UK-based fintech Revolut is on track to make its first monthly profit this year, with more regular profits in 2021, chairman Martin Gilbert said.
Profitability is an increasingly important target for the fintech sector, Mr Gilbert told the Financial Times’ Global Banking Summit.
“Up until now, profitability didn’t matter. It was all about growth,” he said. “Over the past year, both regulators and shareholders have demanded that there’s a path to profits.”
“Regulators because they’re cautious and they don’t want to see you fail. For shareholders, there are the ‘haves’ and ‘have nots’. Those that have raised money before Covid are in a much better position than those that have had to raise money since,” Mr Gilbert said.
Revolut is one of Europe’s biggest and most high-profile fintechs but its accounts show that it made a pre-tax loss of £107m in 2019, more than three times the level of the previous year.
Mr Gilbert, a City of London veteran who was previously co-chief executive of Standard Life Aberdeen, became Revolut’s first chairman at the start of this year as the company bolstered its corporate governance. Michael Sherwood, the former co-chief executive of Goldman Sachs International, has also been brought on to the board.
In February, before the coronavirus crisis hit in earnest, the company raised $500m in a funding round that gave it a valuation of $5.5bn. “We were certainly fortunate and pragmatic in the fundraising,” said Mr Gilbert.
Revolut has not been immune to the impact of the pandemic though.
Foreign exchange has traditionally been one of Revolut’s most popular offerings, but Mr Gilbert said that this year there had been a “big shift” to other revenue streams, such as cryptocurrencies and more regular domestic spending. He is not expecting foreign travel to return to its 2019 levels until 2022.
The company has also had to cut costs to make sure that it can hit profits.
Looking ahead, the priorities are to win both banking licences and customers in the markets where the company operates.
“In Ireland, we’ve got something like a 30 per cent penetration rate — it’s amazing,” said Mr Gilbert. “One of the big strategies is to get the penetration rate up in all the countries we operate in to that sort of level that we have in Ireland.”
Revolut has high hopes for the US, where it has just launched. “The medium-term plan is eventually to have a banking licence there, as it is in the UK [and] in Ireland as well,” he said.
“We see a huge opportunity in the US,” he said, highlighting the Hispanic market as one that the company would target because of the potential for international money transfers.
“I’ve always thought — and it was the same in asset management — you have to succeed in America. Half of the world’s wealth is there so you’ve got to go there and compete.”
Quick Fire Q&A
Company name: Onfido
When founded: 2012
Where based: London and San Francisco
CEO: Mike Tuchen
What do you sell, and who do you sell it to: Artificial intelligence-powered digital identity verification, matching government-issued IDs with facial biometrics, designed for financial services, healthcare, telcos, retail and more.
How did you get started: Our three co-founders experienced the frustration of slow, manual background checks and identity verification when applying for jobs during university.
Amount of money raised so far: $200m
Valuation at latest fundraising: N/A
Major shareholders: TPG Growth, Idinvest Partners, Crane Venture Partners, Salesforce Ventures, M12 — Microsoft’s venture fund
There are lots of fintechs out there — what makes you so special: Onfido is digitally proving users’ real identity for financial products and services, creating an open, secure and inclusive online world.
Further fintech fascination
Regulators advance: Singapore’s regulators have launched the biggest shake-up of its banking industry in decades by awarding digital bank licences to a group of major tech companies including Ant Group and Sea, reports the Financial Times. But some analysts say that the new entrants might struggle to make an impact in a market that is already well served.
Crypto chronicles: Reuters reports that Libra, the Facebook-backed cryptocurrency, has been rebranded “Diem” as part of its efforts to gain regulatory approval. The change is part of a move to a simpler structure, according to Stuart Levey, who is chief executive of the Geneva-based Diem Association.
Wirecard fallout: Wirecard fugitive Jan Marsalek is alleged to have violated internal governance rules and banking laws in an incident that was flagged to regulators in 2019, says the Financial Times. Mr Marsalek is believed to have fled Germany as Wirecard collapsed in June, and is now on Interpol’s most wanted list.
Follow the money: UK challenger bank Monzo has raised an additional £60m in funding, according to TechCrunch. The latest fundraising is an extension of a top-up round in June that valued the company at £1.2bn, which was lower than its previous valuation. The latest funding comes from investors including Novator and Kaiser.
AOB: Venture capitalist Michael Moritz has been named as the next chairman of Swedish fintech Klarna, the FT reports; the FT also reports that French bank SocGen is to shut 600 branches as customers move to digital banking; Stripe has launched a service that will allow clients to provide bank accounts to their customers, says TechCrunch; Paysafe is to go public via a merger with a special purpose acquisition company in a deal that values the payments company at $9bn, according to Reuters.
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