Revolut launches personal loans in the UK. What does this mean for the neobank?

London-based fintech Revolut has launched its first credit product in the UK since receiving a banking license, now offering unsecured personal loans. Revolut UK CEO Francesca Carlesi spoke to Reuters about the news. The company aims to challenge traditional British banks and boost interest income, Bloomberg reports.

“We want to transition from being a very successful everyday spending app... to become effectively the primary bank of choice for everybody in the UK,” Carlesi said. The digital bank has begun offering unsecured personal loans ranging from GBP2,000 ($2,670) to GBP25,000 ($33,400), with annual rates of 6.9-29.3% and repayment terms of one to five years. “We’ve built a transparent and simple loan process with near-instant funds on approval, no fee for early repayment and competitive rates,” Carlesi said.

Revolut will roll out personal loans in phases over several months. They are currently available to only a small number of customers, Bloomberg reports. The UK CEO added that the company will also launch credit cards in the near future. This is part of a broader strategy to increase revenue per customer, a metric on which the digital bank still trails traditional lenders, Reuters notes.

The company plans to expand lending gradually and has no target for the size of its UK loan portfolio, Carlesi told Reuters. Eventually, the bank plans to transfer much of its risk to investors through securitization, aiming to keep its loan-to-deposit ratio at around 6%, far below that of other banks, Carlesi said. Revolut also intends to enter the highly competitive British mortgage market over time.

Revolut, which serves around 14 million customers in the UK, received its British banking license in March. In other markets, the company offers personal loans, mortgages, and credit cards. Interest income accounted for around 22% of Revolut’s global revenue last year, with most of the rest coming from fees, an unusual mix for a large bank, Bloomberg notes.

Revolut’s launch of UK personal loans takes it beyond its core payments and subscription services into a riskier business as the fintech seeks to compete directly with heavyweights such as NatWest, Lloyds, Barclays, Santander’s UK business, and HSBC, Reuters reports.

Since its founding in 2015 by Nik Storonsky and Vlad Yatsenko, Revolut has grown into a global service with more than 80 million customers and a private valuation of $115 billion, exceeding the market capitalizations of publicly traded rivals such as Barclays and NatWest. Questions remain, however, about whether the bank can sustain its rapid growth: Revolut’s revenue per customer is well below that of rivals, while the proportion of customers using it as their primary bank and having their salaries paid into their accounts remains small, Reuters reports.