Earlier this 12 months, the UK-based fintech firm Revolut ended its banking relationship with a major buyer. Quickly after, a strategic partnership supervisor at Revolut pasted wording from a criticism by the shopper about its remedy into an inside messaging board, seen to numerous staff.
The corporate’s international head of gross sales replied on the general public Slack channel, asking the identify of the corporate. “OnlyFans Ltd,” the unique poster replied, referring to the corporate greatest identified for internet hosting grownup content material. The publish earned him 37 smiley face emojis, based mostly on a screenshot seen by the Monetary Instances.
In a press release, Revolut acknowledged the knowledge was dealt with improperly, however stated “no delicate data was mentioned” and that each worker receives annual confidentiality coaching.
However one Revolut staffer who learn the alternate on the time describes it as a “notably egregious” instance of how the fintech shared extensively data on shoppers “when it was not applicable”. Whereas it was not unlawful, the individual provides, it risked embarrassing the shopper and making Revolut look unprofessional. OnlyFans declined to remark.
The best way this shopper communication was dealt with appears attribute of a streak of immaturity that runs via the enterprise, judging from interviews with greater than a dozen former Revolut staffers, lots of whom left up to now 12 months, and others who’ve handled the corporate.
The inner lack of restraint has not prevented them successful greater than 25mn clients who use the Revolut platform for every part from funds to international alternate, and a far greater valuation than its neobank rivals.
However after seven years in operation, the challenges dealing with Revolut counsel it’s time to develop up. The corporate is staring down the prospect of more durable regulation by the European Central Financial institution because it pursues European banking ambitions. UK regulators are but to grant Revolut the banking licence it utilized for in January final 12 months, which chief govt Nik Storonsky says is essential to the corporate’s broader ambitions.
The fintech can be attempting to handle what insiders say are undesirable cultural and operational points on the agency.
The UK’s Monetary Conduct Authority, which together with the Financial institution of England, holds the important thing to the banking licence, final 12 months carried out a overview of the corporate’s tradition, which raised alarms inside Revolut. The FT has additionally learnt of a separate overview requested by the FCA in 2020 into danger administration on the agency.
In 2019, earlier than it utilized for financial institution standing, monetary management was a “weak level,” says one former Revolut govt. “[It] was a basic firm that had grown very quick and didn’t have lots of people with the required monetary companies and regulator expertise.”
Revolut denied that allegation and stated it “takes its obligations in relation to monetary crime extraordinarily severely. We proceed to speculate considerably in each our folks and programs to additional develop and strengthen our controls.”
Now, as a recession looms which has already battered valuations at friends, Revolut should persuade the gatekeepers of world banking programs that it is able to take the following step in its growth.
‘A identified difficulty with tradition’
Revolut has a brutally frank inside tradition, by its personal admission. The corporate’s web site boasts of being “radically truthful about one another’s efficiency”, and giving trustworthy suggestions in a means that “may harm generally”.
The corporate places a pointy give attention to assembly targets, which some say impressed extreme danger taking. “It drives unhealthy behaviours . . . and makes folks very combative towards one another. Usually good folks,” says one other former staffer.
“There’s undoubtedly a identified difficulty with tradition,” says one former govt at Revolut group, describing a “cut-throat” surroundings that prevailed. Revolut stated it has a “excessive efficiency tradition” that’s “various, supportive, and encourages folks to be the perfect.”
Turnover appears sizeable. Publicly accessible knowledge from LinkedIn suggests the median tenure is about 0.8 years, decrease than figures for these at rival fintechs akin to UK neobanks Starling and Monzo or Swedish funds pioneer Klarna.
Revolut stated it didn’t settle for Linkedin’s knowledge, and stated its personal information present common tenure is a 12 months and a half. In exit interviews, they stated, 80 per cent of respondents say their expertise of working there was optimistic.
The cultural tone is about from the very prime, insiders say, by Storonsky, the corporate’s 38-year-old Russia-born co-founder.
“He’s extremely targeted and extremely decided and makes no excuses for who he’s. And for lots of people that’s actually onerous to abdomen,” says Nick Hungerford, the Nutmeg founder who received to know Storonsky via the UK fintech scene they each got here up in.
Storonsky made a advantage of his plainspokenness and outsider standing, saying that when he and his co-founder began Revolut “we simply didn’t know a lot about funds in any respect . . . We simply had this concept that we wish to do it without spending a dime. So we jumped in.” In mid-June, he publicly lambasted the UK regulators making him wait indefinitely for a banking licence.
Hungerford says he doesn’t help each remark Storonsky has made, however says his frankness has produced admirable outcomes. “If he was extra . . . reserved we wouldn’t get what we get along with his ferocity of growth.”
