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Revolut, Europe's $5.5 Billion Digital Bank, Quietly Broke Even in November

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  • Digital banking unicorn Revolut broke even in November, CEO and co-founder Nik Storonsky told CNBC.
  • Revolut's revenues dipped 40% in the early days of the pandemic but are now 50% ahead compared to pre-Covid levels.
  • The firm has been diversifying its revenue streams and expects to launch lending in most European markets next year.

LONDON — Revolut managed to break even in November, marking a strong rebound for the digital banking start-up from the coronavirus crisis. 

Nik Storonsky, Revolut's CEO and co-founder, said the firm saw a 40% dip in revenues in the early days of the pandemic, but added that business had improved significantly since then.

"We're now actually 50% ahead in terms of revenues compared to pre-Covid levels," Storonsky told CNBC in an interview Monday. "Gross margins increased significantly as well."

"In terms of financials, we broke even in November and we're doing much better compared to pre-Covid times," he added.

Revolut's most recent accounts were released in August, showing the firm more than tripled its losses to £106.5 million ($142.1 million) in 2019, despite a 180% increase in revenues to £162.7 million.

It's not the first time Revolut has broken even; the company previously said it had done so in December 2018.

Profitability vs growth

Founded in 2015, Revolut is one of several so-called neobanks that have emerged in the last decade, taking on larger lenders with travel-friendly mobile checking accounts and linked payment cards.

The London-based company competes with the likes of Germany's N26 and U.K. rivals Monzo and Starling. With a $5.5 billion valuation, Revolut is one of the largest fintech unicorns in Europe.

But many of Europe's neobanks have struggled to turn a profit, sacrificing profitability in favor of aggressive growth. That became a concern during Covid-19 as some investors worried about whether their business models were sustainable.

Whether Revolut can reach full profitability "depends on how fast we want to grow," Storonsky added. Revolut now has over 13 million retail banking users and 500,000 business customers.

Starling eked out an £800,000 profit in the month of October, largely thanks to a lending boost it got from U.K. government-backed coronavirus loan schemes. It comes after the firm saw losses double in 2019.

Monzo, meanwhile, similarly saw its losses double in its 2020 accounts. The company also issued a warning about its ability to continue "as a going concern" due to disruption resulting from Covid-19, and saw its valuation fall 40% this year after raising fresh funds.

'Well diversified'

Revolut gets most of its income from interchange fees which are generated each time a customer pays for something with their card. But it has been aggressively expanding into other areas of finance, such as investing and business banking.

The coronavirus outbreak and resulting lockdowns hit Revolut hard in the spring, as cross-border payments declined sharply.

But the company's boss said it had recovered since then, after cutting spending on marketing and gaining traction in newer features like cryptocurrency trading.

"We have many revenue lines because we are a very well-diversified payments business," Storonsky said.

Revolut last week announced the launch of a new product called merchant acquiring, which lets its business customers accept payments online. The move marked a challenge to digital payment processing titans like Stripe and Adyen.

Meanwhile, Storonsky said the firm is gradually making inroads into lending after obtaining a European banking license in 2018. Revolut's credit product is currently live in Lithuania and Poland, and the firm expects to roll it out in most European markets next year.

"It does not make sense to have a banking license unless you lend," Storonsky said. But, he added: "We're very careful in terms of rolling out our credit capabilities."

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