Revolut reports its first full year of profit

Image credit: Revolut

All-in-one fintech app Revolut has released its 2021 annual report. While 2021 ended more than a year ago, this report includes some significant numbers as the company nearly tripled its revenue between 2020 and 2021. Due to this explosive growth path, the company reached profitability for the first time.

Revolut’s financial success starts at the top of the funnel. By the end of 2021, Revolut had more than 16 million customers, representing a 46% increase compared to 2020.

Revolut’s core product is an account for sending, holding and receiving money combined with a payment card. While Revolut has yet to obtain a banking license in the UK (its home country), the company now has a full banking license in Lithuania.

It can use this license in the European Economic Area through passport rules, which means that Revolut can be considered a bank in Europe. In addition to these basic banking functions, the company offers a ton of fintech products – but more on that later.

First, let’s look at the big numbers and convert them to dollars using today’s exchange rate:

• In 2021, Revolut generated 769 million dollars (636 million pounds) in revenue vs. 266 million dollars (£220 million) in 2020.
• In 2021, Revolut reported a net income of 31 million dollars (£26 million) vs. a net loss of $270 million (£223m) in 2020.
• Gross margin also jumped from 33% to 70% between 2020 and 2021.

“We have achieved our first full year of profit and demonstrated that we can accelerate customer growth at scale and increase revenue across all of our product lines,” Revolut co-founder and CEO Nik Storonsky said in the release. “In 2021, we received a full banking license from the European Central Bank and welcomed millions of new customers. We also launched several new products and saw more activity from our customer base.”

Everything moves up and to the right. In other words, it looks good at Revolut right now. That’s why the company was able to raise an $800 million funding round at a $33 billion valuation in mid-2021.

Generate revenue from crypto trading and other fees

Revolut’s income comes from several sources. While customers can create an account for free, users must pay some fees for some money management services. The most enthusiastic customers can also choose to pay for a premium subscription plan to waive some fees and access additional features.

On top of that, Revolut generates revenue from brokerage fees. Every time a Revolut user pays for something with a card, merchants have to pay some card transaction fees. These fees are shared between the merchant’s bank, the card scheme (e.g. Visa or Mastercard) and the card-issuing bank (in that case, Revolut). While Revolut only gets a small fraction of the transaction amount, it can add up when you have millions of customers.

Income can be divided into three major pillars:

• Cards and interchange represent 23% of total revenues ($180m/£149m).
• Subscriptions represent 17% of total revenues ($129m/£107m).
• Foreign exchange and wealth services represent 55% of total revenues ($421m/£349m).

While the first items are quite easy to understand, the last one includes quite a few Revolut services. Revolut started as a seamless currency app combined with a multi-currency card. Revolut charges at least 0.5% in exchange fees above a certain limit for free users. For everyone (including paid users), there are additional fees when exchanging money at the weekend or when exchanging an unusual currency.

Revolut also allows you to trade cryptocurrencies, shares and commodities such as gold and silver. For these financial products, Revolut charges some significant fees – between 1.49% and 1.99% for crypto transactions, between 0.5% and 1.5% for precious metals.

2021 was a special year with a crypto boom that led to an increase in crypto transactions as well as some renewed interest from retail investors in stocks. Remember that 2021 started with the GameStop short squeeze at WallStreetBets.

Although 2022 may not look as dramatic as 2021, Revolut already shared a brief preview of last year’s numbers. By 2022, the company’s revenue once again increased to more than $1 billion (£850 million). That’s a 30% increase, which is much lower than the 189% increase in 2021. Still, many large startups would be quite happy with a 30% revenue jump. Revolut now has 27 million customers.

Now it’s time to stabilize the business as Revolut failed to release its accounts on time. If the company wants to go public in the coming years, it must improve its internal processes. It will also help when it comes to getting a banking license in the UK