The fintech says it wants to improve its customer offering and strive towards profitability in 2020
Revolut's co-founders: CTO Vlad Yatsenko and CEO Nik Storonsky ( Revolut )
London-based fintech Revolut has raised £387 million ($500 million) at a £4.2 billion ($5.5 billion) valuation, making it one of the highest valued financial tech companies in the world.
The company launched in 2015 by former Credit Suisse trader Nik Storonsky as part of the new wave of challenger banks, alongside Monzo and Starling, that wanted to upend the staid banking industry. With a focus on currency transfers in its easy-to-use app, as well as additional features such as cryptocurrency and commission-free trading, Revolut now boasts 10 million customers across Europe.
This latest round, which makes the company one of the highest-valued tech companies in the world alongside the likes of Robinhood and Square, is one of the largest ever investment rounds raised by a UK or European tech company. In total, Revolut has now raised £646 million ($836 million).
Fintechs in particularly are enjoying a boom period. According to data released by KPMG yesterday, British fintech companies raised a total of £37.4 billion in investment in 2019, up 91 per cent from the year before. US-based growth capital firm TCV, which has backed the likes of Airbnb, Netflix and Spotify, led the Revolut funding.
The company says the money will be focused on improving the customer experience, including on product development, strengthen its retail and business offering in existing markets, and build on the progress its made with its Premium and Metal account subscriptions. It says it also hopes to launch lending services for customers, extend its high-interest savings accounts beyond the UK, and crucially, achieve profitability by the end of the year.
Speaking about the investment, Storonsky said: “We’re on a mission to build a global financial platform - a single app where our customers can manage all of their daily finances, and this investment demonstrates investor confidence in our business model. Going forward, our focus is on rolling-out banking operations in Europe, increasing the number of people who use Revolut as their daily account, and striving towards profitability.”
The profitability note is an important one. Over the past few years, high-growth tech companies have crashed and burned as the vast amounts of cash they raise from investors fail to turn into actually money on their balance sheet. Last year, co-working space WeWork was aiming for a $50 billion initial public offering – now it is worth about $5 billion, with CEO and founder Adam Neumann leaving the company in disgrace.
Just this week, another startup named Zume focused on pizza-making robots, which raised $375 million from SoftBank (a big backer of WeWork), also fell from grace, cutting 360 jobs and moving away from pizza making to focusing on packing for other food delivery companies.
Whilst Revolut’s problem doesn’t appear to be cash at this stage, there are other challenges ahead. The fintech doesn’t boost a UK banking license, only a European one. Fellow fintech N26, a German challenger bank, recently pulled out of the UK, saying that its European banking license means it can no longer operate in the UK following Brexit. Revolut says it will continue to operate under its existing e-money license in the UK for the time being.
Speaking of Brexit, an investment of this size does show confidence in the UK tech sector following the decision to leave the European Union. Comment on the investment, John Glen MP, the UK economic secretary and city minister said: “It is clear that the UK fintech sector continues to thrive, and Revolut's announcement, which comes on the back of record-breaking fintech venture capital investment in 2019, is a clear indicator of our strength as a place for fintech business as we leave the EU.”