Dawn of the Financial Super App

Revolut came into the fold to usher in a new era for banking but, six years later, the fintech is licensed to operate as a traditional bank. Here, Nik Storonsky, CEO and founder of Revolut, explains why building daily banking into the company’s offering does not deviate from its initial ambition to become a financial super app, as well as how a more structured and efficient approach has helped it navigate the tumultuous waters of the pandemic, noting, too, that Cypriot users are particularly partial to crypto.

By Adonis Adoni

Revolut started from one personal pain point – the unreasonable costs related to spending money abroad – and has grown into an app that covers almost all the financial needs of its users. Can you give us a rundown on the various products now offered on the Revolut app?
The Revolut app has grown a lot over the last 6 years. It was indeed born of the idea of not paying high and inconvenient FX fees and eventually became a real financial super app, a tool with which customers can manage all things money: card and mobile payments, money transfers, budgeting, spending analytics, Vaults, Donations, crypto, cashback and discounts on favourite brands, split bills, subscriptions, travel insurance and airport lounges, insurance on purchases and more. People don’t want to download dozens of apps for what they need; they want to have a single trusted partner and to be sure they can find anything they need there. We have set a new standard in the fintech industry and we keep listening to our customers to respond to their needs and raise the bar every day.

One significant change in Revolut’s model came when it obtained a European banking licence in 2018. It has since launched as a bank in 10 EU countries, including Cyprus. What kind of impact did this change have in terms of profitability, which has historically been a problematic issue for the company?
It’s too early to see the impact of Revolut Bank since it has just been launched in 12 markets and a specific service like credit is only available in Lithuania and Poland at the moment. Over the last few years, our focus has been on growing our customer base, expanding to new markets and hiring; each of these areas requires a lot of investment. Despite the business being less than six years old, we are on track to reach profitability, although obviously that always depends on investment decisions. In 2020, we expanded our offering to customers focusing on everyday activities and tightened costs. We have focused on increasing revenues, improving gross margins and reducing operational costs, with the result that we were profitable in November and December. Our aim is to remain sustainable and profitable.

You recently applied for the UK banking licence. What is the status of the application?
Our ambition is to offer customers across the world a financial super app, with which they can manage all aspects of their financial life with the best value, the best security and the best choice in everything they want to do. Daily banking is central to that ambition. We look forward to continuing to work with regulators in the UK to conclude that process and provide the essential products that customers expect from their primary bank, such as overdrafts, loans and deposit accounts.

As more and more neobanks move away from their fintech roots to become lenders, some have claimed that this infers that the original ambition to create a “new banking model” promulgated at the advent of the fintech industry back in 2015 is now falling short. Do you agree with that statement?
Absolutely not! Despite the global pandemic, we managed to follow our product roadmap and our international expansion plan to keep building our financial super app and allow people from anywhere in the world to manage their money at any time through their smartphone. We have worked hard to build services that, until a few years ago, were available only to small niches and offer them to the widest audience possible. In parallel, every month, we are introducing and improving features that our customers demand, so as to make the Revolut app a great financial partner for everybody. We are a tech company, we build our technology in-house and work incessantly to enhance our products – Retail and Business – with new features to make people’s life easier. This is our mission and it will not change to focus only on revenues coming from credit and lending.

Let’s look at the strain that COVID-19 placed on Revolut, especially with customer spending abroad significantly reduced due to the travel restrictions. How did the company try to compensate and did it see a rise in other income streams, like cryptocurrencies or domestic spending?
This pandemic has affected every kind of industry and fintech is no exception. However, Revolut was well equipped to handle the situation. We raised US$500 million in Series D funding in February 2020, which was extended by another US$80 million in July and our product offering is very diverse, allowing customers to exchange currencies, trade stocks and cryptocurrencies and send international transfers. While we saw a decline in physical card payments, we saw dramatic increases in other areas, reflecting the growing diversity of our offer to customers. As you say, customers spent less on travel and on out-of-the house leisure and entertainment, but we saw supermarket spending, online shopping and home entertainment all increase and there was an enthusiastic return to outdoor leisure whenever lockdowns were lifted. Equally, as a cloud-based digital company, we were able to switch our teams to home working very quickly with barely any disruption to the business. In some areas, we actually became more productive as we weren’t losing lots of time travelling internationally, but we worked hard to ensure that we still communicated effectively. The change has also been an opportunity to make our company more structured and efficient. So, despite the global travel freeze and economies in lockdown, we have continued to see solid customer growth in personal and business customers and improving revenues and margins.

Could you give us some figures on how many users you have in Cyprus and what financial products Cypriots prefer to use?
Cyprus is one of the markets where Revolut penetration is higher: with more than 190,000 customers – almost 1 in 4 residents is a customer of ours – and we are very proud of that. We offer a wide range of services and can clearly see a great appreciation for many of them, from our budgeting and analytics tools to disposable cards, etc. However, in the last year we have also seen significant interest in crypto from our customers in Cyprus, with volumes showing a massive growth in 2021 compared to last year.

The tech giants are slowly entering the fintech arena – Apple Pay has been around for a while and now Google is initiating a similar service. Given that these companies have a huge customer base, do you see them as an obstacle, or do such moves create opportunities for partnerships, especially as you are now trying to enter the US market?
More companies in the industry means that services will get better and better for customers and this is a great opportunity. In fact, many of our customers use Apple Pay with their Revolut account, so the services are complementary. But most of the big techs are specialised in something else and, while they have a huge customer base, in some cases they don’t have all the necessary resources and knowledge to scale up as fast as those who started with that mission and have built the infrastructure and specialist skills in-house. We’re never complacent and we see competition from any quarter as a good challenge. It makes the whole industry better and we all learn from competition.

What new products can we expect from Revolut as it works on becoming a financial super app?
We have just redesigned our app to make it easy for our customers to meet their everyday needs and we are working to roll out banking operations in other European countries. On top of this, we are launching new products and services as well as improving existing ones. We are revamping our crypto offer with new tokens and Bitcoin withdrawals (for the moment available in the UK only). We are launching new features to make customers’ shopping easier and more affordable, as well as new tools to allow people to manage their money more and more easily. Our teams are working on additional exciting product launches and 2021 will be another key year in our super app journey..

Our ambition is to offer customers across the world a financial super app, with which they can manage all aspects of their financial life