in February 2019 when ASIC granted the company an exemption to operate without a local licence for nine months.
The exemption was issued only a few weeks before a whistleblower leaked details of alleged anti-money laundering breaches at the company’s London headquarters.
While the allegations were never proven, months of intense media scrutiny of Revolut’s work culture resulted in company efforts to bolster its compliance and risk management resources, including the addition of anti-money laundering specialists.
The public controversy over the company’s compliance culture might also have prompted ASIC to monitor the local operation more closely – a likely upshot being the drawn out licencing process.
Revolut was still without a licence when the exemption expired last October, but ASIC extended the relief period a further six months on a condition that the company stop activating new Australian accounts.
ASIC’s restriction effectively froze Revolut’s customer acquisition campaign in Australia and stranded thousands of prospective customers who had joined a waiting list to access the electronic money service.
Revolut managed to activate more than 20,000 customers before the regulatory restriction was imposed and their accounts have continued to be serviced since October.
While securing the licence opens the door for Revolut to renew product promotion in the domestic financial services market, Banking Day understands that ASIC has also directed the UK parent to shift the active Australian accounts to a recently established Australian entity known as Revolut Payments Australia Pty Ltd.
When the novation process is completed, Revolut’s Australian arm will be free to activate accounts for applicants on its waiting list and hawk for new customers.
Customers are able to load value to their Revolut accounts by transferring funds from a credit or debit card issued by another financial institution.
Revolut is required to hold customers’ funds in trust accounts managed by an Australian bank.
Since it began activating accounts in June last year, Revolut has been using ANZ to manage the trust accounts.
While this structure ensures that Revolut is never able to access customers’ funds, the company retains all of the interest earned on the ANZ trust accounts.
This is spelt out in the company’s product disclosure statement:
“The Revolut Electronic Money Account does not accrue interest. Any interest accrued on funds held by Revolut in the trust accounts with an ADI will be kept by Revolut and will not be paid to you.”
Revolut’s local management is led by a team of executives with deep experience in the local banking market.
While Baxby is best known for his time as CEO of Virgin Money, he has spent the last seven years as a senior executive at Bank of Queensland.
Other Revolut executives include former NAB and ME Bank risk specialist Mike Hendricks, and Scott Jamieson who previously led the compliance function at 86 400.