UK Banking Licence Applications Hit Zero in 2025 Amid Regulatory Concerns
New figures reveal a startling decline in UK banking licence applications, with zero bids recorded in 2025. This dramatic drop raises serious questions about the government and regulators' ability to foster competition and attract overseas investment to the financial sector.
Steep Decline in Applications
According to data obtained through a Freedom of Information request by financial regulation consultancy Pathlight Associates, the number of licence applications has plummeted from 11 bids in 2020 to none in 2025. The trend for foreign banks is equally concerning, with only five foreign banks authorised in the UK since 2020.
Pathlight Associates attributes this decline to perceptions of excessive regulatory stringency and complexity. John Higgins, the consultancy's chief executive, emphasised that UK regulators need to provide clearer, more encouraging guidance for prospective applicants.
"The UK regulators could play a greater role in addressing these misconceptions by providing clearer, more encouraging guidance for prospective applicants. Put simply, we need to make the process look less scary," Higgins stated.
Revolut's Regulatory Journey
The challenges are exemplified by Revolut's recent experience. The fintech giant secured its full UK banking licence last month after a four-year wait that included an 18-month mobilisation stage between initial approval and final launch permission. Prior to this, the company spent three years obtaining initial approval.
Revolut's chief executive Nik Storonsky publicly criticised what he called "extreme bureaucracy" in the UK, citing "extra cautious" regulation as a significant hurdle. However, some delays were attributed to Revolut being the largest bank ever to undergo the process, with approximately 70 million customers worldwide.
Fintechs Exploring Alternatives
Several fintech companies are considering their options in light of the challenging UK regulatory environment:
- Wise: The money transfer firm is reportedly considering a UK banking licence after consulting with financial services experts about related roles, though plans remain at an early stage with no formal application submitted.
- Klarna: The Swedish fintech unicorn is transitioning from its buy now, pay later model to become a digital bank, having received an electronic money institution licence from the Financial Conduct Authority in July.
Global Competition Intensifies
The United States has capitalised on the regulatory uncertainty in the UK, experiencing a surge in banking charter applications. Recent developments include:
- Revolut applied for a US licence in March 2026
- European neobank Bunq, with over 20 million customers, sought a US permit earlier this year
- PayPal, Brazilian fintech Nubank, and cryptocurrency giant Coinbase all lodged US licence bids in 2025
This shift follows regulatory reforms in the US, where changes to the Dodd-Frank Act have made the process more accessible. The primary asset threshold for stricter prudential standards increased from $50 billion to $250 billion, reducing regulatory burdens for many companies.
Economic Implications and Warnings
Higgins warned of significant economic consequences if the UK fails to address perceptions of regulatory complexity:
"The UK is currently struggling to attract new entrants into its banking sector, and this trend has been clear for several years. Robust regulation is essential to maintain a safe and trusted financial system. However, the UK must ensure that perceptions of the complexity of its framework do not inadvertently deter investment or innovation. If this issue is not addressed, investment and enterprise could flow to other regions meaning the UK economy will miss out on growth and job creation."
The zero applications in 2025 represent a significant challenge for Chancellor Rachel Reeves, who pledged to "rewire" the financial services system through deregulation reforms aimed at bolstering the banking sector. Critics have described these proposed reforms as "untransformative" in addressing the fundamental issues deterring potential applicants.
As global competition for financial services investment intensifies, the UK faces increasing pressure to streamline its regulatory processes while maintaining necessary safeguards. The complete absence of banking licence applications in 2025 serves as a stark indicator of how perceptions of regulatory complexity may be undermining the country's position as a leading global financial centre.
