Is Revolut worth nearly as much as Citigroup or American Express? Both of those financial firms have market capitalizations that exceed US$200 billion. They also have annual revenue of US$85.2 billion and US$72.2 billion respectively. Revolut posted US$6 billion in revenue last year.
Yet, the UK fintech unicorn is not letting something like modest revenue stand in the way of a blockbuster IPO, which is now planned for 2028. An April 21 Financial Times report, quoting a Revolut source, said that the company is targeting an IPO valuation of US$150 billion to $200 billion – which is double to 2.7x its current US$75 billion valuation.
To be sure, Revolut’s business is growing at a steady clip. Revenue rose 46% last year, while pre-tax profit jumped 57% to US$2.28 billion. Customer balances increased 66% to $67.5 billion, while the company’s user base grew to 68.3 million retail customers and 767,000 business customers. Revolut operates in over 40 markets, with licensed banking operations in 30+ countries, including Mexico and Colombia.
It is difficult to assess how reasonable Revolut’s IPO valuation target is because there are not many large digital banks that trade in public markets. Brazil’s Nubank, which is the largest pure-play online lender in the world, has a market capitalization of about US$70 billion. Nubank posted a record-breaking US$16.3 billion in revenue last year, with net income of US$2.9 billion.
Revolut’s business is considerably smaller than Nubank’s, yet the UK firm is targeting an IPO in two years that would value it at more than double the Brazilian company’s valuation and the higher end, almost triple.
The UK firm’s backers might say that it is positioned to become a dominant banking force in Europe. On the one hand, the company recently was granted a full UK banking license, which allows it to offer full current accounts, loans, and credit products to its 13 million UK customers, with deposits protected by the FSCS up to £120,000.
On the other, it is expanding aggressively in continental Europe. Some analysts see rapid growth in markets such as France, Italy, and Spain as evidence that the UK fintech is increasingly being used as a primary, rather than secondary bank account. In Europe, about one in five working-age adults now uses Revolut.
While the UK company’s prospects in Europe look good, its ability to justify a sky-high IPO valuation will depend largely on if it can crack the U.S. market. Revolut has been operating in the U.S. since March 2020 as a fintech company in partnership with American banks. While the company boasts about its 1 million U.S. users and the US$500 million it has invested in the country, the reality is that its current American business is small potatoes. One way or another, it needs to become a full-fledged bank to make that investment pay off.
With its own license to operate in the United States, Revolut would be able to start taking insured customer deposits. That would make it easier for the company to offer lending products like its own credit cards, which it sees as crucial for gaining American customers. To offer those right now, it would have to borrow from the capital markets. With a banking charter, Revolut would also gain access to payment systems such as Fedwire and A.C.H.
Will Revolut succeed where other digital banks (like its competitor Monzo) have failed?
Revolut seems confident: The company is betting on the U.S. regulatory environment being favorable to its application for a standalone charter.
This seems risky to us given that the UK firm has a checkered compliance history. And unlike Mexico—where Revolut did recently acquire a full banking license—the U.S. market doesn’t really need another flashy digital bank.