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The Rapid Rise of Revolut

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Patrick Calma

Revolut plays a substantial role for most individuals when it comes to personal finance and banking. But how did this seamless way to transfer money to your friends for splitting a taxi get its footing in the market?

The story behind Revolut is the perfect example of rapid transformation and innovation. Founded in 2015 by Nikolay Storonsky and Vlad Yatsenko, Revolut has grown from a simple prepaid card offering fee-free currency exchange to one of the world’s most valuable fintech companies. The journey of Revolut from a small startup to a unicorn with a valuation of over $45 billion is marked by its relentless pursuit of growth, strategic pivots, and significant milestones. One of the pivotal moments in its rise was obtaining a UK banking licence after a three-year wait, signalling its ambition to become a fully-fledged bank​. 

The Revolut Revolution

Revolut was launched with a mission to disrupt traditional banking by providing financial services that are more accessible, affordable, and convenient. Early on, Revolut focused on offering currency exchange at interbank rates through a prepaid card, addressing the pain points of high fees and poor exchange rates that traditional banks imposed on travellers and international spenders. This unique value proposition attracted tech-savvy consumers who were looking for a more cost-effective way to manage their money. 

Revolut’s comprehensive financial ecosystem and diverse services like peer-to-peer payments, cryptocurrency trading and budgeting tools set them apart from their competitors as more than just a digital bank. By continually listening to user feedback and rapidly iterating on its product offerings, Revolut positioned itself as a user-centric company that was constantly evolving to meet the needs of its customers.

The Current State of Revolut

As Revolut expanded, it faced increasing pressure to comply with different regulatory standards across multiple jurisdictions. This was particularly evident in its long battle to obtain a UK banking licence, which was finally granted after three years of negotiations. This milestone was a crucial step in Revolut’s ambition to transition from a fintech disruptor to a fully regulated bank​. Competition has also been fierce, with Revolut contending with other neobanks like N26, Monzo, and Starling Bank. However, Revolut’s focus on customer experience, combined with a relentless push to add new features, helped it differentiate itself in a crowded market. 

Scaling & Growth

Revolut’s aggressive expansion strategy was instrumental in its rise. After establishing a strong foothold in the UK and Europe, Revolut set its sights on the global market, launching in countries such as the United States, Japan, and Australia. The company’s “move fast and scale” mentality was escalated by significant funding rounds, which attracted major investors including SoftBank and Tiger Global Management. These funds allowed Revolut to expand its workforce, invest in new technologies, and enter new markets rapidly. 

One of the core strategies Revolut employed was its focus on customer acquisition through a freemium model. This allowed users to experience the platform without any upfront costs, while premium and metal plans provided additional features such as higher withdrawal limits, travel insurance, and exclusive concierge services. By 2022, Revolut’s revenue had surpassed $1 billion, and it doubled this figure to $2 billion in 2023. 

What’s Next?

To share the success, the company allowed the employees to sell $500 million worth of shares to big investors such as Coatue, D1 Capital Partners, and Tiger Global. Revolut’s current valuation has surpassed banking giants such as Barclays, Lloyds Banking Group, and NatWest with only HSBC being higher. Moreover, it has a higher valuation than other fintech companies in Europe such as Klarna, but it’s a big world out there as United States’ Stripe and Brazil’s Nubank are setting the bar for its European rivals.

This narrative is linked to the fact that companies are increasingly avoiding listing on the London Stock Exchange, deterred by tax regulations and a challenging economic environment. In response, the UK is making efforts to attract the next wave of public companies by reducing bureaucratic hassles, adjusting listing rules, and even inviting Revolut for a meeting with the Treasury this fall. Despite these efforts to roll out the red carpet, Revolut appears to remain drawn to the allure of a potential listing in the United States and future scaling.

Investment in future growth has been a clear priority for Revolut. The company continues to explore new areas such as decentralised finance and integrating blockchain technologies into its platform. These forward-looking initiatives reflect Revolut’s strategy to stay ahead of financial trends and provide more services to its users. Moreover, Revolut’s focus on sustainability and ethical banking is resonating with a new generation of consumers who are increasingly conscious of where they place their money. By incorporating features like carbon footprint tracking and green investment options, Revolut is appealing to environmentally conscious customers, further solidifying its position as a progressive financial institution.

