7 ms·

Losses at Revolut more than triple to £106m

49 points by m33k44 6y ago

enkid 6y ago
Paywalled
- kurthr 6y ago
  This might work for you: https://www.msn.com/en-gb/news/finance/losses-at-revolut-more-than-triple-to-%C2%A3106m/ar-BB17OTRJ?li=BBoPWjQ https://www.msn.com/en-gb/news/finance/losses-at-revolut-mor...
- sixhobbits 6y ago
  https://telegra.ph/Losses-at-Revolut-more-than-triple-to-106m-08-11 https://telegra.ph/Losses-at-Revolut-more-than-triple-to-106...
jbob2000 6y ago
I work for a bank. We only make money on credit cards and mortgages. The fees for regular banking stuff like accounts, cheques, etc. barely cover the expenses for operating them. And this is after decades of MBAs and executives trying to find ways to profit off of them. Unless Revolut gets into lending (aside from the overnight market) I think there is little opportunity for them to make a profit - It’s like trying to run a bar without serving alcohol.
- deleted 6y ago
  [deleted]
- mirekrusin 6y ago
  Yes, startups can give a good run for their money to banks.
  - jbob2000 6y ago
    Well, with accounts, their money is going to come from the Overnight Market; The bank has to be UP money at the end of the day in order to lend money to other banks over night. If Revolut’s customers did more withdrawals throughout the day than deposits, then Revolut has to borrow money overnight and it will cost them money. So that’s the challenge facing startup banks: have your customers do more deposits in a day than withdrawals.
- colinmhayes 6y ago
  I have to assume they're planning to get into lending. There's no point in being a bank otherwise.
  - jbob2000 6y ago
    Their banking executives are quitting. I’m assuming that’s because they’re butting heads with the tech guys who think “a bank is just a type of software company”.
    - user5994461 6y ago
      I think they're quitting because the company is mismanaged by the founders and there is nothing they can do about it (it's the next Uber). See scandals about not paying their employees and recurrent fraud. My wife used to use Revolut, had to close her account AND block all transfers from her normal bank to Revolut after repeated frauds. Want to know how fraud works nowadays? Let's say a fraudster gets a card number somehow. What they do next is open a revolut account under the same name as the card, then credit the account using the stolen card. It's easy because revolut has zero KYC (identity verification) and the name/address matching doesn't trigger fraud detection.
- deleted 6y ago
  [deleted]
- ptype 6y ago
  Except their revenues are £163m, so it’s not exactly like they do not have a revenue source. I think you are too pessimistic. I don’t have a split but would imagine the largest revenue source is the interchange fee? I would also doubt very much that their cost base is very optimised at the moment, so I would think profit is very doable. In addition, having used their business offering, I think they have a huge opportunity there, their product is very good.
  - jbob2000 6y ago
    Europe is known to have really shitty profits from interchange fees. It’s not like North America, where these profits are a bit of a runaway train. We are currently talking about “interchange shrink” because we expect this ride to come to an end soon (aka loyalty programs are about to get really shitty, especially with the collapse of the travel industry)
    - toomuchtodo 6y ago
      For those who aren't aware, European interchange fees are regulated (In the EU, interchange fees are capped to 0.3% of the transaction for credit cards and to 0.2% for debit cards, no cap for corporate cards), which is good IMHO. Banking should be treated as a utility, lending and other services can be the profit center (as you allude to in your comments). Margin compression is a thing for banks who haven't realized yet they're software companies that offer financial services now, and the moat continues to shrink (getting a banking license is hard, partnering with another bank in need of deposits less so). One must be willing to cannibalize margins to survive or be prepared to be left behind by those who are more efficient (and I admit that macro trends make this harder than in the past; "borrow at 3, lend at 6, at the golf course by 3" [1] is dead). Disclosure: Part of my work is helping old banks attempt to turn into software companies, with wildly varying results depending on the org. [1] https://en.wikipedia.org/wiki/3-6-3_Rule https://en.wikipedia.org/wiki/3-6-3_Rule
  - hocuspocus 6y ago
    > I would also doubt very much that their cost base is very optimised at the moment, so I would think profit is very doable. I agree. Until recently they were literally paying users to open an account and recruit new customers. You could exchange up to £5000/month for free (now only £1000). And if you need to make a big single transfer, for instance while moving to a different country, paying one year of premium membership can still be cheaper than Transferwise's fee on that single transaction.
- sixhobbits 6y ago
