Revolut’s PR machine has long sought to depict the company as an ascendant player in the Asia-Pacific (APAC) region. These efforts go back almost six years. Revolut entered Singapore and Japan in late 2018 and Australia in early 2019. In recent years, it has invested big in India. The UK finech unicorn talked about entering China in 2021, but those efforts to do not seem to have come to fruition.
Having finally swung to a profit, an emboldened Revolut will likely double down on its APAC expansion. The company reported pretax profit of £438 million, compared to a loss of £25.4 million in the previous year. Revenue almost doubled to £1.8 billion. “Our customer base is expanding at impressive rates, and our diversified business model continues to fuel exceptional financial performance,” Revolut cofounder and CEO Nik Storonsky said in a statement.
However, success is far from assured.
Growth In Singapore
Judging by some of the publicly available figures, Revolut’s business in Singapore is growing at a brisk clip. According to figures cited by Fintech News Singapore, on an annual basis, users grew 77% in 2023, while customer e-wallet balances rose 52%. Overall card payments increased 83% from 7.07 million in 2022 to 12.95 million in 2023. Physical transactions with Revolut cards rose more than 93%, while virtual card payments ticked up 64%. “Our 2023 results demonstrate that we are truly becoming an everyday app for Singaporeans,” Matt Baxby, Revolut’s APAC CEO, said in a statement.
When assessing the prospects of Revolut’s business in Singapore, it is useful to keep in mind that stringent capitalization requirements caused the company to eschew applying for a digital banking license in Singapore. Because it does not operate a bank in the city-state, it lacks the ability to directly offer deposit and lending products. It remains to be seen if the workarounds bear fruit.
For instance in late May, Revolut launched Flexible Accounts in the city-state, which invest customer deposits into USD-denominated money market funds (MMFs) managed by global asset manager Fidelity International. Revolut calls this a “high-yield savings product” because of a 5.21% APY.
Additionally, in mid-June, Revolut said that users can now hold up to S$20,000 in their e-wallets at any point, up from S$5,000 previously. Annual spending limits were also raised from S$30,000 to S$100,000. “With the cap increases, we expect payment volumes in-app to increase by at least two to three times,” Revolut Singapore chief executive Raymond Ng told The Straits Times.
Slow Progress In India
While Revolut has been eager to highlight its growth in Singapore, it has been less vocal discussing its India business. The subcontinent is a challenging market for Revolut, where the UK company has sought to carve out a niche in payments before moving into trading, investment and credit.
Three years into the foray, Revolut does not have a lot to show for it, though in April, the Reserve Bank of India granted the UK fintech in-principle authorization to issue pre-paid instruments (PPI), including prepaid cards and wallets. We understand it took so long in part because of data localization requirements. At the time, Revolut India CEO Paroma Chatterjee emphasized that there were 175,000 people on the waiting list for these products. We wonder how many of them will become profitable customers.
Revolut committed to invest US$45 million in India back in 2022, and it will be interesting to see how far that money goes – and if the company is willing to up the ante in the future. With Google Pay and Walmart-backed PhonePe dominant in domestic payments, it is unclear how regulators will perceive a foreign fintech with ambitious plans for the cross-border market.
Opportunity in Australia and New Zealand
Australia and New Zealand offer Revolut the best opportunity in the Asia-Pacific region. They are most similar to its home market of the UK – and the UK fintech unicorn could ultimately obtain banking licenses for both countries. Revolut already has a lending license for Australia. It just needs an authorized deposit-taking institution (ADI) license so it can be a fully-fledged bank.
In February, The Australian reported that Revolut is planning to launch credit cards in Australia and increase unsecured lending. The company sees rising demand from cash-strapped households that are turning to debt to cover higher expenses linked to the rising cost of living. Baxby told the newspaper that Revolut doubled local customer sign-ups in 2023 to 500,000 and sees an opportunity in unsecured debt as the country’s big four banks focus more on mortgages than consumer credit.
Revolut started providing personal loans in Australia as part of a pilot last year. Further, it is planning to launch a credit card pilot in 2024 or 2025.
Future Prospects
To some degree, Revolut’s ADI bid could depend on whether it ultimately receives a banking license in the UK. This process has dragged on for about three years so far. In Nov. 2023, Revolut appointed a new UK CEO. While the company denied the move was related to its banking license application, we wonder if that is entirely accurate. Meanwhile, Storonsky told CNBC earlier this week, “Hopefully, sooner or later, we’ll get it [the UK banking license].”
If Revolut gets approved for a banking license in the UK, it would signal the legitimacy of the company’s banking aspirations to other regulators. Approving Revolut’s ADI would then become a safer bet. However, if the UK banking license is not forthcoming, things could get more complicated for Revolut in Australia.
Given the different fintech segments Revolut is exploring in Singapore and India, the UK banking license is less directly relevant for its business in those two countries. We expect that the UK fintech unicorn will continue to expand incrementally in the city-state, while India could prove difficult for Revolut to penetrate.
In India, Revolut has to prove that it can cater to the needs of a large, diverse emerging market. The jury is still out on whether Revolut can create a compelling value proposition for Indian customers given the plethora of competition and regulatory hurdles it faces there.
Given its actual business performance (not account numbers), we think Revolut was ultimately a bit overly ambitious in its APAC expansion. To prove skeptics wrong, the company has its work cut out for it.
