Residents of France: Neobank may be solution if UK bank closes account

Some mobile banking apps allow you to receive and make payments in several currencies at little or no fee

Revolut recently made it easier for French residents to open an account

Barclays has upset many longstanding customers by sending out letters announcing it is soon to close the accounts of people living in France.

The letters do not mention Brexit but when the UK left the EU, UK banks and financial firms lost the ability to rely on the EU’s passporting system to provide services to clients in the bloc.

The only way they can now legally offer services to such clients is to obtain individual licences to operate in each EU state, which is complex and expensive, especially given the small number of accounts involved.

UK banks divided

Other established UK banks are divided in their approach to France-based clients.

Virgin Money, which owns Clydesdale Bank, is not taking new customers but continues to service existing ones. That is also the case with Nationwide, Santander and Lloyds Banking Group, which includes Halifax and Bank of Scotland.

However, HSBC is accepting new current account applications.

NatWest did not respond to our repeated queries on this.

Some ‘lost’ customers might be tempted to open accounts with one of the many mobile phone-based ‘neobanks’, which have sprung up in the last decade.

These often allow clients to receive and make payments in several currencies with little or no fee. Basic accounts are often free of charge, with premium accounts available for those who regularly deal with larger sums.

Revolute best known neobank in the UK

Revolut is perhaps the best-known UK neobank and in six years has grown to be valued on the markets at a third of the value of Société Générale, one of the big four French banks. This is in spite of its struggle to make a profit.

It started as a mobile app for international money transfer, aimed at businesspeople who travel regularly and want to transfer money to secure deals.

It is currently registered in the UK as an ‘electronic money institution’, a financial firm offering similar services to a bank, but not with full banking status and not offering credit.

It also obtained this status in Lithuania several years ago, and its customers across the EU were registered there with a Lithuanian Iban (international code identifying accounts).

Earlier this year it obtained a full banking licence in Lithuania and, as of July, customers in France (said to number 1.5 million) can open a full bank account with a French Iban.

This came after some customers were discriminated against by employers and utility companies because their systems did not recognise Lithuanian Ibans.

Are neobanks safe?

Several readers have asked if neobanks are safe for larger transactions, such as handling the proceeds of a house sale while people move back to or across from the UK and buy another property.

Full banks (also called credit institutions), such as Revolut Bank in France benefit from national guarantee funds, which under European Central Bank rules should guarantee at least €100,000 of their money back if a bank goes bust.

‘Electronic money’ and ‘payment’ institutions do not directly offer this but put aside customers’ money in an account with a full bank. So if the neobank goes bust the money is safe and should be returned to its owners before other creditors. Some other firms under the vague ‘neobank’ banner have different statuses again – if in doubt, ask providers their status and how your money is protected by them. The large neobanks should generally be a safe bet.

Revolut told The Connexion that while it does not have a dedicated property transaction service, customers can easily make pound-to-euro transfers.

“Large sums of money paid into accounts can sometimes flag up on our fraud controls, leading to additional checks by our support and compliance staff,” a spokesperson said.

“But as long as you explain and send some paperwork proving the sale of the house, it should be fine to proceed.”

Note that if it is a priority to you to have an account located in the UK (with a UK Iban), then you need to check if this will be possible. In the case of Revolut, its French-based customers’ accounts are based in Lithuania, or in France if they choose to transfer their account to Revolut’s French subsidiary.

Alternatives to Resolute

Another UK electronic money institution that has made a name for itself, Wise, states on its site that people in France can opt for a UK-based Iban.

Popular French competitors include Orange Bank and Ma French Bank.

Potential neobank customers need to stay alert, though, as,things can change quite quickly.

Australia was once seen as an ideal market for neobanks but in the last two years, three have closed. It is unlikely the same will happen to larger neobanks in France, but among the smaller players, Vybe has already gone bankrupt after fundraising efforts failed.

Aimed at teenagers and with just 40,000 customers, Vybe was not typical, but it shows that not all neobank business plans are successful. Customers did not lose their money and bankruptcy administrators arranged for their funds to be transferred to another French neobank, Lydia, if they wanted.

Lydia, which passed the €1billion in capital funding mark in 2021, is mainly used by its six million French customers for transferring money – its roots are in students sharing the cost of a night out.

It too has started to try to expand, offering current accounts with a green bent in a partnership with the co-operative bank Nef. It already had classic current accounts through a partnership with Crédit Coopératif, part of Banque BPCE. It wants to expand in Europe before the UK.

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