FinTech: Are NeoBanks Finally Turning Around? Revolut Breaks Even
Revolut broke even during November, and revenues are 50% ahead of pre-COVID levels.
Revolut has staged a sharp recovery from the depths of the virus pandemic and its debilitative effect on revenues, breaking even in November. That’s encouraging, given that the neobank tripled its losses in 2019 compared to 2018. Further, during 2020, customers’ reduced spending took a swipe at Revolut’s income from card interchange fees. Nevertheless, Nik Storonsky, the digital challenger bank’s CEO, said as recently as August that the bank would break even this year. He just might deliver on that promise. (Business Insider)
Solid growth recovery
Revolut had a solid growth trajectory in 2019, but it stumbled from the impact of the pandemic. That appears to be receding, and fast, in the rearview mirror.
“We’re now actually 50% ahead in terms of revenues compared to pre-COVID level,” Storonsky told CNBC as quoted by BI. “Gross margins increased significantly as well.”
What did Revolut do right? It reworked its model and stepped up to the challenge of becoming a “super app” by adding products and services that cover the entire gamut of a consumer’s financial life. For example, it stepped into investing, business banking, and crypto trading.
It also cut its marketing spend.
Revolut also had a sizable cash cushion from a fortuitously timed $500 million fundraising in February just before the worst of the pandemic. That round valued it at $5.5 billion, making it one of the most valuable fintechs in Europe. It now boasts of over 13 million retail customers and 500,000 business customers.
Starling turns on the heat
But Storonsky can hardly rest on his laurels.
Rival Starling threw down a challenge to neobanks when it announced last month that it had become profitable in October – the first challenger bank to breast the profitability tape. True the coronavirus loan schemes helped, but still, Starling counts less than 2 million retail accounts.
What’s the outlook on Revolut reaching full profitability?
“That depends on how fast we want to grow,” says Storonsky cautiously.
Related Story: Revolut Reports Robust Revenue Growth Even As Losses Triple
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