- Banking app Revolut hit a $5.5 billion valuation earlier in 2020. The firm undercuts banks on foreign exchange fees, transfers, and stock trades.
- The fast-growing company was dogged in early 2019 with negative headlines on culture and compliance.
- We spoke to cofounder and CTO Vlad Yatsenko, who said the company wasn't a "9-to-5" environment but that it had matured and implemented better HR processes.
- Revolut has been less drastically impacted than some of its startup peers, thanks to a major fundraise in 2020, rapid growth, and a push to diversify its revenues.
- Visit Business Insider's homepage for more stories.
Revolut has spearheaded the fintech revolution in Europe, netting a valuation of $5.5 billion and catapulting its two cofounders, Vlad Yatsenko and Nikolay Storonsky, onto UK rich lists.
The startup, founded in 2015, allows users to spend money worldwide in 150 currencies at a real-time exchange rate, with no fees, through a debit card. It generates 99% of its revenues in the UK and has around 13 million customers.
It's part of the wider rise in Europe of challenger financial services that aim to replace legacy banks and payment systems, and part of a sector that has attracted huge amounts of venture capital.
Storonsky, a former trader and Revolut's deeply serious billionaire CEO, is usually the face of Revolut.
CTO Yatsenko, equally serious, generally prefers to stay behind the scenes, but has granted Business Insider a rare interview.
The engineer has an unconventional background, having started coding at the age of 15 in his native Ukraine. Much like a startup, Yatsenko was forced to make the most of what he had available, practicing code on paper with only occasional access to a school computer, forcing a mindset which required out-of-the-box thinking.
"It's the same for startups," Yatsenko told Business Insider. "You don't have resources so you have to be more creative."
With capital scarcity clearly no longer an issue, have things changed from Revolut's shoestring early days?
"Things have changed a bit, but fundamentally we have the same mentality," Yatsenko said. "Despite increased capital, we don't have a lot of resources accumulated. We want to become profitable as a company."
The rise of Revolut
Revolut has won fans worldwide for its product, with an army of devotees regularly meeting pre-coronavirus for "RevRally" events to discuss the company, a level of positive engagement that traditional banks could only dream of.
An easy-to-use app, striking physical cards — including popular premium and metal options — and a variety of additional services like stock trading and easy currency access have made Revolut one of the most popular fintech brands in the UK.
A dedicated Revolut sub-reddit boasts almost 20,000 subscribers to discuss its famous metal card, crypto trading on its platform, and to grumble about bugs and issues — again a level of online interaction and engagement unheard of by legacy banks.
Customer satisfaction is a major data point for Revolut, which closely monitors its "Net Promoter Score" and reviews to tailor its products.
The firm is considerably larger by revenue than its main UK rivals Monzo and Starling Bank. Unlike the latter two, Revolut has not applied for a UK banking licence and is therefore not officially a bank.
In 2019, the startup tripled its revenues to £162.7 million ($213.1 million) but likewise saw its total loss triple to £107.4 million ($140.6 million).
Expenses at the company increased nearly fourfold to £92 million ($120.5 million), driven by increased staffing costs. The startup grew from 633 employees at the end of 2018 to 2,261 employees at the end of 2019.
User deposits hit £2.2 billion ($2.88 billion) for the year, up from £1 billion ($1.31 billion) at the end of 2018, it said.
In February, the firm netted its $5.5 billion valuation after raising $500 million in Series D funding led by Silicon Valley's Technology Crossover Ventures (TCV). The round was extended in June to include an $80 million investment from TSG Consumer Partners, bringing the round's total investment to $580 million.
Revolut's hyper-growth has also attracted scrutiny over its culture and practices.
A Wired piece dated February 2019 outlined how the firm would ask prospective hires to pass a test that involved getting a minimum of 200 new users to download the Revolut app and deposit €10 ($12).
CEO Storonsky is a former high-level swimmer and equity derivatives trader Lehman Brothers and Credit Suisse and is fairly renowned in fintech circles for working long hours. According to Wired's account, Storonsky once told staff in a Slack message that if they did not meet their KPIs they would be fired without negotiation after review.
At the time Revolut responded to allegations from Wired saying: "Our culture is evolving as rapidly as our business." A spokesperson for the company declined to elaborate further when asked for additional comment by Business Insider.
Yatsenko indicated that anyone who wants to work at Revolut needs to be driven by the mission, and that the firm had evolved since the stories emerged in early 2019.
