‘Revolut effect’ fails to materialise as e-money entrants fall
The number of FCA-approved applications from e-money and payment services firms has plummeted by 80% since 2020. This mirrors the collapse in full banking licence activity and signals a broader slowdown in new market entrants, at a time when the government is calling for growth.
Against this backdrop, the Financial Services Bill announced today aims to strengthen the competitiveness of the UK regulatory environment, including through shorter determination deadlines for new authorisation applications.
Analysis of a Freedom of Information request by regulation consultancy Pathlight Associates, shows the total number of authorised applications across e-money and payment institutions has dropped from 171 in 2020 to 35 in 2025. Just 3 applications from small e-money and small payment institutions were approved last year. In parallel, the Prudential Regulation Authority (PRA) received zero new banking licence applications in 2025, down from 11 in 2020.
This shift is notable because e-money and payment institutions have been viewed as a lower-barrier entry point into the UK market, a faster, and comparatively light-touch regulatory alternative to full banking authorisation. Revolut demonstrated how businesses could scale as e-money institutions before pursuing a banking licence while already operating in the UK. However, the data suggests that this pathway has not produced a sustained wave of applications, with the anticipated ‘Revolut effect’ failing to materialise.
Instead, consolidation across the payments sector and fewer authorisation applications, points to a market which became too competitive and reduced scope for new firms to differentiate or scale.
At the same time, regulatory expectations are rising. While the UK offers a relatively flexible framework for smaller firms, supervision has become more demanding in practice for e-money and payment firms. The introduction of the new CASS 15 safeguarding regime last week, underscores a higher compliance bar for firms handling customer funds. This tightening reflects persistent supervisory concerns, which the FCA highlighted in a Policy Statement last year.
Muj Malik, associate partner at Pathlight Associates said: “We are seeing a clear slowdown in new entrants to the UK financial services sector, with banking applications falling to zero and the payment services firms pipeline thinning. While e-money and payment firms were expected by some to create a steady flow of ‘banks in waiting’, this has not happened at scale, with the Revolut pathway proving the exception rather than the rule.
“There has been a dual squeeze on the sector, commercial pressure from a more saturated market, and regulatory pressure from more demanding oversight. As a result, the e-money and payments route is no longer widely perceived as an easier entry point into the UK financial services sector.
“In light of these findings, it is positive to see the government taking action through the Financial Services Bill, which introduces significantly shorter deadlines for determining applications. This should help address what many firms have perceived as a lengthy and burdensome authorisation process.”