How a bored ex-Lehman banker built a $33bn FinTech

Revolut, which has plans to enter India, has expanded significantly since Nikolay Storonsky launched it in 2015

Revolut's services now include bank accounts, international money transfers, cryptocurrency and stock trading, as well as bill payment and budgeting tools. Reuters

Nikolay Storonsky took seven years to quit investment banking. He worked at Lehman Brothers and Credit Suisse Group during his 20s before leaving the industry in 2013.

“As a banker I’d already reached the maximum,” Mr Storonsky, who traded equity derivatives for both banks in London, told Bloomberg four years later. “It became very boring.”

It was partly career malaise that prompted Mr Storonsky, who is originally from Russia, to co-found Revolut, which provides online financial services. Last week, Revolut raised $800 million from investors, including SoftBank Group and Chase Coleman’s Tiger Global Management, at a $33 billion valuation. At that level, Mr Storonsky’s stake is worth about $6.7bn, according to the Bloomberg Billionaires Index.

The latest financing will partly back the expansion of Revolut into the US and its entry to India, according to a company statement last week.

A Revolut representative declined to comment on Mr Storonsky’s shareholding.

The company’s valuation has soared six-fold from its last round in 2020 and is the latest financial technology firm to raise money at a striking valuation. In March, mobile payments firm Stripe became the US’s biggest start-up with a $95bn valuation following its latest fundraising round. Revolut’s local rival Wise went public this month through a direct listing and now has a market value of about $13bn, almost triple its valuation from 12 months ago. That sparked some fears about a valuation bubble.

Revolut has expanded rapidly since Mr Storonsky, 36, launched it in 2015 with Vlad Yatsenko, a technology developer who used to work for Deutsche Bank. It started out offering a pre-paid debit card with no foreign transaction fees, but its services now include bank accounts, international money transfers, cryptocurrency and stock trading, as well as bill paying and budgeting tools.

“The idea always was to expand beyond foreign exchange,” Mr Storonksy, a trained physicist, told Bloomberg in 2017. “We’re trying to launch as fast as possible, the speed of that is much more important to prioritise than setting a target for how big we want this to grow.”

This gateway model has helped draw in young users who have slowly started expanding their use of Revolut.

Owen Barron, a 29-year-old from Dublin, Ireland, began using Revolut in 2017. He liked the lower fees for foreign transactions and use of ATMs abroad.

Now he uses the app every day.

“It’s just like having Instagram or WhatsApp on your phone,” he said.

Around 18 months ago, Mr Barron started using another feature of the app: investing. His first trade was in Microsoft.

The one downside Mr Barron sees with Revolut is fees. He currently uses the free account, which has limits on withdrawals before fees kick in. In Ireland, he can make up to five ATM withdrawals or take out €200 ($236) – whichever comes first – before a 2 per cent fee kicks in.

Pedro Coelho pays £12.99 ($18) for his Revolut account. His Metal membership gives him premium features, including 1 per cent cashback in cryptocurrency, up to £800 in fee-free ATM withdrawals and unlimited commission-free trading. He said the latter perk justifies the monthly cost.

Like Mr Barron, Mr Coelho, 25, was first drawn to Revolut by a single feature. He needed to sell an unwanted Eurostar ticket in 2018 and the buyer wanted to send the funds through Revolut’s peer-to-peer money-transfer service. Three years later, Mr Coelho is now a paying customer in the company’s highest membership bracket.

Analysts question whether more consumers will join him.

“We’ve never seen a strong appetite for consumers willing to pay a monthly service fee,” said Jim Miller, executive managing director of banking and payments at the research firm JD Power. “Maybe if it’s called a membership fee?”

Mr Miller also questions Revolut’s march into new services. Traditional banks have long used current accounts as an opportunity to build a relationship with consumers, hoping they will eventually age into mortgages and insurance.

“I’ve been in financial services for over 30 years and the entire time we’ve been talking about gathering the entire relationship, the ‘financial supermarket’ approach. If anything, over that time it’s become easier for consumers to spread their relationship out,” he said. “In some ways that almost logically organises things in someone’s mind.”

The UK’s financial watchdog examined why in 2018 the firm temporarily turned off a system designed to block suspicious transactions. Former staff have also recounted issues including burnout-inducing work conditions at Revolut, which hung a neon sign in its offices exhorting employees to “Get **** done!” – a reflection of Mr Storonsky’s belief that the future of retail finance is a winner-takes-all race.

Still, those ambitions have paid off handsomely for Mr Storonsky, the biggest individual shareholder of Revolut. As he aims to make the company one of the world's biggest financial services firms, he is still wary of the regulations in the banking world where he started his career.

“To cut corners, it is just not possible in our environment,” Mr Storonsky told Bloomberg in 2019.