The Forgotten Pirates of the Straits of Malacca

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Patrick Calma

When envisioning modern piracy havens, the Red Sea often comes to mind, fueled by the infamous Somali pirates depicted in “Captain Phillips” and, more recently, the Houthis’ pirate-like activities. Yet, there is another, lesser-known region that poses a threat to the global supply chain and shipping industry—the Straits of Malacca in South-East Asia. 

To understand the scale of the pirate attacks we must first understand the importance of the region. It shares the same economic importance that can be seen in The Red Sea. It has been in continuous use since antiquity from Roman, Chinese, Indian, and Dutch traders harnessing the natural canal. Today, a third of all worldwide trade traverses through the straits. This accounts for $3.5 trillion of US global trade, two-thirds of China’s maritime trade volume, and 40% of Japan’s maritime trade. By 2030, shipping traffic is expected to exceed the strait’s capacity. Any prolonged disruption can have a big effect. The gadgets we use have their components manufactured in East Asia so long-term disruptions might result in shortages in the West which would not just impact tech companies but also consumers eager to set their hands on the latest gadgets. Moreover, despite East Asian countries relying more heavily on the straits for their energy needs than the West, global oil prices are intricately linked. Any disruption would cause fluctuations in global oil prices. 

There are various factors that allowed piracy to flourish in the straits in the first place. It was culturally accepted with the tradition of piracy dating back centuries. The favourable geography allowed for low-risk detection as the straits forced commercial ships to be closer to the coastlines. The law enforcement was underfunded, and some even collaborated with the pirates due to poor wages. This all changed in 2004 when a multinational approach was pursued with Singapore, Indonesia, Thailand, and Malaysia cooperating to curb piracy. It was effective as from 2015 to 2018, there was a 92% drop. However, it may be on the rise again with sources differing in statistics. The ReCAAP ISC reported 41 incidents between January and June while the International Maritime Bureau released its annual report that highlighted that the straits have become an area of concern with a reported 37 incidents in the entirety of 2023. Nevertheless, it is a worsening trend with other reports revealing that the attacks are getting more violent.

Diverting shipping is one countermeasure. But it would extend voyages by an estimated 4,600km & spiking expenses by 20%. Indeed, with the current events unfolding in the Red Sea, the journey around The Cape of Good Hope adds a further 26 days. This can be further exacerbated by the International Maritime Organisation’s recommendation to have ships speed up through danger zones as pirates normally target easier slow-moving ships. However, it would remain expensive, for instance, it would cost a super-tanker $88,000 per day in added fuel consumption if it increases its speed from 15mph to 20mph. Vessel owners are usually commercially minded, if the cost of rerouting is high, they are unlikely to do it. Additionally, shipping companies are forced to install CCTV and other preventive measures on board their vessels especially since the pirates in the straits are reported to be using advanced technology such as radars and global positioning systems to gain information and allow them to target larger vessels. 

Regardless, cost-effective alternatives are unavailable. Insurance companies encounter key challenges in piracy zones, encompassing cargo, hull, ransom, and war risk.The latter is intriguing as during the peak of the piracy dilemma in the early 2000s, the straits were labelled as an area of war risk by insurance underwriters at Lloyd’s of London. It led to an increase in insurance premiums and shipping companies were forced to pay this enhanced risk. They were expensive with the average premium increasing from $500 to $150,000. In some instances, shipping companies tend to cover the losses out of their own pocket instead of reporting the incident as it could result in their insurance premiums increasing as well as facing long delays due to government investigations. Shipping companies will also be faced with the prospect of paying ransoms. During the height of the crisis, more than $1 million in ransom was paid in 2005. If the trend continues, we may see a repeat of this fiasco. 

Regional nations must sustain collaboration to curb the escalating piracy trend in the straits and prevent further exacerbation of the situation. In the bigger picture, both China and the U.S. have been growing their power in the region. Uncontrolled piracy could provide a pretext for major powers to escalate competition in the straits, potentially heightening tensions and leading to more severe consequences. Similarly, this can be seen in the Red Sea with the U.S. and Iran, any threats of a commercial sea passage may increase geopolitical tensions and further shape the global market dynamics.  Imagine the calamity that will be faced if both the Red Sea and the Straits of Malacca have been rendered unviable.