00:08:12 · Nik Storonsky, David Senra
[00:08:12] S1: Yeah. Also, we speak with regulators, they're all kind of fear about growth or it's not a good mentality and so on. And my answer is very simple. Every time when you think as a regulator that I'm an excessive risk taker, it's completely wrong. Right? Because I'm the only one motivated for this company to succeed and to survive, right? And that means I'm actually not going to take stupid excessive risk compared to professional CEOs or professional boards. Because there's no separate... This is [00:08:40] S0: what I hate when I was like, oh, it's just business, it's not personal. So like, such thing with founders. Yeah, yeah. So this is another thing that surprised when I started reading about you was originally you set out to like not be regulated. And there was something about you saying this is like the worst mistake you ever made. Can you talk about what happened and how you learned this lesson? [00:09:00] S1: Yeah. Basically, when we got several million customers and then we applied for banking license, the entity with zero customers is less riskier compared to an entity with millions of customers. And then the regulator eyes, they become much more risk averse to you. Right? Because for them, it's much easier to give a license to a company with zero customers because maybe they will have zero customers in three, four, five years' time. If you give a bank license to a company with five, 10,000,000 customers and something goes wrong, then the regulator will be to be blamed.
00:09:00 · Nik Storonsky, David Senra
[00:09:00] S1: Yeah. Basically, when we got several million customers and then we applied for banking license, the entity with zero customers is less riskier compared to an entity with millions of customers. And then the regulator eyes, they become much more risk averse to you. Right? Because for them, it's much easier to give a license to a company with zero customers because maybe they will have zero customers in three, four, five years' time. If you give a bank license to a company with five, 10,000,000 customers and something goes wrong, then the regulator will be to be blamed. [00:09:36] S0: Why were you not regulated before? What was the state of the business when you applied for the banking license? What were you doing before? [00:09:41] S1: Well, we simply got e money license, payment licenses. So we [00:09:45] S0: You're just moving money. [00:09:46] S1: Much lighter licenses. [00:09:47] S0: Yes. Okay. Yeah. [00:09:49] S1: And then the idea was, Bankylacense back then was three, four years to get. While eMoneyalyse, you can get within one year. So, obviously, as a founder, you want to do things faster. So, that's why we went for eMoneyalyse. Then we got a lot of customers and then we moved to Bankylise. And then it became almost impossible because we're very, very large. I think in history of UK, it never happened before that a company with seven or 8,000,000 customers in UK applied for banking license. So is that a difficult process? Like what happened? It took us almost five years to get a bank license in UK.
00:09:49 · Nik Storonsky, David Senra
[00:09:49] S1: And then the idea was, Bankylacense back then was three, four years to get. While eMoneyalyse, you can get within one year. So, obviously, as a founder, you want to do things faster. So, that's why we went for eMoneyalyse. Then we got a lot of customers and then we moved to Bankylise. And then it became almost impossible because we're very, very large. I think in history of UK, it never happened before that a company with seven or 8,000,000 customers in UK applied for banking license. So is that a difficult process? Like what happened? It took us almost five years to get a bank license in UK. [00:10:26] S0: Okay. So what would you do differently before? You would have tried it like... Think the way you put it is like regulation. It's not a moat. That's not the the right word to to... But it's like there's a huge benefit to actually getting yourself regulated. Is this correct? Is this the way you thought about it? [00:10:41] S1: It's like there are pros and cons. To build a lush business, It's a must. Right? Because if you want to really compete with banks, you need to get trust from customers. They need to put salaries in. They need to put a lot of their wealth in the accounts. They need to start trading stocks with your ETFs and so on. So they need to trust you. And then in their minds, mean, they they trust banks. What do you [00:11:06] S0: think the American, like, fintech companies are doing wrong about this? To build a very large business, to
00:11:06 · David Senra, Nik Storonsky
[00:11:06] S0: think the American, like, fintech companies are doing wrong about this? To build a very large business, to [00:11:11] S1: capture large market share, it's it's just unavoidable. So I think in The US, a lot of companies started like Chime, Cash App. It was simple before ten, twelve years ago. They all never went for banking license. I think it's a big mistake. So they could never become a large business because Explain [00:11:29] S0: why they can't become a [00:11:30] S1: large business without retail. Just because they are not a bank. Right? They can target certain niche audience, certain cohorts of customers, I don't know, low income and so on. But they cannot never go to to prime audience. Right? And they can never become prime bank account without a banking license. [00:11:48] S0: But why do you think that relegates them to being a small company? [00:11:51] S1: Well, just because, yes, early adopters want 2% of the population will try them. Maybe it will go from early adopters to their friends' family and other like a 90%, so 4% of the population when you want 40, 50, 60, 70%. For example, in Ireland, we have our 80% micro penetration. For all In Ireland? Yes. Four out of five adults use Revolut accounts. [00:12:11] S0: Okay. How did that happen?
00:12:11 · David Senra, Nik Storonsky
[00:12:11] S0: Okay. How did that happen? [00:12:12] S1: Slowly, I think combination of lack of competition, very bad banks. They have only four banks which are bad, plus very small country with a lot of people living outside of Ireland as well. So I think altogether, it led to us being 80% of... 80% of the market. If you look at other markets, for example, in The UK, we're about 20% penetration. France is 20%, Spain. Certain markets are 30, 30, 40% penetration. So it is possible to go to 60, 70, 80 as as island shows. But for it, you need to be a banker. [00:12:47] S0: So I'm very curious, like, when you're going into a new market and you said there's just bad banks, just like low competition here. Like, what are you seeing that they're doing wrong?
00:12:47 · David Senra, Nik Storonsky
[00:12:47] S0: So I'm very curious, like, when you're going into a new market and you said there's just bad banks, just like low competition here. Like, what are you seeing that they're doing wrong? [00:12:56] S1: Well, they they they stuck in limbo of professional management who are extremely risk averse. As a result, there is zero lack of... Zero intention to innovate. And then all the resources are spent on protecting what they have already. Right? So for example, you can have a very old legacy third party core banking system. Obviously, you need to change it to your own or to some new provider, but then banking management will never do it because it introduces risk. Right? Because you need to migrate customers, you know, something might go wrong. And they never take a risk. Right? So that's the problem. Plus on top of it, because a lot of them, they are not technical. So they don't really understand how to do a lot of technical things. As a result, them, our default choice is to not do anything for regulators and then for legacy banks. Because doing anything is risky in an industry where you lack certain skills, so certain technical skills. And banking is about... It's not only about, like, regulation, it's also about building tech. And I think all these people are very bad at building tech.