Storonsky’s administration fashion raised some hackles internally. “There was plenty of solo decision-making versus group decision-making,” a former group govt says.
A choice to shut key companies in Eire in 2021, for instance, was “all Nik,” the individual says. Whereas the choice was sound, they add, the method round making it was not.
“I discovered about [Revolut planning to offer] UK mortgages when Nik introduced it at a convention someplace,” says one other former senior govt concerned within the UK financial institution utility.
In 2019, Revolut appointed Martin Gilbert, former co-chief govt of asset supervisor Abrdn, as its inaugural chair, who stated he was proud to carry his “deep expertise of company governance” to the corporate. However the board was seen by some “as a hindrance greater than something,” within the view of the previous group govt.
Requested to touch upon Storonsky’s oversight and involvement within the agency, Revolut stated: “Like most founder CEOs, Nik has a 360° view of the enterprise and is actively concerned in all elements of Revolut.” He sits at a desk on an openplan ground, it added, and is contactable “at any time”.
On the query of the board, it famous that Storonsky meets with Gilbert weekly, and that collaboration is “tantamount to our collective success”.
A number of former staff say that Storonsky unnerved executives by putting in younger graduates as “founder associates” to look at enterprise strains and report instantly again to him.
Typically these founder associates, normally males of their early 20s, had been appointed to run divisions if Storonsky was sad with present administration, say former executives. One was put accountable for knowledge in 2019, and one other given oversight of expertise acquisition in early 2020.
Revolut stated founder associates had been often called “working principals” for the previous 12 months and supply “experience on distinctive and sophisticated initiatives, normally within the short-term”.
The FCA declined to touch upon or verify a cultural overview of Revolut, however such assessments can study problems with management and governance. The critiques are “very uncommon” and “undoubtedly a sign the FCA is uncomfortable”, an individual accustomed to the regulator’s course of says.
Revolut stated that these sorts of cultural critiques will not be uncommon, and are a part of its “ongoing supervisory relationship” with the FCA, which already oversees its UK funds enterprise. “We welcomed the chance to showcase our wholesome tradition,” it stated.
The corporate held inside shows on work tradition after the FCA’s overview, two folks inform the FT, and a number of other say they had been informed when being interviewed that the fintech’s tradition was altering.
Nonetheless, one govt who give up earlier than the FCA overview says he left Revolut partly as a result of he couldn’t persuade Storonsky to alter the tradition in a extra significant means.
“Some firms, the founder is a nasty individual, poisonous, that’s not Nik. He’s only a machine. He has no EQ and that results in a excessive friction tradition,” the individual says, including that he would converse to Storonsky at size on tradition and the CEO “struggled to grasp a plan of action” to repair it.
A present Revolut govt suggests there wasn’t that a lot to repair anyway. “There was nobody single occasion [regulators] have been capable of level at of so-called tradition resulting in a nasty buyer consequence,” the individual says.
In a publicly streamed dialogue with an investor on November 17, Storonsky in contrast his workforce to “elite athletes” who “wish to win, wish to be no 1,” and stated he acts as a “coach” serving to them attain their objectives. “Being within the crew implies that you be taught from the perfect, actually quick.”
“Nobody will keep within the crew eternally,” he added. “Everybody understands and accepts it.”
Watching the watchdogs
The FCA’s cultural overview is barely the newest signal that UK regulators have been scrutinising Revolut extra intently than earlier than.
In 2020, the FCA requested an impartial professional perform a overview of Revolut’s measures to forestall and detect monetary crime, a course of often called a bit 166.
The regulator doesn’t disclose particulars of part 166 requests, however says on its web site it asks for such critiques “if we’re involved or need additional evaluation”.
The FCA did not too long ago grant approval for Revolut to hitch a register of firms allowed to supply cryptocurrency companies within the UK. The banking licence, nevertheless, stays elusive.
Folks accustomed to Revolut’s regulatory dealings inform the FT that UK regulators expressed considerations in regards to the firm’s cash laundering controls. There have been additionally considerations about operational points like the truth that the one method to contact Revolut is thru its app, so non-customers who’ve considerations about fraud have nearly no method to get in contact.
Storonsky’s private interventions haven’t helped, says one regulatory supply. “Having a go on the regulator is . . . not very efficient.”
Revolut’s regulatory challenges have been exacerbated by a string of high-profile departures from its danger and compliance groups, and extra strain from auditors after watchdogs warned of the “unacceptably excessive” danger of flaws in its accounts.