  I've always assumed that they make their money through mining customer data and merging it with e.g. Facebook Pixel datasets etc, but I have no evidence for this. Just seems like the 'obvious' business model for a tech-focussed bank as I assume that traditional banks have more difficulty in adapting their systems for these kind of use cases and I don't see how they could offer so much for free based on small monthly fees from a handful of people. That said, they're also looking more and more like they might become the Robinhood of Europe, which brings its own revenue models.
  - jbob2000 6y ago
    Normal banks do this too, it’s not that profitable. We mine your credit card history and form partnerships with companies that appear on a lot of people’s statements. We send you our customers, you advertise our credit cards, win-win!
    - godzillabrennus 6y ago
      Companies buy data on who buys their products if they have a wholesale/retail distribution model. Unlike DTC they don’t know who buys their stuff so they don’t know who to target. Buying our credit card data is a big business.
  - vegannet 6y ago
    I think people like yourself value “data” too much. The value of financial data is that it can be used to target financial products: if you’re a bank why would you cut in a middleman on that? Look to any financial services company trying to make money through “data” and you’ll see they have direct relationships with advertisers that integrate directly into their product through “recommendations”. This is very well established and very very profitable — see nerdwallet, CreditKarma etc.
- xorcist 6y ago
  Doesn't the likes of Mastercard and Visa pay some sort of kickback?
smnrchrds 6y ago
Are deposits at Revolut government-insured like deposits at a regular bank are? If not, what happens if Revolut goes out of business?
- fasicle 6y ago
  "If you choose to open a full current account with Revolut Bank in the future, any funds you deposit will be protected up to €100,000 under the European Deposit Insurance Scheme (EDIS)." https://blog.revolut.com/we-got-a-banking-licence/ https://blog.revolut.com/we-got-a-banking-licence/
  - codethief 6y ago
    …until the UK leaves the EU, I suppose?
  - xorcist 6y ago
    Despite it being (2018) the "in the future" part still holds. Not sure why, but since customer acquisition doesn't seem to be limited by it, it's probably not their top priority.
- jamesfmilne 6y ago
  https://www.fscs.org.uk/what-we-cover/banks-building-societies/ https://www.fscs.org.uk/what-we-cover/banks-building-societi... You are protected up to £85k per bank.
  - ccjnsn 6y ago
    This is incorrect see: https://www.fscs.org.uk/check-your-money-is-protected/ https://www.fscs.org.uk/check-your-money-is-protected/ Type in revolut. The money is ring fenced usually in a too big to fail bank. Edit: Though they have a banking licence in Lithuania and may be insured there?
  - smnrchrds 6y ago
    Their "Protection Checker" has this to say about Revolut: Revolut Ltd (FRN:900562) ... None of your money is protected by FSCS https://www.fscs.org.uk/check-your-money-is-protected/ https://www.fscs.org.uk/check-your-money-is-protected/
tempsy 6y ago
I had the worst interview experience there (contacted on LI and agreed to interview). Totally unnecessarily drawn out interview process that took months, with a long homework exercise only to be dinged at the very last interview with a “walk me through your resume” interview (are you kidding me).
- benmller313 6y ago
  Sounds like you got Top Graded.
- saos 6y ago
  Honestly. I do not blame you. https://web.archive.org/web/20200406205828/https://jobs.lever.co/revolut/7445f477-6ba8-43e8-ab50-fa61cb303630 https://web.archive.org/web/20200406205828/https://jobs.leve...
  - ccmcarey 6y ago
    Ridiculous, they care about a 10+ year old GPA?
    - crististm 6y ago
      It can be used as a conscientiousness signal.
    - LatteLazy 6y ago
      Yeah, and (as a brit) wtf does "60% (UK)" even mean!?
      - ashconnor 6y ago
        2:2 I imagine.
        ddek 6y ago
        It’s a rock bottom 2:1. I find this odd. Generally a 2:1 equals a GPA between 2.8 and 3.2, depending on how strong it is. The UK degree requirement is very soft in comparison to the others.
Havoc 6y ago
Not surprised. I’ve used them for travel but don’t think they made any real money off that. Doesn’t seem like much of a business model
eruci 6y ago
I have a Revolut debit card/account but I've never used it. Why? I can not fund it via PayPal, Stripe , etc.. making it useless in my case. They should learn from Transferwise.
aosaigh 6y ago
This seems to be a sensationalist headline. Their revenue is up and they are spending a lot to expand into new markets, hence their losses will be high. > Revolut’s revenues increased sharply to £163m in 2019, up from £58m in 2018. > Revolut has been expanding heavily over the past year, with the total number of employees of the company rising from 633 to 2,261 by the end of 2019. As someone who spends a lot of time between € and £, Revolut has been an absolutely huge money saver. I don't like their reported working conditions and I wouldn't keep savings there, but there's no denying that they are a useful product.
- heavenlyblue 6y ago
  You can also use Monzo
LittlePeter 6y ago
Maybe a way out of these losses is to have employees working weekends for free? [1] Maybe a new CFO? [2] [1] https://twitter.com/phillipcaudell/status/1101081229351415808 https://twitter.com/phillipcaudell/status/110108122935141580... [2] https://news.ycombinator.com/item?id=19279746 https://news.ycombinator.com/item?id=19279746

