Revolut reports first full year of profit

The all-in-one fintech app Revolut has released its annual report for 2021. While 2021 ended more than a year ago, this report includes some significant figures as the company nearly tripled its revenue between 2020 and 2021. Because of this explosive growth trajectory, the company reached profitability for the first time.

Revolut’s financial success starts at the top of the funnel. At 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 to send, hold and receive money combined with a payment card. While Revolut has yet to obtain a banking license in the U.K. (its home country), the company now has a full banking license in Lithuania.

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

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

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

“We have achieved our first full year of profit and shown that we can accelerate customer growth, at scale, and grow revenue across all of our product lines,” Revolut co-founder and CEO Nik Storonsky said in the release. “In 2021 we were granted a full banking licence 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 is moving up and to the right. In other words, things are looking great at Revolut right now. That’s why the company managed to raise a $800 million funding round at a $33 billion valuation in the middle of 2021.

Generating revenue from crypto trading and other fees

Revolut’s revenue comes from multiple sources. While customers can create an account for free, users have to 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 interchange fees. Every time a Revolut users pay for something with a card, merchants have to pay some card transaction fees. These fees are split between the merchant’s bank, the card scheme (Visa or Mastercard for example) and the card issuing bank (Revolut in that case). While Revolut only gets a tiny fraction of the transaction amount, it can add up when you have millions of customers.

Revenue can be broken down in three big pillars:

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

While the first items are quite easy to understand, the last one includes quite a few Revolut services. Revolut started as a seamless foreign exchange 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 you exchange money on the weekend or when you are exchanging an uncommon currency.

Revolut also lets you trade cryptocurrencies, stocks and commodities like 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 a spike in crypto transactions as well as some renewed interest from retail investors for stocks. Remember, 2021 started with the GameStop short squeeze on WallStreetBets.

While 2022 might not look as dramatic as 2021, Revolut already shared a short preview of last year’s numbers. In 2022, the company’s revenue increased once again to more than $1 billion (£850 million). It’s a 30% increase, which is much lower than the 189% increase in 2021. And yet, many large-scale 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 financial statements on time. If the company wants to go public in the coming years, it will have to improve its internal processes. That would also help when it comes to obtaining a banking license in the U.K.