‘Make the process look less scary’: UK banking licence applications hit zero in 2025
The number of applicants for UK banking licences plummeted to zero in 2025, raising questions over the government and regulators’ capacity to foster competition and attract overseas investment.
The fresh figures – revealed in a Freedom of Information request by financial regulation consultancy Pathlight Associates – show a steep fall from the 11 licence bids lodged in 2020.
For foreign domiciled banks, the data continues to wane with just five foreign banks having been authorised by regulators in the UK since 2020.
Pathlight said perceptions around the UK’s regulatory stringency and complexity were hindering firms from making a licence bid.
The consultancy’s boss John Higgins said: “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.”
The fresh figures mark a blow to Rachel Reeves, who claimed to “rewire” the financial services system with a package of deregulation reforms aiming to bolster the banking sector. But criticism quickly developed that these reforms would be “untransformative“.
Last month, fintech juggernaut Revolut clinched its full-fat UK permit after a four-year wait. The $75bn was in the mobilisation stage – the period between approval for a licence and permission to fully launch – for over 18 months before getting the final green light. Ahead of this the firm battled another three years to get the initial approval.
Frustrations led to chief executive Nik Storonsky lashing out at the “extreme bureaucracy” in the UK, citing “extra cautious” regulation as a hurdle in obtaining the licence. But much of the delays were pointed to Revolut being the biggest bank to ever to go through the process, with a whopping 70m customers worldwide.
Fintechs eye Wall Street for licence bid
Numerous fintechs are tipped to make a play for a banking permit in the near-future. Money transfer firm Wise is said to be mulling a UK licence after reaching out to financial services heavyweights in the last two months regarding roles related to starting a banking licence, though plans are understood to be at a very early stage with no formal application having taken place.
Elsewhere, Swedish fintech unicorn Klarna has sought to shed its buy now, pay later label in a bid to become a digital bank. In July, Klarna received an electronic money institution licence from the Financial Conduct Authority (FCA), setting the firm up to compete with the UK’s e-commerce titans.
Higgins said: “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 US has capitalised on a boom in enthusiasm for banking charters with an influx of applications.
Revolut made its play for a US licence in March, which followed Europe’s second-largest neobank Bunq, which boasts over 20 million customers, kicking off the year with its play for a US permit.
Beyond Europe, firms are also making moves with payments giant Paypal, Brazilian fintech Nubank and crypto giant Coinbase all lodging licence bids in 2025.
Trump’s sweeping deregulation of the Dodd-Frank Act of 2010, which was enacted after the financial crisis to boost financial stability and increase accountability, has helped open the floodgates.
The fresh reforms hiked the primary asset threshold at which firms face tougher prudential standards to $250bn from $50bn previously, meaning fewer companies were subject to stringent standards.