Startup Europe — The Sifted Podcast
00:01:56 · Tom Matsuda
[00:01:56] S1: Yeah. I mean, Revolut's pace of growth is is is nothing really short of of breakneck, really. I mean, just to kind of pull it into into figures back in 2019, pre pandemic, they had just around 10,000,000 users. Now it's grown to to 50... More than 50,000,000 with customer balances over over 30,200,000,000 as well, especially when you compare it to some of its other counterparts, other, neo banks like like Mondo and Starling who are based in The UK, those are kind of figures that those companies could only really, really dream of. Mondo has has revenue of around 1,200,000,000. That's almost half of what what Revolut made, last year, 3,100,000,000. And in terms of kind of customer numbers as well, Monde has 12,000,000, and and Storling has 4,600,000. That's kind of a a drop in the pond, really, if you compare to Revolut, which is over 50,000,000. And, you know, I think every VC and every founder as well across Europe and and further fields as well wants to know what that special source is that that Revolut has. And, yeah, a big, big factor, at least, I understand from speaking with people internally at the company and ex employees as well is Revolut's new bet strategy, which is kind of a a key part of the way, it's able to continually roll out some of these new products that you you mentioned. And this really involves kind of building these specialized business units. They almost operate like micro startups within the company. And their tasks were rapidly testing and developing new products in more experimental areas of financial services. Some of the products that I understand at least, that have kind of gone through this initial testing process are are there products in crypto, in stock trading, and the kind of private banking products as well that are that are currently developing as well. These are really, really small 10 person teams, and they're often led by people with more, I guess, entrepreneurial kind of founder like backgrounds. And, yeah, they're not just responsible for the product development, but it's also the profit and loss as well. So if any of these products don't even gain traction, they can pivot or they can even be shut down immediately if they work. They're obviously gonna be be scaled up quick... More quickly.
00:04:00 · Tom Matsuda, Amy Lewin
And that's kind of part and parcel of how Revolut has been able to continually roll out all these these products you mentioned, telecoms, crypto derivatives, private banking. That... That's kind of part of how they're they're able to move so fast. There's also, obviously, as we've kind of reported quite a lot, the culture is is known to be quite tough and and hardworking, and that obviously really comes from the top, you know, the CEO, Nik Storonsky. It would be fair to say he's been described as quite relentless, demanding, and and kind of focused on execution at all costs. And that really lends itself to a company that is continually able to build out and roll out these new products and financial services faster and quicker than some of its counterpart. [00:04:42] S0: And it is a huge company now. Yes. [00:04:45] S1: 10,000 people now work there. You definitely couldn't call it a start up. [00:04:49] S0: It's a serious business. And Yeah. And as you said, Nik Storonsky is Russian born founder and CEO and ex Lehman Brothers and Credit Suisse trader, you know, he's become almost this mythical figure in Startup land, hasn't he? So many people sort of refer to him as the example of a sort of super driven, very good at execution founder. What what else do we do we know about him?
00:05:14 · Tom Matsuda
[00:05:14] S1: Well, at least according to our recent Internet searching, he's he's really into kite surfing. Aside from that, my my kind of conversations with ex employees and investors are really that, yeah, he's so driven and so focused that they don't actually know that much about his personal life. You know, I've asked in the past, like, what does he do outside work? How would you describe him as a person? And it's more... It's always come back to his his job as a founder and really that focus on execution at all costs. That's quite different from his cofounder, Yatsenko, who's the chief technology officer at Revolut. He's more been described as, like, the human heart in Revolut's leadership team. He's more focused on individual career development compared to Nik who really just wants to see the results happened and and, yeah, the product rolled out. Vlad is more someone who will kind of take time to work with each employee and kind of build them up a bit more. Yeah. Whereas Nik is just focused on getting that product out. And he's really known as like the product guy as well. I've interviewed him in the past. That was really when like our conversation got going was as soon as we started talking about products. So you can really see that that passion is really there.
