Revolut sees losses double despite cashing in on cryptocurrency boom

Banking app Revolut saw losses almost double in 2020 despite cashing in on the cryptocurrency boom, as it continued to expand rapidly around the world and saw staff costs jump.

The fintech company chaired by the former boss of Standard Life Aberdeen, Martin Gilbert, said it made a £39million gain on its cryptocurrency investments last year.

Revenues rose 34 per cent to £266million as Revolut, which allows users to trade anything from bitcoin to gold, saw growing demand for its trading services.

Crypto boom: Revolut made a £39million gain on its cryptocurrency investments last year

The banking app said it turned a profit in the last two months of 2020, which coincided with the beginning of a huge rally in the price of Bitcoin and other cryptocurrencies.

But continued investment in expanding its business around the world – it launched in the US, Australia and Japan last year – saw administrative and staff costs jump, pushing losses higher.

Pre-tax losses widened to £207.8million, from £107.7million in 2019, as administrative costs rose to £266million, from £125million in 2019. 

That was driven by £170million of staff costs, which is almost three triple the wage costs it incurred last year. 

Founder and chief executive Nikolay Storonsky, a former Lehman Brothers trader, said the company had ‘significantly improved’ profitability this year.

‘We launched 24 new retail and business products, expanded into the US, Japan and Australia and launched banking services in Lithuania, all while significantly improving our profitability,’ he said. 

‘We began 2021 with a more resilient and productive business that will enhance our trajectory towards rapid growth.’

Revolut launched in 2015 with a pre-paid card offering money transfers and free currency exchange. 

It then expanded to offer bank accounts, investments and tools for budgeting and saving money.

And unlike UK banks, it allows its customers to buy and sell a raft of cryptocurrencies, including bitcoin, litecoin, ethereum and doge, among the others.

Investors can load money onto Revolut from another bank account and exchange up to £1,000 into bitcoin for free. 

Above that those who don’t subscribe to either of its paid for accounts are charged 0.5 per cent, while it takes 2.5 per cent on the exchange rate too. 

It has benefited from a crypto boom over the past year, when the price of bitcoin went from just about $8,000 at the start of 2020, to an all-time high of around $65,000 in April this year before falling back in recent months, to around $32,000 today.  

Former boss of Standard Life Aberdeen, Martin Gilbert, is Revolut's chairman

Former boss of Standard Life Aberdeen, Martin Gilbert, is Revolut’s chairman 

Revolut has become one of the UK’s most valuable fintechs, valued at around $5.5billion in its last private fundraising round. 

But the company still does not have a full UK banking licence, which it applied for at the end of last year, but said it hopes to be granted one next year, while it is also waiting for a US licence.

‘The process is not as fast as I wanted,’ Storonsky said.

Adjusted revenue, which included a 39 million-pound gain on the group’s cryptocurrency holdings, rose 57 per cent to £261million, driven by fees on prepaid cards and a surge in new clients, according to the annual report. 

The company had 14.5million retail customers at the end of last year, up 45 per cent, while commercial customers doubled to more than half a million.

The current year started positively, said newly-appointed chief financial officer Mikko Salovaara. 

Revenues increased by more than 130 per cent in the first quarter, according to the company.

The start-up, which was valued at $5.5billion in its last private fundraising round, is looking at raising more money in the coming months, Storonsky said, without giving further details. 

Sky News reported in April that Revolut was in the process of hiring US-based investment bank FT Partners to advise on a new equity fundraising that would value it at more than $10billion. 

Storonsky also said Revolut is working on expansion plans that could include Latin America, the Philippines, Indonesia, South Korea and India.

 It might consider acquisitions in some countries to speed up the process of acquiring banking licences.

A stock market listing, however, is not in Revolut’s immediate plans, according to Storonsky. ‘We don’t have a target in mind,’ he said. 

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