A tech upstart – a FinTech, no less – breaking even in 2020?
Could happen.
For more than one company.
We’re being a bit tongue in cheek, but the fact remains that digital-only banking is getting a wider embrace – especially in Europe, as the pandemic surges yet again. Open banking, of course, allows financial data to be shared and synthesized across everyday financial life, making banking by app far less of a novelty than it once was.
Revolut, the U.K.-based FinTech that focuses on digital banking and building what it terms a global financial super app, has broken even as of last month, as reported by CNBC.
As to how the pandemic has impacted results – first to the downside, and then as a tailwind to buoy top lines and operating results – Nik Storonsky, Revolut’s CEO and co-founder, said the firm saw a 40 percent dip in revenues as the coronavirus hit earlier in 2020.
But “we’re now actually 50 percent ahead in terms of revenues compared to pre-COVID levels,” Storonsky told CNBC, and the company has thus broken even for the month. That would come on the heels of revenue growth in its most recently reported results, through August of this year, where revenues were up 180 percent but losses tripled. In a statement back in August, the company said that revenues stood at 162.7 million pounds, but losses were 106.5 million pounds.
Scale and reach, of course, are critical to turning red ink to black. The company noted on its site that thus far, it has garnered 12 million personal customers with 500,000 business customers.
But in the drive toward critical mass – across a slew of products and services spanning everything from savings accounts to cryptos – competition is fierce. Competitor Starling has also broken even, the company said last month, “becoming the first in the new breed of digital banks to break even.” Starling said in its recent accounts update that it has 1.8 million accounts in place and 4 billion pounds in deposits, with total operating income in October of 9 million pounds and revenues up more than fourfold in the period.
Revolut, judging from the spate of recent and continuing announcements related to new products and services, is making a full-court press to broaden the scope and geographic presence. On Wednesday (Dec. 9), the company said it had launched Pockets, billed as a way to organize bills and set aside a dedicated amount of money to pay for them.
The company has said that with the creation of Pockets, the company will pay the bills as they are due and users can route funds every payday to cover those bills. The latest announcement comes on top of news earlier this month that it has launched an acquiring solution to allow businesses across 13 countries to accept credit card payments online.
And in terms of country-by-country expansion, the company said it had, in collaboration with TrueLayer, expanded into Germany. Earlier this year, Revolut established a presence in Ireland, France and Italy, with a cross-border launch into the U.S. this past spring, and the firm is also applying for a U.S. banking license.
And in a nod to holistic views of users’ financial lives, the recent foray into Germany offers a microcosm: The new setup would also allow users to transfer money between Revolut and other bank accounts, Revolut said. The digital bank’s German customers will now be able to use the Revolut app to make some money transfers — such as with family and friends — without logging into other FIs’ online banking systems (thus centralizing financial activity).
But it’s early days yet, and one month of break-even does not a trend make. Diversification remains key – toward operating profits, beyond the pandemic.