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UK-based neobank Revolut is looking to raise as much as $1.5 billion in new funding as it prepares for a global expansion spree, reports Sky News. The startup is planning to raise $500 million in equity and secure a $1 billion convertible loan in the coming months.
Revolut has hired investment bank JPMorgan to conduct the raise, according to the outlet, while the mooted $1 billion loan would convert to shares if the startup secures a US banking license. If successful, the raise would propel Revolut into a select group of fintechs that have secured total funding in excess of $1 billion. The company would target a valuation of $5 billion to $10 billion for the equity raise, according to sources cited by Sky, which would make it the most valuable European fintech.
Since it was founded in 2014, Revolut has managed to capture customers at pace. The company initially launched a free app-based bank account and prepaid debit card, and has since expanded its offerings to include premium accounts, insurance products, crypto and stock trading, and business accounts, including loans.
Revolut, which secured a eurozone banking licence last year, has also expanded its geographical footprint extensively in recent years. In total, it’s attracted more than 8 million customers across Europe and Australia. And it’s planning to grow its markets aggressively: It inked a partnership with Visa to open in 24 new countries, including Canada, Japan, and the US, a move that’ll take its services to a total of 55 jurisdictions.
It’s this global push that’s likely driving the startup to look for fresh funding. Richard Davis, the startup’s COO, confirmed as much earlier this month, saying the company would look to raise $500 million before the end of 2019 in a bid to double down on its growth, per the Financial Times.
But Revolut’s impressive growth hasn’t always been smooth sailing — and unless it can shore up its weaknesses, it’ll struggle to realize its long-term ambitions.
- In the past 12 months, a string of controversies has followed the company. It was revealed in February that the company turned off an automated system designed to stop dubious money transfers, resulting in thousands of transactions passing through its systems without adequate sanctioning checks. Additionally, it came under fire for its workplace culture and treatment of employees, and experienced a social media storm over its Valentine’s Day advert. The company has also come under sustained scrutiny for its links to Russia.
- In an effort to get ahead of these transgressions, Revolut has been on a wide-reaching hiring spree in recent months. This year, the company has hired several experienced banking executives, including Martin Gilbert, who is a City veteran, and Michael Sherwood, a former Goldman Sachs executive, as chairman and nonexecutive director. Those appointments followed the hiring of David MacLean, the former finance director at challenger bank Metro, as its CFO. It’s also planning to bolster this addition to its executive team by hiring around 400 compliance staff in Portugal.
- Going forward, Revolut needs to be proactive when it comes to expanding its workforce to meet its growing needs, rather than only reacting to past failures. This is especially important given that it’ll face huge regulatory costs as it scales, not least as it tries to manage different regulatory requirements in different jurisdictions. This hasn’t been a problem in Europe, for instance, due to financial services’ regulatory alignment. And as a multinational company with millions of customers, regulators are unlikely to see Revolut’s future transgressions as a small startup finding its feet. As such, it could find itself slapped with huge regulatory fines, much like the heavy ones levied against its established peers, for failing to meet compliance demands.
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