Fintech firm Revolut moves closer to UK banking licence after first annual profit

Company criticised for late filing of accounts made profit of £26.3m in year to December 2021

Revolut, the UK’s most valuable fintech company, claims it is at the “finish line” of winning a UK banking licence, as much-delayed accounts revealed its first annual profit.

The company has been praised as a high-growth success story by leading UK politicians including the chancellor, Jeremy Hunt, but it has also been criticised for the late filing of accounts, as well as EU regulatory breaches and fines.

The company said IT glitches had delayed its accounts and that this had been fixed going forward.

However, the external number crunchers BDO said in the delayed 2021 annual report that its staff were unable to get a complete picture of some of the company’s revenue and as a result it, or other financial balances, could be “materially misstated”.

These issues meant the auditor was limited in its ability to detect “irregularities, including fraud”, it said.

It was able to confirm customers’ cash balances held with third parties and did not raise any warnings about Revolut’s future as a going concern.

Allegations of an aggressive work environment, which Revolut has denied, have also come under scrutiny as the company pushes toward a prized UK banking licence.

The fintech, which has ambitions to be the “Amazon of banking” and which cannot yet hold deposits or make loans to customers, made a profit of £26.3m in the year to December 2021. The company’s revenues rose from £220m in 2020 to £636m in 2021.

Mikko Salovaara, its chief financial officer, told the Guardian in an interview that the company was on the brink of getting a banking licence from City regulators: “I think we’re at the very last stages. Really at the finish line.”

Salovaara said the UK licence was a step towards achieving Revolut’s aim of becoming a “truly global bank”. It would allow the company to offer “an increasing set of services to our customers, particularly credit,” he added.

Revolut did not put a deadline on when it expected to receive a UK banking licence in the 2021 report, instead saying it was “in the advanced stages of its application” to British regulators.

It added that revenues exceeded £830m ($1bn) in the year to December 2022.

Nik Storonsky, its chief executive, said: “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.

“In 2021, we were granted a full banking licence from the European Central Bank and welcomed millions of new customers.”

Revolut’s accounts for the year ending December 2021 were due to be published on the British business register, Companies House, in September last year. An extension up to December was then also missed by the fintech.

The delay is understood to have come after BDO, which has been Revolut’s auditor since 2018, was chastised by the accountancy regulator for the “unacceptable” quality of a string of company audits – which, according to the Financial Times, included Revolut.

The FT report claimed Revolut was the unnamed company behind accounts that the Financial Reporting Council said suffered from an “inadequate” approach to the way revenue was recognised.

This process appears to be referenced in Revolut’s 2021 annual report. It states that the FRC’s audit quality review team examined BDO’s assessment of Revolut’s December 2020 financial statements and that “matters” were raised. An attempt to address these issues was “incorporated into the 2021 audit plan” and there were “changes made to the audit strategy and approach”.

Salovaara said the lengthy delays in publishing critical financial information were caused by having IT systems for accounting that were not fit for the company’s larger scale in 2021.

“It [Revolut’s growth] outgrew the initial implementation of IT systems around and specifically for accounting. We recognised that and we remediated it.

“It’s a one-off. We don’t expect further delays on an ongoing basis in our accounts.”

As a result, Revolut’s senior managers who oversee its financial reporting concluded “the [2021] audit was effective and that none of the matters raised brought into question the integrity of the prior year financial statements”.

Revolut declined to address specific questions from the Guardian on the turnover of its compliance employees last month. These staff ensure businesses follow regulations, including those on sanctions and anti-money laundering.

However, in the 2021 report published on Wednesday it said: “Last year we reported a significant expansion and upskilling of our risk and compliance function in terms of people, processes, tools and infrastructure, which was commensurate with Revolut’s customer and commercial development.”

It added that it had increased its headcount in this area from 147 to 206.


Anna Isaac City editor

The GuardianTramp

Related Content

Article image
Fintech firm Revolut assembles behavioural team after criticism of its corporate culture
Exclusive: Company denies creation of team to track overhaul is part of effort to secure UK banking licence

Kalyeena Makortoff Banking correspondent

16, Jan, 2023 @10:49 AM

Article image
Revolut becomes UK’s biggest fintech firm with £24bn valuation
Surge comes after banking app raised $800m from new investors Tiger Global Management and SoftBank

Kalyeena Makortoff Banking correspondent

15, Jul, 2021 @6:57 PM

Article image
Cryptocurrency boom fails to stem losses at UK fintech firm Revolut
Losses almost double last year despite growing demand for crypto trading pushing up revenues 34%

Kalyeena Makortoff Banking correspondent

21, Jun, 2021 @10:53 AM

Article image
Revolut valuation makes little sense when compared with Lloyds | Nils Pratley
How can this six-year-old fintech firm be worth £24bn, supposedly 70% of Lloyds’ stock market value?

Nils Pratley

15, Jul, 2021 @7:19 PM

Article image
Revolut’s place as UK’s top fintech firm at risk after Schroders writedown
Asset manager suggests its stake could be worth less only 18 months after investing almost £10m

Kalyeena Makortoff Banking correspondent

24, Apr, 2023 @12:16 PM

Article image
UK ministers ask to meet Revolut amid reports it may be refused licence
Britain’s most valuable fintech firm has criticised regulatory hurdles that it says could drive it abroad

Kalyeena Makortoff Banking correspondent

19, May, 2023 @1:56 PM

Article image
Digital bank Revolut becomes UK's most valuable fintech startup
Valuation more than triples to £4.2bn after Cash injection by early Airbnb and Spotify backer

Kalyeena Makortoff Banking correspondent

25, Feb, 2020 @12:01 AM

Article image
Revolut: can the chancellor’s fintech favourite fix its image problem?
The UK’s would-be ‘Amazon of banking’ run by Nikolay Storonsky has raised alarm over delayed accounts, EU regulatory fines, its co-founder’s Russian ties and issues with staff

Kalyeena Makortoff and Anna Isaac

20, Feb, 2023 @5:00 AM

Article image
Banking tech could lead to discrimination, says ex-regulator
Banks can now more accurately identify ‘unprofitable’ or costly customers

Kalyeena Makortoff Banking correspondent

11, Nov, 2019 @4:23 PM

Article image
Fintech firm Wise valued at almost £9bn on stock market debut
Largest-ever flotation of a UK tech company boosts London’s hopes of attracting more listings

Mark Sweney

07, Jul, 2021 @4:50 PM