Which UK neobank performed best in its latest results?

After a long wait for the last out of the gate Revolut, the UK’s top three neobanks have finally delivered their 2021 annual accounts.

And it was a landmark year for fintechs. After spending the first half decade of their existence with heavy losses, Starling and Revolut have created neobank (and fintech, and European startup!) history by posting its first annual profit.

Monzo said it is “on track for profitability” at the end of the current financial year.

So what do the numbers we have available tell us about how their performance compares?

The bottom line

Revolut has made the most dramatic turnaround in terms of bottom line. In 2020, it recorded the biggest loss of all three digital banks (£221m), but managed to reverse that to achieve the biggest profit (£39.7m) in 2021. It attributed significant growth in its customer base and revenues with higher margin products, which it said included crypto trading.

Starling’s turn to profit was fueled by a 93% revenue increase to £188m in 2021, after it entered the mortgage market.

Monzo, meanwhile, remained in the red – although it made a modest 9% improvement on its total losses, from £131m to £119m between 2020 and 2021.

Income growth

Both Revolut and Monzo have – rather unusually – given guidance on what we can expect for 2022 revenue. Starling hasn’t shared any such clues with us yet.

In a recent investor update, seen by Sifted, Monzo said it had achieved record revenue growth in 2022, and was on track to achieve annual profitability by the end of 2023.

Monzo’s annual earnings shot up 250% to £440m in the 12 months to December 2022 – a huge increase from the 92% revenue growth to £154m the neobank reported for the year to February 2022.

Revolut CFO Mikko Salovaara, meanwhile, told Sifted this week that it had increased revenue by 30% to £850m. This was a relative decline from the near tripling of revenue growth it reported for 2021 to £636m, up from £220m in 2020.

So which business areas are responsible for this increase?

Revolut has the most diversified income streams

Card transaction fees (known as intermediary fees) still formed an important part of all three banks’ business models in 2021.

But both Starling and Revolut have diversified the way they make money significantly – which played a big role in getting them to profitability in 2021.

Revolut’s currency and wealth division – which includes the crypto trading division – accounted for over half (55%) of total revenue in 2021. It benefited greatly from the pandemic crypto boom during the period: Salovaara told Sifted that crypto accounted for around 30% of total revenue in 2021.

He also said that this has fallen to around 5-10% of total revenue in 2022, and that Revolut has seen a “big shift back to payments” as its main money maker – so this chart is likely to look quite different when we have full 2022 results. Neobanken also increased the number of private and corporate customers paying subscriptions in 2021 by 75% – which includes the business banking division as well as the various paid subscription accounts.

Starling, meanwhile, swung away from focusing on private customers to businesses when Covid hit, and its participation in the UK’s Covid rescue loan schemes meant it increased lending to small businesses by more than £2.2bn in 2021. At the same time, the acquisition of the company. of Fleet Mortgages in July 2021 marked the neobank’s entry into mortgages. Both of these moves pushed up net interest income – which was the largest income stream at 65% of total income.

Card use still accounts for the vast majority (69%) of Monzo’s revenue. In 2021, it largely increased this revenue by increasing its customer base, but said in its financial report that customers had a strong appetite for the subscription products it launched in 2021. We could see subscriptions making up a larger share of total revenue in 2022.

Starling makes much more money per customer

By dividing the income by the number of active customers in the year, we can get a rough estimate of how much each user generated in 2021.

On this calculation, Starling came out on top, earning £69.62 per customer per year. Revolut followed with £39.75 and Monzo with £26.50. But it’s worth noting that Starling’s pivot to target small and medium-sized businesses with loans likely skews those numbers — since business loans are far higher than average consumer loans.

Revolut’s presence in non-European markets where interchange fees are higher will also increase this calculation.

Both Starling and Monzo are currently only available to UK customers. Starling has abandoned plans to scale its consumer offering into Europe, rather than expand bank-as-a-service offer abroad.

Meanwhile, Monzo’s COO Sujata Bhatia recently told Sifted that the neobank is now focusing on American expansion, and is hiring an American CEO to do so.

Revolut has the highest staff consumption

All three neobanks have managed to survive the past couple of years without laying off staff – unlike many of their European fintech peers.

Instead, they have all gradually increased their headcount – and their total staff costs reflect the size of their respective staffs.

A note about this comparison:

Each of the fintechs’ annual results can be read in isolation on their corresponding websites. All three companies follow slightly different reporting practices and their fiscal years are different from each other.

To present the figures, we have taken each financial year 2021-2022 as “2021” and each financial year 2020-2021 as “2020”.

That said, it’s worth bearing in mind that for each of the three, 2021 consisted of:

• The 12 months to March 2022 for Starling
• The 12 months to February 2022 for Monzo
• The 12 months to December 2021 for Revolut

And another additional note about Starling: The bank changed the reporting period last year, so that the figures for 2020 actually cover 16 months, from December 2019 to March 2021 – so it is not directly comparable with the other two figures for 2020.

We use profit before tax.

Amy O’Brien is Sifted’s fintech reporter. She tweets from @Amy_EOBrien and writes our fintech newsletter — You can register here.