49 points by m33k44 6y ago

enkid 6y ago

Paywalled

kurthr 6y ago
This might work for you: https://www.msn.com/en-gb/news/finance/losses-at-revolut-more-than-triple-to-%C2%A3106m/ar-BB17OTRJ?li=BBoPWjQ https://www.msn.com/en-gb/news/finance/losses-at-revolut-mor...
sixhobbits 6y ago
https://telegra.ph/Losses-at-Revolut-more-than-triple-to-106m-08-11 https://telegra.ph/Losses-at-Revolut-more-than-triple-to-106...

jbob2000 6y ago

I work for a bank. We only make money on credit cards and mortgages. The fees for regular banking stuff like accounts, cheques, etc. barely cover the expenses for operating them. And this is after decades of MBAs and executives trying to find ways to profit off of them. Unless Revolut gets into lending (aside from the overnight market) I think there is little opportunity for them to make a profit - It’s like trying to run a bar without serving alcohol.

deleted 6y ago
[deleted]
mirekrusin 6y ago
Yes, startups can give a good run for their money to banks.
- jbob2000 6y ago
  Well, with accounts, their money is going to come from the Overnight Market; The bank has to be UP money at the end of the day in order to lend money to other banks over night. If Revolut’s customers did more withdrawals throughout the day than deposits, then Revolut has to borrow money overnight and it will cost them money. So that’s the challenge facing startup banks: have your customers do more deposits in a day than withdrawals.
colinmhayes 6y ago
I have to assume they're planning to get into lending. There's no point in being a bank otherwise.
- jbob2000 6y ago
  Their banking executives are quitting. I’m assuming that’s because they’re butting heads with the tech guys who think “a bank is just a type of software company”.
  - user5994461 6y ago
    I think they're quitting because the company is mismanaged by the founders and there is nothing they can do about it (it's the next Uber). See scandals about not paying their employees and recurrent fraud. My wife used to use Revolut, had to close her account AND block all transfers from her normal bank to Revolut after repeated frauds. Want to know how fraud works nowadays? Let's say a fraudster gets a card number somehow. What they do next is open a revolut account under the same name as the card, then credit the account using the stolen card. It's easy because revolut has zero KYC (identity verification) and the name/address matching doesn't trigger fraud detection.
deleted 6y ago
[deleted]
ptype 6y ago
Except their revenues are £163m, so it’s not exactly like they do not have a revenue source. I think you are too pessimistic. I don’t have a split but would imagine the largest revenue source is the interchange fee? I would also doubt very much that their cost base is very optimised at the moment, so I would think profit is very doable. In addition, having used their business offering, I think they have a huge opportunity there, their product is very good.
- jbob2000 6y ago
  Europe is known to have really shitty profits from interchange fees. It’s not like North America, where these profits are a bit of a runaway train. We are currently talking about “interchange shrink” because we expect this ride to come to an end soon (aka loyalty programs are about to get really shitty, especially with the collapse of the travel industry)
  - toomuchtodo 6y ago
    For those who aren't aware, European interchange fees are regulated (In the EU, interchange fees are capped to 0.3% of the transaction for credit cards and to 0.2% for debit cards, no cap for corporate cards), which is good IMHO. Banking should be treated as a utility, lending and other services can be the profit center (as you allude to in your comments). Margin compression is a thing for banks who haven't realized yet they're software companies that offer financial services now, and the moat continues to shrink (getting a banking license is hard, partnering with another bank in need of deposits less so). One must be willing to cannibalize margins to survive or be prepared to be left behind by those who are more efficient (and I admit that macro trends make this harder than in the past; "borrow at 3, lend at 6, at the golf course by 3" [1] is dead). Disclosure: Part of my work is helping old banks attempt to turn into software companies, with wildly varying results depending on the org. [1] https://en.wikipedia.org/wiki/3-6-3_Rule https://en.wikipedia.org/wiki/3-6-3_Rule
- hocuspocus 6y ago
  > I would also doubt very much that their cost base is very optimised at the moment, so I would think profit is very doable. I agree. Until recently they were literally paying users to open an account and recruit new customers. You could exchange up to £5000/month for free (now only £1000). And if you need to make a big single transfer, for instance while moving to a different country, paying one year of premium membership can still be cheaper than Transferwise's fee on that single transaction.
sixhobbits 6y ago
I've always assumed that they make their money through mining customer data and merging it with e.g. Facebook Pixel datasets etc, but I have no evidence for this. Just seems like the 'obvious' business model for a tech-focussed bank as I assume that traditional banks have more difficulty in adapting their systems for these kind of use cases and I don't see how they could offer so much for free based on small monthly fees from a handful of people. That said, they're also looking more and more like they might become the Robinhood of Europe, which brings its own revenue models.
- jbob2000 6y ago
  Normal banks do this too, it’s not that profitable. We mine your credit card history and form partnerships with companies that appear on a lot of people’s statements. We send you our customers, you advertise our credit cards, win-win!
  - godzillabrennus 6y ago
    Companies buy data on who buys their products if they have a wholesale/retail distribution model. Unlike DTC they don’t know who buys their stuff so they don’t know who to target. Buying our credit card data is a big business.
- vegannet 6y ago
  I think people like yourself value “data” too much. The value of financial data is that it can be used to target financial products: if you’re a bank why would you cut in a middleman on that? Look to any financial services company trying to make money through “data” and you’ll see they have direct relationships with advertisers that integrate directly into their product through “recommendations”. This is very well established and very very profitable — see nerdwallet, CreditKarma etc.
xorcist 6y ago
Doesn't the likes of Mastercard and Visa pay some sort of kickback?

