Fintech
Revolut CEO confident in UK banking license approval as fintech hits record $545m profit – NBC Los Angeles
- Nikolay Storonsky, CEO and co-founder of Revolut, said the company is confident of obtaining a UK banking license “soon” after overcoming some major hurdles.
- Revolut first applied for a UK banking licence in 2021, but faced lengthy delays.
- Revolut released its annual financial statements on Tuesday, showing that its full-year pre-tax profit rose to $545 million in 2023, with the company citing strong user growth and revenue diversification.
LONDON — The chairman of British financial technology giant Revolut told CNBC he is optimistic about the company’s chances of getting a banking license in the U.K., as a surge in users helped the firm post record pre-tax profits for the full year.
In an exclusive interview with CNBC, Revolut CEO and co-founder Nikolay Storonsky said the company is confident it will secure a UK banking license after overcoming several key hurdles in its more than three-year journey to gain regulatory approval.
“I hope we get it eventually,” Storonsky told CNBC via video call. Regulators are “still working on it,” he added, but so far they have not raised any outstanding concerns with fintech.
Storonsky noted that Revolut’s sheer size meant it took longer for the company to get approved for a banking license than it would have for smaller companies. Several small financial institutions have managed to get approved for a banking license with just a few customers, he added.
“The UK banking licenses are approved for smaller companies,” Storonsky said. “They usually approve someone twice a year,” and they tend to be smaller institutions. “Of course, we’re very large, so it takes longer.”
Revolut is a licensed electronic money institution, or EMI, in the UK, but it cannot yet offer lending products such as credit cards, personal loans or mortgages. A banking license would allow it to offer loans in the UK. The company faced lengthy delays in its application, which it submitted in 2021.
One of the main problems the company faced was the inconsistency of its shareholding structure with the regulations of the Prudential Regulation Authority, the financial services industry regulator that reports to the Bank of England.
Revolut has multiple share classes, and some of these share classes previously had preferential rights attached to them. One of the conditions set by the Bank of England for granting Revolut its UK banking licence was to convert its six share classes into ordinary shares.
Revolut has since addressed the issue, striking a deal with a Japanese tech investor Soft Bank to transfer its shares in the company to a unified class, giving up preferential rights, according to a person familiar with the matter. News of the settlement with SoftBank was first reported by the Financial Times.
2023 is a turning point year
The fintech giant released financial results on Tuesday showing full-year pre-tax profit rose to £438 million ($545 million) in 2023, swinging into profit from a pre-tax loss of £25.4 million in 2022. Group revenue rose 95% to £1.8 billion ($2.2 billion), up from £920 million ($1.1 billion) in 2022.
Victor Stinga, Revolut’s chief financial officer, said the company’s growth was driven by a record increase in user numbers (Revolut added 12 million customers in 2023) and strong performance across all its key business lines, including card fees, foreign exchange, wealth management and subscriptions.
“We see 2023 as a turning point year from a growth and profitability perspective,” Stinga said in an interview this week.
Revenue growth was driven by three main factors, Stinga said, including customer growth, strong performance across key revenue lines and a significant increase in interest income, which now represents approximately 28% of Revolut’s revenue.
He added that Revolut has made exercising financial discipline a key priority in 2023, keeping operating expenses under control and adopting a “zero-based budgeting” philosophy, where any new expenditure must be justified and accounted for before it is considered acceptable.
That translated into administrative expense growth that was much lower than revenue growth, Stinga said, with administrative costs growing 49 percent while revenue nearly doubled from the previous year.
Revolut has been investing more aggressively in advertising and marketing, he added, with the company spending $300 million on advertising and marketing last year. The company’s business banking solutions are also a top priority, with Revolut dedicating around 900 employees to business-to-business sales.