Revolut swung to a £25m loss in 2022 after shelling out more on staff and a near 80% pay jump for its founder, despite uncertainty over the approval of the fintech firm’s UK banking licence.
The company, which became the UK’s most valuable fintech firm in 2021, detailed the loss in its delayed annual report on Friday, marking a return to the red after reporting its first-ever annual pre-tax profit – worth £39m – a year earlier.
Its losses mounted as a result of an increase in administrative costs, including staff wages, which followed a hiring spree that doubled Revolut’s global headcount to 6,000 last year. That number has since grown beyond 8,000, including more than 1,000 in the UK.
The London-headquartered firm also revealed a 78% pay bump for its highest-paid director, believed to be the founder and chief executive, Nik Storonsky, to £17.8m. While his salary held steady at £100,000, he was given almost £17.7m worth of shares, compared with £10m a year earlier.
Administrative costs also climbed as a result of a high-profile marketing campaign, and a jump in legal and advisory costs, as it continued to pursue an elusive UK banking licence.
Revolut has been waiting almost three years for a decision from UK regulators, having lodged an application to become a fully fledged bank in early 2021.
A banking licence would allow Revolut to hold its own customers’ deposits, and use them to offer its own-branded loans to customers, including mortgages. This would offer a new stream of income, and would probably open the door to banking licences in other countries, including the US.
But UK regulators have had a number of reputational issues to consider, with the fintech company facing criticism in recent years for EU regulatory breaches, its corporate culture, and the late filing of its accounts.
Storonsky has hit out at regulators over the lengthy licensing process, saying earlier this year that it was “hard to do business in the UK”, where there were high taxes and “an extremely bureaucratic regulator”. He also said Revolut might end up considering floating the company in the US instead of the UK, in what would be a big blow to the London Stock Exchange.
The company was credited as the UK’s most valuable fintech, estimated to be worth as much as $33bn (£26bn). However, a writedown from an investor earlier this year implied its value had fallen to $18bn.
Revolut was late filing its 2021 accounts, and only narrowly met the deadline to file its latest annual report, which was originally due in September, but was granted an extension to 31 December. However, the company will have been relieved that auditors gave a stamp of approval to its latest set of figures, after raising concerns over its 2021 filing.
BDO said in February that its auditing team had been unable to get a complete picture of some of Revolut’s revenue. As a result, BDO said that the company’s revenue, or other financial balances, could be “materially misstated”.
An update in the 2022 report said BDO’s concerns were related to Revolut’s IT and business process controls, which meant auditors were not confident that they had enough information to verify about £476m in revenues from the fintech firm’s subscription, card, currency exchange and wealth operations. However, “this matter has been resolved”, BDO said.
Revolut was founded as a pre-paid card firm offering currency exchange but is now a wide-ranging financial company serving 35 million customers in more than 40 countries, with more than 50 products and services. As well as money transfers, it offers home rentals, buy now, pay later credit and a service that issues wages in advance.
In a statement issued alongside the 2022 annual report, Storonsky said he was committed to pursuing a UK banking licence. He said: “2022 was another great year for Revolut, one where we broke away from the pack of our competitors. We strengthened our financial position, grew our customer base, launched multiple new products, expanded into new markets, and bolstered our risk, compliance and governance infrastructure.
“Looking ahead, our focus is on continued growth across all our markets. We remain committed to our ongoing UK banking licence application in addition to bringing the Revolut app to new markets and customers around the world.”