Revolut, the fintech neobanking company, closed an $800 Series E round from SoftBank Vision Fund, and Tiger Global Management to continue developing into the first global financial superapp. With the latest investment, Revolut reaches a $33B valuation and becomes the second-highest valued European fintech company after the buy-now-pay-later giant Klarna which is valued at $45.6B after closing its latest round in June 2021.
Nikolay Storonsky, the Russian founder and CEO of Revolut, has commented that the financial boost coming from SoftBank and Tiger Global represents their support to the mission of the company to create a global financial superapp that meets every financial need of its users through a single platform. According to Storonsky, the goal of Revolut is to outgrow its competitors to a point where it will be able to offer its customers 10x better value and 10x better service and security than other fintech neobanking apps.
The path to $33B valuation
Being one of the pioneers in the neo banking sector, Revolut has managed to reach this stage of development in only 6 years. Back in 2015, the company specialized only in offering money transfers and exchange, while today it provides banking and investing services and cryptocurrency transfers. This round marks a significant increase in the valuation of the fintech company. Оnly a year ago when Revolut closed its $580M Series D, it was valued at $5.5B, almost 6 times less than the current valuation.
When Revolut released its Annual Report for 2020, at the end of last month, the figures showed an increased user adoption with more than 14.5M personal customers and 500K business customers. This marks a 45% increase compared to 2019. Revenues also jumped from £166 million in 2019, to £261m million in 2020 (a 57% increase).
Even though the gross profit was $170M last year, Revolut still operates at a net loss, which means that the big funding it received in this $33B valuation might be a long-term bet for the investors. The losses in the financial statements of the company are a result of the pandemic-caused slow revenue growth and decreased sales. The current growth path on which Revolut has been operating since the beginning of 2021 is said to show the validation of the business model and the strategy that the company has set out.
Before the pandemic, Revolut earned the bigger part of its revenue from the interchange fees that are withdrawn from the merchant’s bank account every time a customer uses their card. After Covid-19 led to a rapid decrease in payment volumes, the company aimed to decrease its reliance on interchange. Therefore, Revolut switched its focus on crypto, business accounts, and stock trading.
Revolut in Eastern Europe
After Brexit was officially finalized at the beginning of 2021, the UK-based Revolut experienced the same issues as many of the financial companies with international customer bases which were headquartered in the “European fintech capital”. In order to mitigate the ensuing regulatory uncertainty and ensure that its services will reach its non-British EU users, the fintech giant announced that it will be transferring a big portion of its customers to a new entity in Eastern Europe, and more specifically in Lithuania.
The logic behind choosing Lithuania stems from the fact that the country is famous for its innovation-encouraging regulatory frameworks, and its fintech sandbox environment. At the same time, being in the EU and the Eurozone, Lithuania is subject to financial supervision and ensures a safe environment.
The future plans of Revolut
The new funding will enable the expansion of Revolut into the US and other international markets, including India, where a big portion of the 1.36B population is underbanked. According to the World Bank, there are around 190 million unbanked adults in India, which makes the country second after China among the developing countries in terms of citizens who don’t have bank accounts.