00:06:23 · Amy Lewin, Tom Matsuda
[00:06:23] S0: I was having lunch with someone yesterday whose partner used to be very senior at Revolut, and she described Nik as like a helicopter. So he's always circling above everything. And then when there's a problem, he will swoop down and land and get involved. And she also said that apparently with his direct reports, he is quite sort of functional one on ones where he follows a set pattern every time. [00:06:49] S1: Yeah. That doesn't surprise me at all. And [00:06:52] S0: so one big thing we were all talking about to do with Revolut for a really long time was its UK banking licence. So famously, it took over three years for Revolut to be granted this bank licence when some of its competitors like Monzo and Storling had achieved banking licence status very early on in their startup journey, whereas Revolut applied a little bit later when it was already bigger and had more customers. It's still in this phase, isn't it, of mobilisation, so it's kind of testing out whether it's ready to fully have the bank licence. But what do we know about why it took so long?
00:07:29 · Tom Matsuda
[00:07:29] S1: Well, as we've kind of spoken about, Revolut isn't a typical company. Over 50,000,000 customers is not a typical kind of, I guess, neobank to go through and apply for becoming a banking license. And it's likely to be, I guess, the largest ever license app by kind of looking at a kind of customer base. And yet the the PRA, the the regulatory authority that's in charge of granting banking license in The UK, they obviously need kind of robust evidence. Right? That Revolut's compliance controls, their governance controls, capital needs as well, and their kind of operational processes are all all up to standard. And that's a much higher bar for a company that's... Has millions of users, right, compared to, you know, when, I guess, Monza and Startup applied for their banking license. And they, you know, they were a lot smaller fry in terms of the kind of amount of customers that they they served at that time. Things that haven't helped as well, though, I think both in the kind of 2020 and 2021 annual results in the past, auditors have have criticized certain portions of, yeah, of their kind of revenue profile as being inadequate, and they were unable to kind of verify kind of key revenue segments in in in the past. That obviously delayed any progress with kind of the regulatory process until those accounting standards were improved. Revolut leadership itself has also publicly criticized The UK financial regulators in the past for how sluggish and slow the process as well with which likely kind of complicated the process. They've also had some turnover in the finance department. So I think during this entire process, their former chief financial officer, Miko Salavar, left and was soon replaced by somebody called Victor Stinger, who's their current CFO. He was initially put in as interim CFO. He's, you know, known as being this kind of early employee of Revolut. He joined as the founder's associate and sort of worked his way up. Although he is younger and maybe less experienced than a typical CFO, he, at least from conversations I've had, has been credited with kind of rectifying those accounting issues, which likely paved the way for for Revolut to be granted a UK bank of license.
00:09:34 · Amy Lewin, Tom Matsuda
[00:09:34] S0: And what will... Once it's out of this mobilisation phase, which we expect to happen quite soon, what will it be able to do when it has the full banking license? [00:09:44] S1: Well, Revolut will be able to roll out more kind of grown up products than it's been known for. Most people now go to Revolut for, say, things like remittances, stock trading, crypto. [00:09:56] S0: Just their bank account. [00:09:57] S1: Just the bank. Yeah. Exactly. Just holding some deposits and some cash. Getting a banking license in The UK will likely see them more mirror what has happened in Europe, where they've they've held a banking license for their Lithuania base since 2021. In Europe, in certain jurisdictions, they've been able to offer things like credit cards and even mortgages in Lithuania, which are currently kind of testing out. Getting a banking license in The UK will enable them to roll out these kind of similar lending products, which are typically in the past more associated with 100 year old banks like your your Barclays, your HSBC, your Santander, and not 10 year old banks in the case of Revolut. So I guess all in all, it's really gonna help see their kind of product portfolio grow up essentially, and that will be a key key test for them. [00:10:50] S0: And so once they have the banking license, it's highly probable that they launch mortgages in The UK. How do you think they'll go about doing that? And do we have any clues from how they've done it in Lithuania?