The exchange is back after its brief interruption. Anne and I’ve got some really cool stuff planned, so stick with us every morning this week. – Alexis

Building a consumer-focused fintech business is expensive. And if you want to start one in an area populated by both legacy companies and richly funded startups, it can be Great expensive.

It was the lesson we learned at the end of 2020 by reviewing the operating results of a number of neobanks.

Neobanks are essentially software layers on top of the banking infrastructure, providing consumers with digitally-focused, mobile-friendly and often cheaper banking services. The push to rethink consumer banking is a global effort, with neobanks popping up in virtually every market you can think of. Private investors have come forward in droves to fund competing neobanks, as they have the potential to secure the users – the customers – who generate income for long periods of time.

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Investors have been more than willing to fund huge investments in the growth and products of many neobanks, which has resulted in strongly negative operating results for unicorns. In short, while the American consumer fintech Chime has published a positive EBITDA – an adjusted measure of profitability – many neobanks whose figures we have seen have demonstrated a flagrant inability to chart the course of profitability.

It could change.

Recent Revolut results which TechCrunch covered earlier this morning show that the company has experienced a deeply unprofitable year 2020. But if we dig into its quarterly results, there is good news to be found. Neobanks could finally mature in their cost structure.

So today we are going to analyze the main financial results of Revolut and see what we can extract from Starling and Monzo. Maybe Revolut’s good financial news isn’t just in one neobank?

Revolut 2020

Our own Romain Dillet has an overview of Revolut’s activities here, if you want a larger lens. We only care about its raw bottom line at this time.

Here are the big numbers:

  • 57% returned growth from £ 166m in 2019 to £ 261m in 2020
  • Gross profit £ 123million growth in 2020, up 215% from 2019
  • Gross margin 49% in 2020, which Revolut described as almost a doubling
  • 2020 operating loss £ 122 million compared to £ 98 million in 2019
  • Total loss £ 168 million in 2020, up from £ 107 million in 2019

The gist of these numbers is that the company’s revenue growth has been solid, but improving gross margins has allowed its gross margin to rise in 2020.


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