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U.K.-based financial-technology company Revolut Ltd. sees big opportunities to further expand its business internationally as more people seek digital options to manage their money.
The world of digital financial services is crowded, but Revolut executives are betting that the privately held company’s global focus will help it continue to win new customers. The company had 15.5 million retail users as of the first quarter, up from 14.5 million as of the end of 2020 and 10 million as of the end of 2019, according to an annual report released Monday.
Revolut offers free money transfers when its users send money to other users of the platform, and it lets customers exchange currencies at interbank rates. The company, which has operations in more than 35 countries, provides other financial-services functions too, including budgeting tools and single-use debit-card numbers for customers looking to avoid entering their real credentials on unknown sites.
After launching its fintech offering in the U.S. last year, the company plans new feature introductions in the market as well as further geographic expansion that could make the Revolut network more valuable. The company expects to launch its product in Mexico, which would allow it to better tap the U.S-Mexico corridor that Chief Financial Officer Mikko Salovaara said is the top remittance corridor in the world.
“The proposition is especially targeted to expats,” Salovaara said of Revolut’s business in the U.S. The company has seen with its European business that users may sign up for foreign-exchange features before eventually trying out other Revolut functions like insurance and stock trading. The company is looking to add trading features in the U.S., too., and in March it announced that it submitted a draft application for a U.S. banking license.
The company disclosed 2020 financial results Monday that showed overall revenue of £222 million ($309 million), up from £166 million a year earlier, as growth in subscribers, trading activity, and the company’s business-focused operations helped offset pressure on the company’s payments business that was brought on by the pandemic. Revolut also saw fair-value gains on cryptocurrency assets of £39m in 2020.
In addition to seeing expansion in its consumer business, the company posted 127% growth in its business customer base, which surpassed 500,000 users last year. Revolut offers various functions for business clients, allowing them to handle payroll, banking, and insurance, among other things. The ability to conduct all of those services with one provider helps Revolut’s offering stand out to customers, according to Chief Executive Nik Storonsky, who told MarketWatch that businesses would otherwise open multiple accounts with different providers that “don’t really talk” to one another.
Ultimately the company is looking to drive synergies between the consumer and business ends of its operation, with Storonsky calling out the company’s Revolut Pay checkout experience that its business customers can offer consumers with Revolut accounts. By playing into both sides of a transaction, the company can avoid processing fees paid to the credit-card networks.
The company remained unprofitable last year, posting a total comprehensive loss of £168 million last year compared with a year-earlier loss of £107 million, though it disclosed in an annual report that it saw positive operating profitability on an adjusted basis, when excluding stock-based payments, during the months of November and December as strong trading activity benefitted the business.
Revolut continues to seek out new ways of growing its user base and it’s running a beta test of a feature that would let customers who work at participating employers get early access to their wages ahead of payday. The service would carry a “nominal” per-transaction fee that could be paid by the employer or employee depending on the terms of the contract, but Salovaara suggested that Revolut is not looking to turn that feature into a big money maker.
“The point for us is if we can get users to deposit salaries into our accounts and have a balance with that, we benefit in a myriad of ways,” he said, since these users could then engage with other aspects of the Revolut ecosystem.
Revolut was last valued at $5.5 billion in a 2020 Series D funding round. A spokeswoman told MarketWatch that “the business is suitably capitalized” but that it is “likely to need to raise capital as we get closer to being granted bank license.”
Bloomberg reported Monday that the company was in the beginnings of talks over a fundraising round that could value Revolut at $20 billion or more.
“Any valuations, other than those provided at funding rounds, are speculation,” the Revolut spokeswoman said. The company declined to comment on potential plans for an initial public offering.
