Revolut is a major British financial technology company. In an interview, the CEO of the company said something interesting. He said he is hopeful about the company’s chances of getting a UK banking license. He isn’t just hopeful based on nothing. He is optimistic because of the numbers his company is making. The company experienced a surge in users, leading to record-high pre-tax profits for the year.
Overcoming Obstacles and Challenges
Nikolay Storonsky is the CEO and co-founder of Revolut. In an exclusive interview, he shared the news and his thoughts. Nikolay Storonsky shared that the company is optimistic about getting its UK bank license. He said they have been working on getting this license for over three years.
The company has a few obstacles to overcome before getting the license. However, they have recently overcome several of these critical challenges to move closer to approval from regulators.
Revolut vs. Smaller Companies
“We hope to get it sooner or later,” Nikolay Storonsky said during the interview. The process is still ongoing. According to him, regulators are “still working on it.” However, he is optimistic because they haven’t mentioned any major problems with Revolut.
The CEO of Revolut explained why the process is taking so long. He explained that because Revolut is such a large company, it’s taking longer to get its banking license approved.
Revolut: Comparing With Smaller Companies
Smaller companies get their banking licenses faster compared to Revolut. He pointed out that several small financial institutions with fewer customers have been able to get their banking licenses more quickly. “The reason is because Revolut is larger.”
When explaining that the U.K.U.K.roves banking licenses for smaller companies faster, he made a statement. Storonsky said, “The United Kingdom usually approves two companies per year. But since Revolut is much larger, the process is taking more time than usual”.
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Revolut: One Major Problem
Revolut is currently allowed to handle electronic money in the UK. However, it can’t provide lending products like credit cards, personal loans, or mortgages. This is why they need a banking license. A bank license would allow the company to offer these loans in the UK.
However, the company has experienced long delays in its application. Revolut applied for the banking license in 2021, and they are still waiting for the approval. One major problem was that Revolut’s share structure didn’t comply with some important rules, including the laws of the Prudential Regulation Authority. The Prudential Regulation Authority is the regulatory body under the Bank of England that oversees the financial services industry.
Revolut and SoftBank
Revolut used to have different types of shares, some of which had special privileges. The Bank of England didn’t want that. The bank asked Revolut to simplify its six classes of shares into ordinary shares. This way, Revolut would be able to get the UK bU.K.king license that they want.
Revolut has complied with the rule. The organization made it happen by negotiating with SoftBank, a Japanese tech investor. They agreed to change SoftBank’s shares into a single class and remove the special privileges. Someone familiar with the situation mentioned this. The Financial Times first reported the news of Revolut solving the problem with SoftBank.
Revolut: Increasing Revenue
On Tuesday, the fintech giant shared its financial results. It revealed that its pre-tax profit for the entire year increased to £438 million in 2023. This amount is equal to $545 million. This is a significant turnaround from the year before. The company recorded a pre-tax loss of £25.4 million in 2022.
Revolut’s total revenue also grew by 95%. It went up from £920 million, which is $1.1 billion, to £1.8 billion, which equals $2.2 billion. The company made this increasing revenue in 2022.
Revolut’s Breakout Year
Victor Stinga, Revolut’s chief financial officer, explained why the organization made a huge revenue in 2023. He said the company’s growth was due to a considerable increase in users. In 2023, Revolut gained more than 12 million new customers. Victor Stinga also mentioned that the company improved its services. Revolut did well in all its main areas, like card fees, foreign exchange, wealth management, and subscriptions.
According to him, the company saw exceptional growth and profitability in 2023. “We consider 2023 to be what we would call a breakout year. This is from the point of view of growth and profitability,” Stinga said in an interview.
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Major Reasons for Increased Revenue
Victor Stinga said there were three primary reasons the company witnessed an increased revenue. “The increase in revenue was mainly because of three things. First, the company got more customers. Second, the company improved and did well in making money from its main sources,” Stinga explained. “Third, there was a big rise in interest income. This increase is about 28% of Revolut’s total earnings.”
Revolut’s Chief financial officer also added that in 2023, the company focused on being careful with money. “The company controlled how much they spent and followed a strict rule called “zero-based budgeting.” This means they had to prove that every new expense was necessary before they agreed to pay for it.
Benefits of Zero-Based Budgeting
Victor Stinga explained that zero-based budgeting had more benefits. He said that the company’s administrative expenses increased much slower than revenues did. Administrative costs increased by 49%, while revenues almost doubled compared to the previous year.
Revolut also carried out other activities that worked in their favor. The company has been spending heavily on advertising and marketing, spending $300 million last year on advertisements and marketing alone. They also focus strongly on business banking solutions. The company is dedicating around 900 employees to business-to-business sales efforts, and this move is proving advantageous for them.
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