- Venture capital firms including Softbank's Vision Fund have invested in Revolut's sixth fundraising round
- The company has ambitious growth plans
Mikko Salovaara, chief financial officer at Revolut has called the fundraising environment “very strong”. That’s probably an understatement. The neobank has just raised $800m (£566m) in its sixth fundraising round in six years to give it a valuation of $33bn (£24bn). That makes it the UK’s most valuable venture-backed company, Europe’s second most valuable fintech company and more valuable than high street banking giant NatWest (NWG).
There’s little in the reported numbers to justify such a wild valuation. Customer numbers (up 45 per cent in the retail arm and 127 per cent in the business arm in 2020) might be heading in the right direction, taking customer balances (up 96 per cent to £4.6bn) and total revenues (up 57 per cent to £261m) along for the ride. But losses are widening as the company bears the true cost of being a bank - administrative expenses rose from £125m in 2019 to £266m in 2020 as management enhanced its risk and compliance functions.
There is also little in Revolut’s roster of products to differentiate it from its wave of peers in the fintech space. Type ‘pre-paid payment cards’ or ‘foreign exchange services’ into Money Saving Expert and you’re scrolling for a long time before you land on Revolut’s products. Its share dealing and commodities services are hardly unique amid the huge volumes of investment apps clamouring for a space in the growing market, while its crypto exposure is more alarming than anything else - the alternative currency space is still in its infancy and is prime territory for money laundering.
Banking services have been up and running in Lithuania and Poland for the best part of a year and at the end of 2020, the company was lending just £1.4m. Compare that with Lloyds (LLOY) which in 2020, provided more than £6bn of lending to small and medium businesses, £10bn to help Brits buy their first home and £12bn to support government Covid-19 recovery schemes. And that isn’t even acknowledging the fact that Lloyds accounts for 19 per cent of the UK’s £77bn mortgage market or 25 per cent of its credit card balances. Revolut is supposably worth 70 per cent of Lloyds stock market value. Madness.
