The gold rush for digital finance in the United Kingdom has hit a regulatory wall. For years, the Electronic Money Institution (EMI) licence was viewed as the ultimate “starter kit” for fintech disruptors—a way to offer digital wallets and payment services without the grueling capital requirements of a full banking charter.
But new data suggests that the pipeline for the next generation of British neobanks has effectively dried up. According to figures obtained via a Freedom of Information request by financial regulation consultancy Pathlight Associates, only 35 firms secured an EMI licence in 2025. That represents a staggering 80 per cent collapse from 2020, when the Financial Conduct Authority (FCA) approved 171 applicants.
This downturn is more than just a statistical dip; it signals a fundamental shift in the UK’s fintech ecosystem. The “EMI-to-bank” pathway, once the gold standard for scaling a financial business, is no longer the frictionless route it once seemed. With zero applications for full UK banking licences recorded in 2025, the industry is facing a crisis of confidence—or perhaps a necessary correction after a decade of hyper-growth.
The collapse of the ‘Bank in Waiting’ model
In the early days of the fintech boom, the EMI licence served as a critical stepping stone. It allowed non-bank companies to issue digital cash and manage electronic wallets under regulatory supervision, providing a lower-barrier entry point into the market. The most famous success story is Revolut, which secured its EMI licence in 2016 and spent years navigating a complex, often friction-filled relationship with regulators before finally landing a full UK banking licence earlier this year.
For a long time, investors and founders viewed this as a repeatable blueprint: start as an EMI, build a massive user base, and eventually graduate to a full bank. However, Muj Malik, an associate partner at Pathlight, suggests that the Revolut experience was an anomaly rather than a roadmap.
“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,” Malik noted. He describes a “dual squeeze” currently gripping the sector: commercial pressure from a market that has become heavily saturated and regulatory pressure from a watchdog that has significantly raised the bar for entry.
| Metric | 2020 Figures | 2025 Figures | Change (%) |
|---|---|---|---|
| Total EMI Applications | 371 | 155 | -58% |
| Successful EMI Approvals | 171 | 35 | -80% |
| Full Banking Licence Apps | (Multiple) | 0 | -100% |
A ‘pro-growth’ agenda meeting regulatory reality
The decline in approvals comes at a politically sensitive time. Chancellor Rachel Reeves has been vocal about her desire to make the UK a more competitive hub for innovation, pushing regulators to adopt a “pro-growth” stance. This initiative includes the creation of a “Scale Up” unit—a joint venture between the FCA and the Prudential Regulation Authority (PRA)—designed to “supercharge” the growth of innovative firms by easing the administrative burden on startups.
Despite these high-level policy shifts, the reality on the ground is that the FCA has become far more demanding. The regulator’s focus has shifted heavily toward anti-money laundering (AML) compliance, consumer protection, and operational resilience. For many startups, the cost of meeting these rigorous standards now outweighs the benefits of the licence itself.
This shift has stripped the EMI licence of its reputation as an “easy” entry point. Instead, This proves now viewed as a high-stakes commitment requiring significant legal and compliance infrastructure before a single customer can be onboarded.
The survivors: Who is still getting through?
Despite the plummeting numbers, some heavyweights and niche players are still clearing the hurdle. In the last year, the “buy now, pay later” giant Klarna, the financial assistant app Plum, and the foreign exchange firm Tenora all successfully clinched their permits.
Interestingly, some firms argue that the UK’s rigor is actually a competitive advantage. Harry Adams, boss of Tenora, suggested that the FCA’s deep understanding of the market makes the process more logical than in other jurisdictions. “The same can’t be said for a lot of other regulators across Europe who don’t appreciate why a business like ours requires an EMI licence,” Adams noted.
For these firms, the licence is not necessarily a stepping stone to becoming a bank, but a tool for operational legitimacy and expansion. The divergence suggests that the FCA is not rejecting all applicants, but is instead filtering for firms with sustainable business models and mature compliance frameworks—effectively ending the era of “move fast and break things” in British finance.
Disclaimer: This article is for informational purposes only and does not constitute financial, legal, or investment advice.
The industry now looks toward the first official progress report from the Treasury’s new ‘Scale Up’ unit, expected in the coming months, to see if the government’s reforms can actually move the needle on licence approvals or if the regulatory squeeze is the new permanent state of play.
Do you think the FCA is being too strict, or is this a necessary cleanup of the fintech sector? Let us know in the comments or share this story on LinkedIn.
