British fintech challenger bank Revolut has raised $500m, giving the company a valuation of £4.2bn or $5.5bn, making the FinTech the UK’s most valuable financial technology start-up and one of Europe’s most valued FinTech’s alongside start-up Klarna.
This is Revolut’s fourth major round of funding which was led by early Netflix investor TCV and pushes its value way ahead of competitor FinTech, Monzo, which was valued at £2bn in 2019. Revolut’s series D funding attracted backing from existing investors including Ribbit Capital, DST Global, Lakestar, and GP Bullhound.
Revolut founder and CEO, Nik Storonsky speaking on the matter said: “We’re on a mission to build a global financial platform — a single app where our customers can manage all of their daily finances, and this investment demonstrates investor confidence in our business model,”
The FinTech challenger bank popularity has come about from meeting the different consumer behaviors. This includes not having a brick-and-mortar store but only online banking services as people are increasingly doing their banking digitally and pay for items by card instead of cash.
Revolut claims to have 10 million customers globally and witnessed a customer growth rate of 150% in 2019. With the increased funding it will be interesting to see how many customers the fintech will have by the end of 2020.
Although the FinTech challenger bank witnessed revenue increases of 354% in 2018, they still reported a loss of £32.8m the same year. Revolut currently makes most of its revenue from fees charged to merchants every time a customer uses their card to pay for an item or service. Revolut has mentioned bringing in subscription-based accounts where users will pay additional or monthly fees for bonus perks of using the banking service.
With this funding, the FinTech challenger bank aims to be able to break into the US market and increase its customer base, something that’s proved difficult for Revolut due to the strict regularity requirements and restrictions.
According to a report by Which? there were 405 UK branches that closed during 2019 as there was no longer a high enough requirement to keep them open.
Although challenger banks seem to be making headway by meeting new customer needs, it poses the question “will they ever become profitable?”