smnrchrds 6y ago

Are deposits at Revolut government-insured like deposits at a regular bank are? If not, what happens if Revolut goes out of business?

fasicle 6y ago
"If you choose to open a full current account with Revolut Bank in the future, any funds you deposit will be protected up to €100,000 under the European Deposit Insurance Scheme (EDIS)." https://blog.revolut.com/we-got-a-banking-licence/ https://blog.revolut.com/we-got-a-banking-licence/
- codethief 6y ago
  …until the UK leaves the EU, I suppose?
- xorcist 6y ago
  Despite it being (2018) the "in the future" part still holds. Not sure why, but since customer acquisition doesn't seem to be limited by it, it's probably not their top priority.
jamesfmilne 6y ago
https://www.fscs.org.uk/what-we-cover/banks-building-societies/ https://www.fscs.org.uk/what-we-cover/banks-building-societi... You are protected up to £85k per bank.
- ccjnsn 6y ago
  This is incorrect see: https://www.fscs.org.uk/check-your-money-is-protected/ https://www.fscs.org.uk/check-your-money-is-protected/ Type in revolut. The money is ring fenced usually in a too big to fail bank. Edit: Though they have a banking licence in Lithuania and may be insured there?
- smnrchrds 6y ago
  Their "Protection Checker" has this to say about Revolut: Revolut Ltd (FRN:900562) ... None of your money is protected by FSCS https://www.fscs.org.uk/check-your-money-is-protected/ https://www.fscs.org.uk/check-your-money-is-protected/

tempsy 6y ago

I had the worst interview experience there (contacted on LI and agreed to interview). Totally unnecessarily drawn out interview process that took months, with a long homework exercise only to be dinged at the very last interview with a “walk me through your resume” interview (are you kidding me).

benmller313 6y ago
Sounds like you got Top Graded.
saos 6y ago
Honestly. I do not blame you. https://web.archive.org/web/20200406205828/https://jobs.lever.co/revolut/7445f477-6ba8-43e8-ab50-fa61cb303630 https://web.archive.org/web/20200406205828/https://jobs.leve...
- ccmcarey 6y ago
  Ridiculous, they care about a 10+ year old GPA?
  - crististm 6y ago
    It can be used as a conscientiousness signal.
  - LatteLazy 6y ago
    Yeah, and (as a brit) wtf does "60% (UK)" even mean!?
    - ashconnor 6y ago
      2:2 I imagine.
      - ddek 6y ago
        It’s a rock bottom 2:1. I find this odd. Generally a 2:1 equals a GPA between 2.8 and 3.2, depending on how strong it is. The UK degree requirement is very soft in comparison to the others.

Havoc 6y ago

Not surprised. I’ve used them for travel but don’t think they made any real money off that. Doesn’t seem like much of a business model

eruci 6y ago

I have a Revolut debit card/account but I've never used it. Why? I can not fund it via PayPal, Stripe , etc.. making it useless in my case. They should learn from Transferwise.

aosaigh 6y ago

This seems to be a sensationalist headline. Their revenue is up and they are spending a lot to expand into new markets, hence their losses will be high. > Revolut’s revenues increased sharply to £163m in 2019, up from £58m in 2018. > Revolut has been expanding heavily over the past year, with the total number of employees of the company rising from 633 to 2,261 by the end of 2019. As someone who spends a lot of time between € and £, Revolut has been an absolutely huge money saver. I don't like their reported working conditions and I wouldn't keep savings there, but there's no denying that they are a useful product.

heavenlyblue 6y ago
You can also use Monzo

LittlePeter 6y ago

Maybe a way out of these losses is to have employees working weekends for free? [1] Maybe a new CFO? [2] [1] https://twitter.com/phillipcaudell/status/1101081229351415808 https://twitter.com/phillipcaudell/status/110108122935141580... [2] https://news.ycombinator.com/item?id=19279746 https://news.ycombinator.com/item?id=19279746