Revolut revenue drama 🎭; Railsr is going off track and to the wall 🛤 🧱; FTX's massive shortfall is finally revealed 💸

FinTech is Eating the World, 7 March

Hey Everyone,

Good morning! I’ve been eager to publish this issue since last week (you will learn why later), so it’s definitely the best one yet (& worth the wait!). We’re going to look at Revolut revenue drama (red flags, things that don’t add up & why it’s a big deal), Railsr which is going off track and to the wall (is embedded finance over?), and FTX whose massive shortfall is finally revealed (it’s a huge huge hole!). Let’s jump straight into the hot and spicy stuff 🌶

Revolut revenue drama 🎭

The (still hot) news 🗞 FinTech giant Revolut last week has finally released its financial accounts. For 2021 🙃

I was deliberately delaying covering this story as I was expecting some solid follow-up commentary from Revolut, or at least more information.

Yet, nothing worthwhile came in, so let’s unpack this drama as it stands.

More on this 👉 Here are the key things from the much anticipated, and twice delayed, financial accounts for Revolut:

• Revolut onboarded more than 5M retail customers in 2021, and the number of users on paid plans increased by 75%. Not bad!

• The number of weekly active users grew by 50% with customer average spend growing by 10% per user. Revolut didn’t specify how many active users it has, which might make one assume it’s not much. Some former Revolut execs told me that number is 5-10%. That’s very small, if true.

• Revolut also rolled out banking services to 18 European countries in 2021 and closed the year with almost 2M customers, 10x the number from the previous year. Solid!

• The Super App wannabe reported revenues of £636.2M ($767.1M) for the year, which is 3x of what it made the previous year. That’s nice! 👏

  

  Credit: Robert Collings

• This swung the digital bank to a pre-tax profit of £59.1M. For the perspective, in 2020, Revolut recorded a pre-tax loss of £205M. That’s quite a pivot 👏

Below is a good visual illustration of how Revolut makes its money, in 2020 vs. 2021:

As you can clearly see, most of neobank’s revenue is from FX & wealth (that includes crypto) and cards & interchange. This is a very important thing to keep in mind.

BUT…

Houston, we have a problem🚨 Actually, it’s not we - it’s they. BDO, Revolut’s auditors, weren’t impressed by their results at all.

Not only did they QUALIFIED the audit report (this is a pretty big deal on its own). More importantly, BDO concluded that because of limitations in Revolut's control environment, they were unable to verify £477M of revenue. In other words, 75% of Revolut's revenue was impossible to be confirmed by the auditors. This basically means we're just trusting Revolut on that number 🤷‍♂️🚩

Here’s more on this + other things that don’t add up + why it’s a big big deal: