Revolut bags $500m from TCV to drive daily account usage

Written by Ruby Hinchliffe
25th February 2020

It’s finally happened. Revolut has closed its next round of mammoth funding. Now valued at $5.5 billion right behind its US challenger counterpart Chime ($5.8 billion), the UK-founded bank has landed its $500 million Series D with the help of leading investor Technology Crossover Ventures (TCV), the early backer of Airbnb, Spotify and Netflix.

Now the most valuable UK fintech and one of the most valuable European fintechs up there with Klarna which was valued at $5.5 billion last year, Revolut has tripled its value since its last valuation in 2018 which put it at just $1.7 billion. Rival Monzo is in talks with SoftBank for a £100 million fundraising round, but even once this round is closed, Revolut will still be the highest valued UK fintech.

Revolut says it has 10 million customers worldwide, but in its announcement of the funding it says it wants to focus the money in part on driving “daily adoption”. For some time, industry players have cited their user numbers without clarifying how they class an ‘active user’ – the most simple determiner being how often they use their account.

Revolut’s founder and CEO Nikolay Storonsky

The neobank says the new capital will help strengthen its presence in current markets, with “a particular focus on product development that will help accelerate daily usage of accounts”. This points to a very real challenge for neobanks, often defaulted as the secondary account and used only for holidays abroad where users can take advantage of fee-free spending.

The open acknowledgment comes as fellow challengers have been exposed for their misrepresentation of active users. Leaked numbers in November showed that only 16% of fellow UK challenger Curve’s half a million customers were active, i.e. used their account a least once a month. Once activity was taken into account, Curve only had 72,000 customers which used the service regularly.

Revolut does say that it increased its number of daily active customers by 380% last year, which is a higher increase than its customer growth which saw a 169% increase over the same period. These numbers support the challenger’s claims that its strategy is morphing into a two-part approach which not only focuses on quick global expansion, but also reaffirms the activity of its current user base.

“We’re now entering the reality-check phase for challenger banks,” says Forrester’s senior analyst Aurélie L’Hostis on the Revolut funding news. “Investors will be looking for reassurance that Revolut can achieve sustainable organic growth.”

Initially struggling to secure the funding amid reports of negative workplace culture and anti-fraud practices according to City AM, Revolut’s founder and CEO Nikolay Storonsky said on CNBC this morning that “it was definitely tougher [to secure funds] this time.”

The bank is also gathering an executive team together to take on Australia

Other focuses for the newly-attained capital include retail and business lending services, extending high interest savings accounts beyond the UK, and European expansion, as well as developing its paid Premium and Metal subscription accounts which grew the challenger’s revenue by 154% last year.

The neobank is, however, still making a loss. In 2018, when it last filed its financial results, Revolut lost $32.8 million despite increasing its revenue by more than four times the size from 2017 to 2018.

“Going forward, our focus is on rolling-out banking operations in Europe, increasing the number of people who use Revolut as their daily account, and striving towards profitability,” says Storonsky.

The bank is also gathering an executive team together to take on Australia. Former Bank of Queensland’s chief financial officer and head of Virgin Money Australia Matt Baxby is heading up the operations down under as the new Revolut Australia CEO.

This appointment arrives alongside two others. Scott Jamieson, former head of compliance for local challenger 86 400 and previously a Westpac manager, will be Revolut’s chief compliance officer for Australia. And Michael Hendricks, who spent stints at ME Bank, Citibank and National Australia Bank, will be the challenger’s local chief risk officer.

Revolut is “mid process” with Australian regulators for a banking licence. The neobank only has one banking licence in Lithuania, with the majority of its 10 million customers served through an e-money licence which piggy backs off a third party bank and does not protect funds with deposit insurance schemes.

The full Revolut Australia launch is expected in the first half of 2020.