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Inside Revolut’s bid to be the Amazon of banking

Revolut CEO Nikolay Storonsky speaks onstage at the TechCrunch Disrupt conference in San Francisco, California.

Kimberly White | Getty Images

“Get sh– done.”

Those are the words on a neon sign at fast-growing fintech firm Revolut’s London headquarters. The first two letters of the word in the middle aren’t lit up, though, so it read “get it done” instead.

It’s a bit of fun, of course. But it’s also an indication of the mentality of a company looking to disrupt banking in the same way Amazon took on retail. Revolut wants to succeed in being a global financial player, and failure isn’t an option.

Set up in July 2015 by two former bank employees, Revolut’s founders had an initial vision of eliminating the fees involved in foreign exchange transactions. It gained a following with a service that lets users spend abroad at the real exchange rate, no fees attached.

“When we started this business, we just didn’t know much about payments at all,” Nik Storonsky, Revolut’s CEO, told CNBC in an interview. “We had this idea that we want to do it for free. So we jumped in.”

Storonsky, who previously worked as an equity derivatives trader at Lehman Brothers and Credit Suisse, said that one of the first big lessons he learned setting up the business was just how many middlemen there are in finance. The solution? Bringing the infrastructure behind it in-house.

“Effectively when you run all the infrastructure in-house, you can actually make money out of this business, and the business becomes quite profitable,” Revolut’s boss said.

Revolut isn’t a profitable business yet, however. Its most recent annual results showed a £15.1 million ($19 million) loss for the year 2017. But boss Storonsky laid out the strategy for the firm to eventually turn a profit.

“The whole idea was we provide the product for free, then we cross-sell other services. So we just need to have large customer numbers,” he said. The company has added a number of new features to the app in recent years, including cryptocurrency trading and business accounts.

Revolut says that becoming profitable is not a priority for the time being, however, with expanding globally being the main focus for the firm.

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The company is one of several so-called challenger banks that are looking to shake up the finance industry with little more than an app and a bank card. The phenomenon has helped spur established lenders on to make new retail banking platforms aimed at helping users better manage their money.

Revolut has more than doubled the number of users signed up to its platform to 5 million since June last year. It’s also amassed about $336 million in venture capital funding and was last valued by investors at $1.7 billion, making it a so-called “unicorn.” But the road to where the company is today hasn’t been without some bumps along the way.

What happened?

Revolut was the subject of negative media coverage earlier this year. A Wired report on the company highlighted toxic workplace behavior and high employee turnover, while multiple reports out of The Telegraph suggested a lapse in the company’s sanctions screening system could have resulted in illegal transactions going through.

Employees with a performance rating that missed expectations significantly “will be fired without negotiation after the review,” Storonsky told staff on the workplace messaging tool Slack last year, according to a screen grab obtained by Wired.

“There were some moments that were true in the Wired article,” Revolut’s CEO said, without pinning down which of those claims were valid.

But, he adds, most of the events referred to in the story were from three years ago, in the early days of the company’s existence, when it was just a start-up with 20 members of staff. It’s now a team of more than 1,200 workers in total, he says, and has learned to prioritize responsible growth over expanding at any cost.

“Now we’re different, the culture is not the same as it was,” Storonsky said. “I guess when we grow to 5,000 people, the culture will change again, because it’s impossible to have the same culture for 20 people as for 5,000.”

As for the Telegraph’s reporting, Revolut and its boss have strongly pushed back on the suggestion they could have allowed a breach of money-laundering rules.

The newspaper claimed Revolut had switched off a sanctions screening system, and that thousands of transactions went through without undergoing compliance checks. The ordeal even resulted in questioning from the Financial Conduct Authority, the U.K.’s finance watchdog.

Revolut explained that it only temporarily reverted from a new system to its existing controls because the more advanced one flagged more payments than was necessary.

Storonsky said the debacle was the result of Revolut “not having proper corporate communication in-house,” as well as a “desire for journalists to publish something quickly without adhering to the truth.” The firm is hiring a public relations consultancy called MHP Communications to prevent something similar happening again, he added.

“It was a good lesson for us. I mean obviously it was painful, but sometimes you need to get through a lesson in order to grow.”

What next?

As for Revolut’s future, the company is looking to prioritize an ambitious global expansion strategy at the same time as launching a number of new product features.

It recently launched in Australia, its first market beyond Europe, and is hoping to make waves in the U.S. later this year. It’s made no secret of its plan to take on America’s banking giants, and Storonsky said the company is “close” to making that happen.

“It’s a tough market to crack, there’s a lot of complexity, especially with our product which is multi-currency,” he said. “We always wanted to launch a multi-currency product to U.S. customers because I think that’s where our edge compared to U.S. banks.”

The U.S. has proven to be a challenging battleground for many European fintech start-ups, with others like Monzo and N26 also looking to expand into the country. Monzo only recently announced plans to issue cards in some U.S. cities, while N26 was expected to launch in America early this year.

On the product side of things, Revolut is set to debut its own commission-free stock-trading service “very soon,” Storonsky said. The move would see it compete with Robinhood, the $5 billion investing app taking on Wall Street, especially as the company looks to bring its platform to the U.S.

Funding may also be on the agenda this year. Revolut is reportedly looking to raise as much as $500 million. While the company says it’s not actively fundraising, Storonsky says he told investors Revolut will most likely raise fresh cash in September. He also referred to Japan’s tech investment giant SoftBank as a “potential partner” to the firm.

Meanwhile, an EU bank license the firm obtained last year through Lithuania’s central bank will help Revolut eventually expand into new areas like credit. The move saw it join the ranks of British peers Monzo and Starling, which are also regulated like banks.

Revolut’s bank license wasn’t without controversy, however. Lithuanian authorities pushed for the authorization to be reviewed for a third time earlier this year, amid concerns over Storonsky’s father working for Russian state-owned gas firm Gazprom.

For his part, Storonsky, brushed off the affair, saying it’s just “part of political life” in the Eastern European country. The Russian-born entrepreneur says he moved to the U.K. 15 years ago, while the company has denied any connection with the Kremlin.

Storonsky added that the company wants to build a “truly global bank.” As well as being authorized as a lender in the EU, Revolut plans to apply for a banking license in the U.K. and the U.S.

“Generally in each country where we expand we’re going to seek a banking license with them,” he said.

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