Revolut has launched personal loans in the UK, stepping up competition with established lenders as the digital bank seeks to become the primary banking provider for more of its 14 million British customers.
Francesca Carlesi, UK chief executive of Revolut, said the company wanted to move beyond its established payments business and compete directly with traditional banks.
“We want to transition from being a very successful everyday spending app and disrupting the market, to become effectively the primary bank of choice for everybody in the UK,” Carlesi said.
However, expanding into lending brings new risks. As it looks to compete with ‘the big five’ lenders and increase revenue per customer, it faces challenges. Unlike established high street banks, Revolut does not have decades of customer spending and repayment data to inform its credit assessments. It has supplemented its underwriting with information from external providers.
Carlesi said the company would expand lending gradually, with no fixed target for the size of its UK loan book. Revolut also plans to use securitisation to transfer much of the credit risk over time, aiming to keep its loan-to-deposit ratio close to 6%.
The company said its lending offer would give customers a straightforward borrowing process, with no early repayment fees. Integrating credit into its existing app would also allow customers to view repayments alongside their everyday spending, budgeting and investments.
The loans range from £2,000 to £25,000, with annual percentage rates (APRs) between 6.9% and 29.3%. Repayment terms will run from one to five years, and approved customers can typically receive funds within minutes. Initially available to a selected group of customers, the product is set for a phased rollout over the coming months.
Revolut’s receipt of a full UK banking licence earlier this year opened the way for it to broaden its range of banking products. The company plans to introduce a credit card in the near future and has longer-term ambitions to enter the UK mortgage market