Revolut on track for profits as regulators and investors switch focus
Chairman Martin Gilbert says cryptocurrency revenue has grown as foreign exchange has shrunk
UK-based fintech Revolut is on track to make its first monthly profit this year, with more regular profits in 2021, chairman Martin Gilbert said.
Profitability is an increasingly important target for the fintech sector, Mr Gilbert told the Financial Times’ Global Banking Summit.
“Up until now, profitability didn’t matter. It was all about growth,” he said. “Over the past year, both regulators and shareholders have demanded that there’s a path to profits.”
“Regulators because they’re cautious and they don’t want to see you fail. For shareholders, there are the ‘haves’ and ‘have nots’. Those that have raised money before Covid are in a much better position than those that have had to raise money since,” Mr Gilbert said.
Revolut is one of Europe’s biggest and most high-profile fintechs but its accounts show that it made a pre-tax loss of £107m in 2019, more than three times the level of the previous year.
Mr Gilbert, a City of London veteran who was previously co-chief executive of Standard Life Aberdeen, became Revolut’s first chairman at the start of this year as the company bolstered its corporate governance. Michael Sherwood, the former co-chief executive of Goldman Sachs International, has also been brought on to the board.
In February, before the coronavirus crisis hit in earnest, the company raised $500m in a funding round that gave it a valuation of $5.5bn. “We were certainly fortunate and pragmatic in the fundraising,” said Mr Gilbert.
Revolut has not been immune to the impact of the pandemic though.
Foreign exchange has traditionally been one of Revolut’s most popular offerings, but Mr Gilbert said that this year there had been a “big shift” to other revenue streams, such as cryptocurrencies and more regular domestic spending. He is not expecting foreign travel to return to its 2019 levels until 2022.
The company has also had to cut costs to make sure that it can hit profits.
Looking ahead, the priorities are to win both banking licences and customers in the markets where the company operates.
“In Ireland, we’ve got something like a 30 per cent penetration rate — it’s amazing,” said Mr Gilbert. “One of the big strategies is to get the penetration rate up in all the countries we operate in to that sort of level that we have in Ireland.”
Revolut has high hopes for the US, where it has just launched. “The medium-term plan is eventually to have a banking licence there, as it is in the UK [and] in Ireland as well,” he said.
“We see a huge opportunity in the US,” he said, highlighting the Hispanic market as one that the company would target because of the potential for international money transfers.
“I’ve always thought — and it was the same in asset management — you have to succeed in America. Half of the world’s wealth is there so you’ve got to go there and compete.”