Revolut — the London-based, Russian-led $5.5bn fintech unicorn — appears to be having an identity crisis.
Earlier this month the firm applied for a full UK banking license so that it can start to offer overdrafts, loans and fully fledged current accounts to its three million-plus British customers. Over the past year or so Revolut has also hired a load of grandees from the world of traditional finance — such as Aberdeen Asset Management founder Martin Gilbert, now Revolut’s chairman, and former Goldman Sachs vice-chairman Michael Sherwood — in an apparent bid to shake off its reputation for being unreliable and unprofessional, and to become a grown-up financial institution.
And yet it often seems to behave more like a teenager.
The thing is, Revolut does already offer lots of good and sensible services for helping customers manage their money, such as budgeting and analytics tools, “savings vaults” with decent interest rates (or decent enough, given the times we live in), and a “linked accounts” feature that allows you to see all your various bank balances in one place.
But the problem is that none of those seem to make them very much money. So they also offer a load of much less sensible features for helping retail customers take on risks, such as cryptocurrency speculation, “commission-free” stock trading, and commodity trading, under the category of “Wealth”.
The only two months that yet-to-make profit Revolut has ever said it has broken even were in late 2017 and in November 2020. Here are those two time periods on a chart — guess what the chart is showing?
If you guessed something that rhymes with, er, fit loin, you guessed correctly.
Revolut declined to tell us which segments powered its profitability in those two particular time periods, nor whether they had managed to stay in the black since November. But we do notice that their two months of profitability seem to coincide quite neatly with the months in which the price of bitcoin suddenly surges. So we can see why the company is so keen to push that particular class of gambling trading.
And they do really push it.
This is what this serious financial institution sent via push-notification to customers on its app last week (you can see the same thing on its blog):
Yes, Revolut wants its customers to “celebrate” a milestone that literally doesn’t exist. We have said it before and we will say it again: there is no such thing as a “market cap” in the world of crypto. Revolut goes on to share the “fun fact” that “with Bitcoin leading the charge, it makes up $762bn of the total market capitalisation – which is more than Facebook! ($754bn)”
The most fun facts are always the ones that aren’t true.
Revolut goes on to present “3 ways Revolut makes trading crypto quick and easy”, which really feels like a plea for their customers to get involved in the market. Here’s number three (emphasis ours):
It took Bitcoin 11 years to get to $20,000, but only about 3 weeks to double that to $40,000. In 2020 alone, the value of bitcoin grew by over 400%. You can get in on the action from just $1 – starting small is OK! Remember, the value of assets is variable and can go down as well as up.
It has also taken less than three weeks for the price of bitcoin to crash by about 25 per cent — it was trading around the $31,000 mark at pixel time, down from a high of just over $41.500 on January 8. But strangely, Revolut hasn’t notified this to their customers.
Look, we understand that Revolut is trying to disrupt finance and to become “the world’s first truly global financial superapp”, so to moan that they are not behaving like a boring old bank might seem a little unreasonable.
But we also think it’s a little discordant for Revolut to simultaneously be trying to be taken seriously as a place that’s going to look after your hard-earned money, while also encouraging retail investors to get involved in highly frothy markets.
Of the main challenger banks that have emerged in the past few years in the UK, Starling Bank was the first to become profitable. It says its average balance in its consumer bank accounts is now £1,625 — that compares to a reported average balance of £250 for Revolut, and £359 for Monzo.
So why is Starling Bank doing so much better than its competitors? We think the main clue is in the name. The bank has been clear about what it is offering from the start, and hasn’t tried to jump on any high-risk bandwagons, temptingly lucrative as those might be. It might be less exciting than the other challenger banks, but its reputation is one of reliability and maturity.
To sum up: if Revolut really wants to be taken seriously as a bank, it needs to start behaving like one.
Still, even if it hasn’t achieved that yet, at least the company portrays a serious image in its marketing (screenshot from Revolut’s website, under the “influencers” tab):
Ahem.
Related links:
The virus has crushed the challenger bank dream – FT Alphaville
Revolut’s growing pains rumble on – FT Alphaville
No, bitcoin is not the “ninth-most valuable asset in the world” – FT Alphaville
Inside Revolut’s bid to be a bank – Sifted
Monzo: the bank that doesn’t want to be – FT Alphaville