Revolut, the UK-based fintech leader, has secured another vote of confidence from institutional investors as Schroders, one of the largest asset managers in the UK, increased its stake in the digital bank. This move has pushed Revolut’s implied valuation to an impressive $48 billion, reaffirming its status as one of the world’s most valuable fintech companies. The investment highlights growing optimism about Revolut’s financial strength, product expansion, and potential for a successful IPO.
Interestignly enough, the $48 billion valuation is based on recent market assessments and not solely the result of Schroders’ stake increase. Revolut was previously valued at $45 billion in a secondary share sale. Additionally, there are ongoing discussions about a potential secondary share sale that could further increase Revolut’s valuation, with some reports suggesting a target of $60 billion.
So, can Revolut outpace other fintech unicorns like Nubank, Monzo, and N26? Spoiler: this scenario is more than possible, and here’s why.
Schroders’ increased stake: A signal of market confidence
Schroders’ decision to increase its stake in Revolut demonstrates strong belief in the company’s future prospects. As a major institutional investor, its increased exposure to Revolut suggests that it sees long-term growth potential and confidence in the fintech’s ability to maintain its dominance in the digital banking sector. This investment aligns with Schroders’ strategy to “drive flows into differentiated, specialist capabilities” and invest in high-growth potential financial technology.
The implied valuation of $48 billion, based on Schroders’ investment, represents a major increase from the fintech’s last publicly disclosed valuation is higher than the $45 billion milestone achieved in a secondary share sale last year, though lower than the $60 billion valuation some shareholders are reportedly pushing for in a future share sale.
This valuation trajectory is notable, as it marks a 45% increase from the $33 billion valuation secured during its 2021 Series E funding round led by SoftBank Vision Fund 2 and Tiger Global Management. However, it reflects a compression of multiples, aligning with broader fintech valuation trends that have seen multiples contract from peaks of 20x to around 4x in recent years.
When analysed against industry metrics, Revolut’s valuation appears aggressive. Current industry average revenue multiples stand at 8.8x for public fintech firms and 13.7x for private companies. Based on Revolut’s reported $2.2 billion revenue in 2023, the new valuation represents approximately 21.8x revenue – significantly higher than market averages but substantially lower than its previous 108x multiple in 2021.
This growth in valuation is indicative of the fintech’s continued progress in expanding its customer base, diversifying its revenue streams, and achieving profitability. Revolut now shares the top position with Brazilian neobank Nubank (also valued at $45 billion) as the world’s most valuable digital bank. However, Nubank serves 100 million customers compared to Revolut’s 45 million, suggesting Revolut commands a higher per-customer valuation.
Sustained growth and profitability
Revolut’s journey to its current valuation has been underpinned by strong financial performance and steady growth. The company has transitioned from a high-growth fintech to a profitable digital bank, reporting record-breaking profits in 2024. The neobank’s diversified revenue model includes income streams from foreign exchange, crypto trading, subscription services, and premium accounts, ensuring consistent growth even in volatile market conditions.
Moreover, Revolut’s aggressive global expansion strategy, particularly in the US and Asia-Pacific regions, has fueled its customer acquisition and increased transaction volumes. By continually adding new features and enhancing its platform, the fintech has deepened user engagement and boosted its revenue.
The company’s user growth metrics validate this approach, with 12 million new customers added in 2023 alone, bringing its total customer base to 45 million, including 500,000 businesses. This represents more than four times the user base of the next largest European neobank competitor.
Regulatory progress positions Revolut for further growth
A crucial component of Revolut’s success has been its progress toward securing a UK banking license, which is expected to provide the company with a competitive advantage in the crowded digital banking space. While Revolut currently operates under an e-money license, obtaining a full UK banking license will allow it to expand its product offerings and increase trust among consumers.
In addition, Revolut has made significant strides in regulatory compliance across various international markets. The company’s proactive approach to securing necessary licenses and maintaining compliance with regulatory standards enhances its ability to operate as a trusted financial institution globally.
Potential IPO on the horizon?
As Revolut’s valuation continues to climb, speculation about a potential IPO grows stronger. Industry experts suggest that the company is strategically positioning itself for a public offering in the near future. The IPO would not only provide Revolut with additional capital to fuel growth but also enhance its market credibility and visibility.
The company’s ability to achieve profitability, combined with its growing valuation and regulatory progress, makes it an attractive candidate for a high-profile public listing. An IPO could unlock significant value for investors while providing the company with the resources needed to further accelerate its expansion and innovation efforts.
Fintech firm poised for big leap
While Revolut’s trajectory is promising, the path ahead is not without challenges. Regulatory scrutiny remains a concern, particularly as the company expands its operations across multiple jurisdictions. Maintaining compliance with evolving financial regulations and ensuring customer data security will be critical to sustaining trust and growth.
Additionally, market volatility and shifting investor sentiment toward fintech valuations could impact the timing and success of a potential IPO. Its ability to manage operational costs while continuing to innovate will play a key role in its ability to maintain its upward trajectory.
Revolut’s valuation surge to $48 billion, driven by Schroders’ increased stake, underscores the fintech’s strong financial performance, regulatory progress, and market dominance. As the company inches closer to obtaining a UK banking license and prepares for a potential IPO, it is well-positioned to capitalise on its momentum and redefine the future of digital banking. With investor confidence at an all-time high and an expanding global footprint, Revolut is poised to make a lasting impact on the fintech landscape.
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