April 20, 2024

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Revolut Growth Buoys Investors After Bruising Year for Fintech

Revolut Ltd. is on track to generate more than £1.5 billion ($1.9 billion) in revenue for the year as Europe’s most valuable startup benefits from rising interest rates across the continent.

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(Bloomberg) — Revolut Ltd. is on track to generate more than £1.5 billion ($1.9 billion) in revenue for the year as Europe’s most valuable startup benefits from rising interest rates across the continent. 

Monthly revenue averaged about £125 million in the first half of 2023, according to an investor presentation seen by Bloomberg that contained unaudited financials. That would put the firm on track to deliver revenue that’s far in excess of the £850 million it previously said it generated in 2022. 

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Revolut is now adding as many as 300,000 users a week, according to people familiar with the matter. It’s allowed the company to amass nearly 40 million customers around the world, even as that growth has also continued to attract new rivals. 

The results are a rare reprieve for investors, who’ve been subjected to a wild year with Revolut. The startup, which was most recently valued at $33 billion in a 2021 funding round, still has yet to receive its banking license from UK regulators and the firm’s auditors warned in March they were “unable to satisfy ourselves” about the completeness of some of Revolut’s revenue data for its 2021 accounts. 

The company is still months late with filing an audited version of its accounts for 2022, though those results are expected in the coming days. 

A spokesman for Revolut declined to comment.

The interim accounts, which haven’t been previously reported, show Revolut has been able to boost returns as it’s pumped out new products. As the upstart’s traditional banking rivals were still reeling from a chaotic period that included the collapse of Credit Suisse Group AG and a trio of regional banks in the US, Revolut was showing investors that one key measure of profit margins was doubling.

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At the start of this year, interest income from its business across Europe, where Revolut has a banking license and is therefore able to make loans, was three times as big as the revenue the company made from foreign exchange. Cryptocurrency activity, which had been a boon for the company in 2021, had dropped to less than 5% of overall volume on the platform.  

License Delays

Those European returns help explain why the firm is intent on securing a banking license in the UK. Under Chief Executive Officer Nik Storonsky, Revolut decided in 2021 to apply for a license from the Bank of England. The license would enable Revolut to offer credit cards, make loans and take deposits in the UK.

Regulators had originally told the bank to expect the process to last just two years, according to the people familiar with the matter. Nearly three years on, bosses are still working through an evolving list of requirements from the central bank’s Prudential Regulatory Authority. 

“In 2024, you want to be able to put Bank at the end of your name,” Meaghan Johnson, a fintech consultant. “If they do finally get over that challenge of UK regulation, it opens up a whole lot of new product areas they can delve into.”

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Storonsky has ordered executives to prioritize the checklist they received from UK regulators, according to the people familiar with the matter. They’ve been making progress: After being locked in negotiations with SoftBank about simplifying its share structure for months, a fact that had been a key sticking point for the Bank of England as it was reviewing the firm’s application, the two sides reached an agreement in October that would resolve the regulator’s issues.

Another issue complicating the process has been the firm’s fast-changing portfolio of businesses as it looks to become Europe’s first real super app, a one-stop shop where consumers can conduct their finances, shop, browse social media and more, according to the people familiar with the matter. 

Revolut has more than doubled in size since it first submitted its application. This year alone, the firm introduced ETF trading for European customers and European stock trading for UK customers. It’s even in the early stages of offering mortgages in Lithuania.

Storonsky’s outbursts of frustration have also punctuated the process. 

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Inside Revolut, Storonsky has complained to board members and top executives about the difference in tone between top UK politicians, who considered Revolut one of the country’s crown jewels, and the Bank of England, which had given the company very little indication on when approval for the license might come, if at all.  

“It’s hard to do business in the UK,” he said in an interview with the Times of London earlier this year. “You wait for emails or letters for months. This is not the business environment to operate in the modern world.”

Executive churn and missed deadlines for filing its financial accounts haven’t helped. Even when it finally revealed its 2021 results in March of this year, it came with the ominous message from auditors at BDO. At the time, then-Chief Financial Officer Mikko Salovaara vowed Revolut had “fully remediated the problems that we had, and it’s not going to happen again.” 

But shortly after making those comments, Salovaara stepped down. Two other top executives — James Radford, head of the firm’s UK business, and Chief Operating Officer Michal Laube — had also recently left. 

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In most cases, top executives are proud of the number of former employees that have gone on to found new startups of their own, such as former chief revenue officer Alan Chang, who launched the energy startup Fuse, and Ayelen Denovitzer, a former operations manager who debuted a crypto firm and a gaming company. 

Revolut is still missing a permanent chief financial officer, but in November the company appointed longtime banking pro Francesca Carlesi as chief executive officer for the UK division, another appointment that had been seen as key to Revolut securing the license. 

“We have big things planned,” Carlesi said in a statement when she was appointed last month. “Watch this space.”

—With assistance from Katherine Griffiths and Harry Wilson.

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