Will the largest fintech startup survive the pandemic and grow into a full-fledged bank?
Revolut is a fintech startup whose developers have created a mobile service that is connected to a multi-currency debit card. Thanks to the application, users can convert funds at a convenient rate, transfer assets around the world, and issue insurance and loans. The startup was launched by Nikolay Storonsky and Vlad Yatsenko in 2015 in Britain. In 2018, it managed to attract investments from large funds, and in 2019 the startup faced criticism in the media, which worried investors. The company’s management was blamed for unattainable KPI, which had to be reached by employees, unpaid overtime work and disabling the functions of checking suspicious transactions. The app was also accused of losing client money. Storonsky noted that the startup faced the “development disease” when it grew from a small company into a full-fledged bank. Despite the difficulties, the company managed to attract a considerable amount of investment again, which resulted in the startup’s value growth to $5.5 billion. However, has the organization really been able to grow and will it cope with the coronavirus pandemic?
This spring, Revolut reached out to clients to allay concerns about an impending collapse. Storonsky is sure that these are just rumors and speculation. In the meantime, management sent 2,500 employees to remote work and quarantined 23 offices. It also asked workers to exchange wages for company securities to maintain liquidity. According to Storonsky, the number of transfers through the application has decreased by 45% since the beginning of the pandemic. At the same time, transaction fees are the only source of income for a startup. Management is confident that revenues will decline twice over the year, but hopes that 2020 will be profitable.
Analysts are confident that Revolut has been very lucky to attract investment ahead of the quarantine. This increases its chances of surviving a pandemic, which will negatively affect the financial sector anyway.
Storonsky is sure that the virus has had a positive impact on the company’s business. The management was forced to revise the terms of cooperation with suppliers, and the internal corporate culture became stronger.
When the company was founded, the creators were confident that the product would help it survive any difficulties. However, they now understand that technology alone is weak. For the smooth operation of the bank, it requires up-to-date security systems to combat fraud, as well as maintaining the quality of service despite a much larger scale. Whereas Storonsky used to be convinced that it was all about technology, today he recognizes that his business depends on people who contact customers.
Another startup transformation is an attempt to be a bank. This is evidenced even by the principle of recruiting employees and top management from this area. One of them is Martin Gilbert, co-founder of Aberdeen Asset Management. Whereas Storonsky used to say that experience in fintech doesn’t matter, now he is sensitive to the years of work of large financial players.
The revision of business processes also affected the company. Previously, the founder of the startup looked at banks with skepticism and wanted to avoid excessive bureaucracy. However, he now acknowledged that this approach has its own subtleties. In part, these changes were imposed by investors, as they wanted to be convinced of the company’s intentions and ability to become a full-fledged bank that can be profitable.