"Culture doesn't bother me, things have changed and we are a lot more mature as an organization with more planning and processes," Yatsenko said. "We are not a 9-to-5 company, when we hire, we hire people who are ambitious and want to be a part of it, not just looking for another job."
Revolut's senior management has shifted a lot in recent years. The company's head of regulatory compliance left in September, after less than two years, while the startup's head of banking and head of trading also left in 2020. It's estimated that by the end of March, eight executives left Revolut.
"At the executive level people maybe didn't stay long enough but we have a high bar and you have to be at the top of your game," Yatsenko said. "The quality of our talent is important and some people get new opportunities. We still have ambitious targets but we don't measure performance exclusively on hitting targets, there are often external factors."
He added that the company's HR team has been working hard behind the scenes to polish its hiring and performance processes so that employees are clearer about their role and expectations within Revolut. "We have targets and performance assessments but it's a natural thing when you want to get from A to B, we don't want to stagnate," he said.
Technical problems have also played out publicly.
In spring 2019, The Telegraph reported that Revolut had disabled a system the prior summer which automatically halted transactions from sanctioned individuals, raising questions about regulatory compliance.
A Revolut spokesperson told Business Insider said no sanctioned transactions had taken place, and that the company did not fail any regulatory requirements.
He said: "The article refers to a systems enhancement project that we were rolling out in parallel with our existing systems and controls. The more technologically advanced sanctions screening system was just part of the overall enhancement project. Like any technology company, we always seek to improve our systems. The new systems were not calibrated to a standard that we would expect, so we reverted to our existing process until calibration was complete."
More recently, The Times reported in February that Revolut mistakenly froze the accounts of a French company in May, trapping thousands of euros. One customer wrote that they couldn't pay for a funeral because their account had been frozen.
These freezes are a small proportion of the company's active accounts, but a younger, online-savvy customer base is willing to make their complaints heard via Twitter. In June, the company began blocking tweets from customers claiming that their accounts had been unfairly locked, Financial News reported.
"Account freezing is important to me as cofounder, not just as CTO," Yatsenko said. "It's a company goal to improve this and the team involved is making good progress and they have a target to hit around locked accounts."
The locked accounts aren't always Revolut's fault. Financial upstarts are subject to the same regulation as legacy financial institutions, including a requirement to lock down any account even loosely suspected of fraud without notice or reason. Fintechs see some of the rules as outdated, and this is something that the company is pushing legislators to change, Yatsenko added.
Like fellow challenger banks Monzo and Starling Bank, Revolut was hit by the coronavirus pandemic, but says it doesn't see uncertainty hurting its business long-term.
The neo-bank made around 60 people redundant in May as part of a cost-cutting plan instigated by Covid-19, amid other startups also having to lay off staff. According to a Wired article dated June, around 50 staff from Poland and Portugal left the firm claiming they were forced to quit or face being fired.
Asked about the Wired report, the company declined to further elaborate. At the time, Revolut responded saying that its "performance management systems" aimed to support its employees in "achieving their best at work and offer training and guidance." The company also added that employees "may leave the business if they are not making progress in their role."
"As a business we tightened our spend, we looked at every spend we had to see things that weren't needed and installed stricter processes around that spend," Yatsenko told Business Insider. Revolut also offered employees the chance to convert some of their salary into shares in the company.
"Something that helped us through Covid-19 was being able to think out of the box," Yatsenko added. He noted that the company's ability to be flexible and make decisions quickly was key.
The firm continues to roll out new products, despite a predominantly remote staff, and remains focused on profitability.
In 2020, Revolut launched commodities trading alongside its crypto and stock offerings, set up operations in the US, Japan, and Australia, and rolled out its credit product in Poland and Lithuania.
The startup is also bolstering its business offering as it moves into merchant acquiring allowing businesses to accept online card payments, Storonsky announced at Web Summit earlier in November.
All of this implies forward momentum rather than a crunch. Raising a huge amount of cash to carry it through the pandemic no doubt helped.
Earlier in November, the firm announced it had appointed ex-Standard Life Aberdeen co-CEO Martin Gilbert as its chairman, giving the youthful firm some grey hairs at the top. Gilbert told This Is Money that the firm wanted to be profitable on a monthly basis in 2021.
Yatsenko said the firm plans to continue diversifying revenues over the next year.
"Creating multiple sources of revenue allows us to build on what we have and add more value to our customers," Yatsenko said. "We have more more ideas and there will be some product launches next year which will be big I hope."
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