Nikolay Storonsky, founder and CEO of Revolut.
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LONDON – The head of British financial technology giant Revolut told CNBC he is optimistic about the company’s chances of being awarded a UK banking license as user growth saw the firm post full-year pre-tax profits.
In an exclusive interview with CNBC, Nikolay Storonsky, CEO and co-founder of Revolut, said the company feels confident it will secure its UK banking license after overcoming some key hurdles on its more than three-year journey to get approval from regulators.
“We’re hoping to get it sooner or later,” Storonsky told CNBC via video call. Regulators are “still working on it,” he added, but have not yet expressed any particular concerns about fintech.
Storonsky noted that Revolut’s sheer size meant it took longer for the company to get its banking license approved than it would have for smaller companies. A few small financial institutions were able to get approval for a banking license with a small number of customers, he added.
“UK banking licenses are approved for smaller companies,” Storonsky said. “They usually approve someone twice a year,” and they tend to be smaller institutions. “Obviously, we’re very big, so it takes extra time.
Revolut is a licensed electronic money institution, or EMI, in the UK, but cannot yet offer credit products such as credit cards, personal loans or mortgages. A banking license would allow it to offer loans in the U.K. The firm has faced long delays in its 2021 application.
One of the key problems the company faced was the incompatibility of its share structure with the rules of the Prudential Regulation Authority, which is the regulator for the financial services industry under the Bank of England.
Revolut has several share classes and some of these share classes were previously associated with preferential rights. One of the conditions set by the Bank of England for granting Revolut a UK banking license was the collapse of its six share classes into ordinary shares.
Revolut has since resolved that with the company striking a deal with Japanese tech investor SoftBank to convert its shares in the firm to a single class and waive pre-emptive rights, according to a person familiar with the matter. News of SoftBank’s resolution was first reported by the Financial Times.
The fintech giant published financial results on Tuesday showing full-year pre-tax profit rising to £438 million ($545 million) in 2023, swinging into the black from a pre-tax loss of £25.4 million in 2022. Group revenue grew by 95% to £1.8 billion ($2.2 billion), up from £920 million ($1.1 billion) in 2022.
Victor Stinga, Revolut’s CFO, said the company’s growth stems from a record jump in user numbers – Revolut added 12 million customers in 2023 – as well as strong performance across all key business lines, including card fees, foreign exchange and wealth. and subscriptions.
“We see 2023 as what we would call a breakout year from a growth and profitability perspective,” Stinga said in an interview this week.
Revenue growth was driven by three main factors, Stinga said, including customer growth, strong performance in key revenue lines and a significant jump in interest income, which he said now represents about 28% of Revolut’s revenue.
He added that Revolut has made it a key priority in 2023 to apply financial discipline, limit operational costs and adopt a “zero budgeting” philosophy, where every new expenditure must be justified and accounted for before it is considered acceptable.
That translated into administrative expenses growing much less than revenue, Stinga said, with administrative expenses up 49% while revenue nearly doubled year-on-year.
He added that Revolut is investing more aggressively in advertising and marketing, with the firm investing $300 million in advertising and marketing last year. Corporate banking solutions are also a top priority, with Revolut devoting around 900 employees to business-to-business sales.