Requested how shut Revolut is to having a full govt crew on the UK financial institution, the corporate stated: “The UK financial institution has the suitable executives in place to ship the financial institution licence and can after all have a full crew upon authorisation.”
The FCA and BoE each declined to touch upon the licence utility.
Because the UK’s regulators clamoured for extra data to help the banking licence, a typical view inside the fintech was “properly, the Financial institution of Lithuania don’t want that”, two former Revolut insiders informed the FT.
Revolut’s relationship with the Financial institution of Lithuania dates again to 2018, when it was awarded a licence to supply banking companies akin to present accounts and loans all through the EU from its Vilnius-based operation.
Three years later, it merged its EU funds enterprise with the Lithuanian financial institution, making a a lot greater pan-European firm with a broader licence which was accredited by the ECB.
Till now, Revolut’s European entity has been primarily overseen by the Financial institution of Lithuania. However after a overview early subsequent 12 months, it’s more likely to meet the edge for direct supervision by the ECB, which oversees the eurozone’s largest and most systemic banks.
When it falls underneath the complete aegis of the ECB, Revolut will likely be handled to a “complete evaluation”, masking every part from asset high quality to danger administration and inside modelling. The overview may also department into areas like anti-money laundering controls.
Day-to-day exercise may even be totally different. “Our supervisors are a bit extra heavy handed,” one individual accustomed to the ECB’s method stated. “The quantity of strain, the knowledge we ask for, there’s a transparent distinction [from national supervisors].”
Revolut may even have so much much less high-level entry underneath the brand new regime. Its senior executives had audiences with the governor of the Financial institution of Lithuania; they’re unlikely to spend a lot time with ECB president Christine Lagarde.
The corporate stated it “proactively and voluntarily sought ECB consolidated supervision” and that the change will imply little to the corporate by way of the character of its oversight.
But it surely not too long ago had a brush with its present European regulators. On November 16, the Financial institution of Lithuania censured Revolut’s European funds enterprise for its failure to submit audited monetary statements in time, and warned it over its dealing with of client complaints — together with instances of “incomplete, unsubstantiated solutions” and missed deadlines.
Revolut’s European financial institution, which merged with the funds enterprise final summer season, was fined €70,000 for the delayed monetary statements.
The corporate stated it had already taken steps to handle the problems with buyer complaints highlighted by the Financial institution of Lithuania. It stated “technical causes” that prevented it submitting on time have since been resolved, so it won’t occur once more.
Licence to thrive
Cracking the house market within the UK stays the prize for Revolut, nearly two years after making its banking licence submission.
“The largest restrictor in not having a banking licence is that the funds clients have with Revolut must be safeguarded,” says one former govt with data of the enterprise mannequin. “While you turn out to be a financial institution, these restrictions go away . . . there’s much more freedom to do what you need with buyer deposits.”
PitchBook analysts Rudy Yang and Robert Le say “additional delays in acquiring a UK banking license may forestall Revolut from attaining greater profitability from lending to shoppers”.
The UK delays are additionally hurting Revolut’s broader ambitions. “The UK is a bottleneck for different licences,” Storonsky informed a convention in November. The corporate has drafted an utility for a US banking licence, and can be wanting to increase operations in Australia. However the CEO says regulators there may make their licences conditional on Revolut getting one in its residence market.
Nonetheless, even with banking licences, consultants say Revolut, like each different lender, will undergo as demand for credit score dries up in a worsening financial system.
The PitchBook analysts say Revolut’s funds enterprise may additionally come underneath strain from “decrease spending volumes”.
Others provide a sunnier take. Gilles Chemla, finance professor at Imperial Faculty, says Revolut can profit from the downturn. “If Revolut continues to increase and is contrarian whereas everybody else shrinks you may count on them to be one of many winners.”
In a press release, Revolut says it’s well-prepared for a declining financial system. “We’re in a powerful place to speed up our progress, as managing cash successfully turns into much more essential.”
Not like different large fintechs, Revolut hasn’t introduced widespread lay-offs or a cost-cutting programme. However insiders say it had already launched a sequence of cost-saving initiatives earlier than the financial system started to show.
A former govt says that in June 2021 all division heads had been informed to justify any open jobs. One former recruiter stated she and her colleagues had been ordered to droop hiring in high-cost areas.
No matter its challenges, Revolut has the luxurious of dealing with them largely in personal. The final set of significant accounts it filed date again to 2020. The following set received’t land till the top of the 12 months.
“We’re not planning fundraising as a result of we don’t actually need it,” Storonsky informed the Internet Summit convention in November. “Clearly buyers are nervous about their portfolios. It’s a tough time for the enterprise trade.”