Nandini Roy Choudhury, writer
Brief news
Revolut, a British financial technology company, is optimistic about obtaining a UK banking license after overcoming major problems during its three-year journey to get approval from regulators. The company’s application for a UK banking license was delayed due to its size, which took longer than smaller businesses. Revolut’s share structure did not follow Prudential Regulation Authority rules, which required it to turn its six types of shares into regular shares before obtaining a UK banking license. However, this issue has been resolved through a deal with SoftBank.
In 2023, Revolut’s full-year pre-tax profit rose to £438 million ($545 million), up from a pre-tax loss of £25.4 million in 2022. The company’s sales increased by 95%, driven by a record number of new users and success in key business lines. Revolut’s chief financial officer, Victor Stinga, believes 2023 will be a breakout year in terms of growth and profitability. Revolut’s top goal in 2023 was being responsible with money, with administrative costs growing much less than revenues. The company has also been investing more in marketing and advertising, with about 900 workers working on business-to-business sales.
Illustrated news
LONDON — The CEO of British financial technology giant Revolut told CNBC that he is positive about the company’s chances of getting a U.K. banking licence. This comes after the company reported record full-year pre-tax profits thanks to an increase in users.
Nikolay Storonsky, CEO and co-founder of Revolut, told CNBC in an exclusive interview that the company is positive about getting its British bank licence because it has overcome some major problems on its more than three-year trip to get approval from regulators.
“We hope to get it sooner or later,” Storonsky told CNBC over video call. He also said that regulators are “still working on it,” but they haven’t brought up any major issues with the business yet.
Storonsky said that because Revolut is so big, it took longer for the company to get its banking licence accepted than it would have to for a smaller business. He also said that a number of small banks have been able to get banking licences even though they don’t have many users.
Storonsky said, “U.K. banking licences are being given to smaller businesses.” “They normally give permission to someone twice a year,” and these are usually smaller schools. “Of course, it takes longer because we’re so big.”
There is a licence for Revolut to be an electronic money institution (EMI) in the UK. But it can’t offer loans yet, like credit cards, personal loans, or home loans. It could give loans in the U.K. if it had a bank licence. Their application, which they made in 2021, has been held up for a long time.
One big problem the company had was that its share structure didn’t follow the rules set by the Prudential Regulation Authority. The Prudential Regulation Authority is the financial services industry’s watchdog and is part of the Bank of England.
There are different types of shares in Revolut, and some of them used to come with special rights. The Bank of England required Revolut to turn its six types of shares into regular shares before it could get a banking licence in the UK.
A person familiar with the situation says that this has since been fixed. Revolut made a deal with Japanese tech investor SoftBank to give its shares in the company to a single class and give up its preferential rights. The Financial Times was the first to report on the deal with SoftBank.
A “breakout year” is 2023.
It was announced on Tuesday that the fintech giant’s full-year pre-tax profit rose to £438 million ($545 million) in 2023, up from a pre-tax loss of £25.4 million in 2022. From £920 million ($1.1 billion) in 2022 to £1.8 billion ($2.2 billion), the group’s sales went up by 95%.
Victor Stinga, Revolut’s chief financial officer, said that the company’s increase was due to a record amount of new users—12 million new customers in 2023—as well as good success in all of its key business lines, such as card fees, foreign exchange and wealth, and subscriptions.
In an interview this week, Stinga said, “We think 2023 will be a breakout year in terms of growth and profitability.”
Stinga said that two of the main things that led to revenue growth were more customers, good performance across its key revenue lines, and a big increase in interest income, which now makes up about 28% of Revolut’s revenue.
He also said that Revolut made being responsible with money a top goal in 2023. They kept running costs low and adopted a theory called “zero-based budgeting,” which means that every new expense has to be explained and accounted for before it’s okay.
According to Stinga, this meant that administrative costs grew much less than revenues. Year-over-year, administrative costs rose by 49% while revenues nearly doubled.
He also said that Revolut has been putting more money into marketing and advertising. Last year, the company spent $300 million on marketing and advertising. Business banking options are also very important to the company, and about 900 workers work on business-to-business sales.
Source : CNBC News
