Revolut CEO confident of UK banking license approval as fintech company makes record $545 million in revenue.

LONDON - The boss of British financial technology giant Revolut said he was optimistic about the company's chances of securing a banking license in Britain as it reported record pre-tax profits for the full year, thanks to user growth.

 

In an exclusive interview, Nicholas Storonsky, CEO and co-founder of Revolut, said the company feels confident about getting a UK banking license, having overcome some key hurdles on its more than three-year journey to get regulatory approval.

 

 

"Hopefully we will get it sooner or later," Storonsky said in an interview. He added that regulators

 

 

"Still working on it," but have not yet made any complaints about the fintech company.

 

 

Storonsky noted that Revolut's sheer size meant it took the company longer to get a banking license than it would have for smaller companies. Several smaller financial institutions have been able to obtain a banking license with a small number of customers, he added.

 

 

"Banking licenses in the U.K. are obtained by smaller companies," Storonsky said. "They usually approve someone twice a year," and they tend to be small institutions. "Of course, we're very large, so it takes extra time."

 

 

Revolut is a licensed electronic money institution, or EMI, in the UK. But it can't yet offer credit products such as credit cards, personal loans or mortgages. A banking license would allow it to offer loans in the UK. The company has faced long delays in its application, which it submitted in 2021.

 

 

One of the key problems the company faced was that its share structure did not comply with the rules of the Prudential Regulation Authority, the financial services regulator that is under the Bank of England.

 

 

Revolut has several classes of shares and some had previously held pre-emptive rights. One of the conditions imposed by the Bank of England in granting Revolut a banking license in the United Kingdom was that six classes of shares be merged into ordinary shares.

 

 

Revolut has since resolved that issue: the company has entered into an agreement with Japanese technology investor SoftBank to convert its shares into a single class, waiving pre-emptive rights, according to a person familiar with the matter. The decision with SoftBank was first reported by the Financial Times.

 

 

The fintech giant released financial results on Tuesday showing full-year pre-tax profit rose to 438 million pounds ($545 million) in 2023, moving into the black after a pre-tax loss of 25.4 million pounds in 2022. Group revenues 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 growth was driven by record user growth - Revolut will add 12 million customers in 2023 - as well as strong performance across all key business lines, including card fees, interchange and wealth, and subscriptions.

 

 

"We believe 2023 will be what we would call a breakout year in terms of growth and profitability," Stinga said in an interview this week.

 

 

Stinga said revenue growth was driven by three main factors, including customer growth, strong performance in key revenue lines and a significant jump in interest income, which he said now accounts for about 28% of Revolut's revenue.

 

 

He added that in 2023, Revolut has made financial discipline a key priority by limiting operating expenses and adopting a philosophy of "zero-based budgeting," where every new expense must be justified and accounted for before it is deemed eligible.

 

 

Because of this, Sting says, administrative expenses grew much less than revenues: administrative expenses grew 49% while revenues nearly doubled from the previous year.

 

 

He said Revolut has become more active in investing in advertising and marketing: the company spent $300 million on advertising and marketing last year. Business banking solutions are also a top priority for the company, with about 900 Revolut employees focusing their efforts on selling to businesses.