Last month, fintech behemoth Revolut filed its first annual results since securing a $45bn valuation and obtaining its long-awaited UK banking licence last summer.
Founded in 2015 by Nik Storonsky and Vlad Yatsenko as a financial travel app, Revolut recently achieved profitability for the second year in a row, bolstering its position as Europe’s most valuable fintech.
Officially valued at $45bn following August’s secondary share sale, recent media reports have suggested Revolut could have an even higher price tag.
In March, shareholder Schroders upgraded the value of its stake in the company to imply a valuation of $48bn and earlier this month, it reportedly rejected a secondary share sale that would’ve valued Revolut at a lofty $65bn — but does that valuation stack up?
The year-on-year growth and diversified revenue streams shown in Revolut’s latest results do justify its valuation to some extent, fintech industry watchers tell Sifted — but the case isn’t closed just yet.
Now the pressure is on for Revolut to sustain its breakneck growth if it hopes to exit at or exceed its current price tag.
One investment banker in the fintech space, who spoke to Sifted on the condition of anonymity, says: “In order to justify the valuation, you need to assume they’ll still be growing at a similar pace in a few years.”
How does Revolut make money?
According to figures covering year-end 2024, Revolut posted £1.1bn in pre-tax profit compared to the £438m the year prior. Revenue also grew from £1.8bn to £3.1bn, thanks largely to an 83% jump in fee income, which accounted for £2.2bn of revenue.
Fee income is revenue earned by providing services and or charging for specific transactions in accounting speak. For Revolut, that includes fees earned on card transactions, wealth trading, foreign exchange and its subscription product.
“The fact that all of Revolut’s key businesses showed such strong growth is pretty impressive,” says Russell Burns, an analyst at financial platform Finimize.
The remainder comes from interest income, the revenue brought in by Revolut’s interest-incurring financial products, which grew close to 60% year-on-year. Revolut is currently only able to lend to customers in Europe where it’s held a banking licence since 2021 (that will soon change once Revolut exits the mobilisation stage of its UK banking licence process).
Revolut’s Brazilian cousin
As Revolut continues to scale, some fintech watchers tell Sifted they expect its revenue to mirror that of NuBank, which makes most of its money from lending.
The Brazilian neobank, which IPO’d on the New York Stock Exchange in 2021, is Revolut’s closest comparison in the public markets but boasts much heftier financials. In 2024, Nubank made $11.5bn in revenue with a pre-tax profit of $2.8bn and has over 100m customers compared to Revolut’s 50m.
At the time of writing, Nubank had at market cap of $62bn — 37% higher than Revolut’s pricetag. On the surface, that might suggest Revolut needs to produce similar figures if it hopes to IPO at its current valuation.
But Revolut has the advantage of acquiring market share in the developed markets of the UK and Europe. Companies focusing on emerging markets like Brazil typically trade at lower valuations, says Finimize’s Burns.
“Nubank’s revenue growth is expected to accelerate in 2025 and 2026 at an annual rate of around 28%, and net profit around 40%,” says Burns. “So if Revolut grows at a faster rate, it can justify the higher valuation. “
Trading boom
After fees earned on card payments and interest income, Revolut’s wealth trading products are the third-largest contributor to the company’s revenue, bringing in just over half a billion.
In Revolut’s most recent set of financial results, the company wrote: “Wealth revenues grew 298% YoY, driven by increased crypto trading activity as observed throughout the industry and the launch of the Revolut X crypto exchange.”
One fintech investor, who tells Sifted they previously passed on investing in consumer neobanks like Revolut in favour of fintechs focused on the infrastructure level, says the company’s crypto activity means its success is linked to more “volatile” corners of the financial services industry.
Revolut first reported pre-tax profitability in results covering 2021, largely thanks to an uptick in crypto trading on the platform. A year later, however, the company sank back into the red for results amid a wider pullback in the digital asset market before returning to operating in the black in 2023.
“Trading is cyclical,” the fintech investor tells Sifted. “Sometimes you’re going to make lots of revenue, sometimes the market is just much quieter.”
Licence to bill
Still, public market investors are likely to view its reliance on fee income favourably, provided it can continue to show growth. “A lack of lending means it does not have to deal so much with the risk of non-performing loans,” says Finimize’s Burns.
Fee income typically incurs fewer expenses compared to interest income, so are higher margin compared to interest income. Profits from lending money are typically small as banks can’t charge much more for loans than they can pay for customer savings account deposits.
Revolut is currently preparing to enter the mortgage market in Lithuania, France and Ireland this year — and once it’s exited the mobilisation stage of its UK banking licence process, it’ll also be able to lend to customers there as well.
Getting that licence — once a long-running question mark hanging over Revolut’s long-term prospects — likely contributed to the company’s fast-growing valuation.
But while the fintech has a track record of successfully foraying into new product verticals, ramping up lending activities and pushing into mortgages will test whether consumers trust Revolut with some of the biggest financial decisions of their lives — the result of which will be a key decisionmaker if it can live up to its pricetag.
“Fee income is where they’ve executed super well,” says the fintech investor. “But I think they are very conscious that if they want to continue to grow at the pace they’re going, they’ll need to grow their interest income.”
Read the orginal article: https://sifted.eu/articles/revolut-value-valuation-ipo-45/
