Revolut: can the chancellor’s fintech favourite fix its image problem?

Minutes after Jeremy Hunt had finished speaking, Nikolay Storonsky collared the chancellor backstage. The 38-year-old co-founder of British financial technology company Revolut, wearing a tech bro’s uniform of jeans and a sweater, had been listening to Hunt set out his vision of the UK as “the world’s next Silicon Valley”, in a speech last month at the media group Bloomberg’s London headquarters.

The chancellor had praised Revolut as a “shining” success, saying the government was willing to back innovative companies “to the hilt”. After a quick introduction, the pair posed for a photo – which was swiftly posted by Storonsky’s team to one of Revolut’s Twitter accounts.

For Storonsky and his fast-growing business, much is riding on the government’s tech ambitions. He describes Revolut as the “Amazon of banking”. Its app offers everything from payment cards to holiday insurance and cryptocurrency trading. Everything, that is, apart from its own loans and deposit services to UK customers. More than two years have passed since Revolut first applied to the UK financial regulator for a licence – and it is still waiting for approval.

Revolut, which temporarily surpassed NatWest with a $33bn (£24bn) valuation in 2021, has yet to convince regulators – chiefly the Financial Conduct Authority (FCA) – it should be trusted to hold deposits and start lending to consumers. Rumours are that may be set to change, but there has been no official confirmation.

Some believe the watchdog’s caution is wise. Revolut has faced a string of controversies: delayed filing of accounts, EU regulatory breaches and fines, Storonsky’s Russian ties and an aggressive work environment that has allegedly resulted in some key employees leaving the company.

Others say Revolut and its peers are key to Britain’s future prosperity, as the government scrambles to attract hi-tech companies to turbocharge the post-Brexit economy.

The balancing act for watchdogs such as the FCA is to ensure standards and regulations are not eroded, while also encouraging growth. One former official at the regulator said: “The FCA will need to greenlight at least some form of licence if it wants to make the case for its continuing relevance. It can’t ignore the very company that’s being championed by the chancellor.”

In a series of interviews with officials, senior City figures and current and former Revolut staff, the Observer has examined a host of concerns about Britain’s most valuable fintech company.

Rise of the super app

Revolut sells itself as a “borderless financial super app”, offering many of the services a consumer would associate with a bank. A licence would move it from an intermediary liaising between consumers and licensed banks to an end-to-end operation in the UK, holding and guaranteeing customer deposits and offering loans.

Both of these activities are lucrative: banks make money by investing customer deposits to generate income, or by lending cash deposited to other customers for a fee.

Storonsky, an ex-Credit Suisse and Lehman Brothers derivatives trader, co-founded Revolut in London in 2015. It has grown from a prepaid card offering free currency exchange to a financial company of more than 6,000 staff, serving 27 million customers in 37 countries, with more than 50 products and services. As well as money transfers, it offers home rentals, buy-now-pay-later credit and a service that pays wages in advance.

Its high-profile venture capital investors include Japan’s SoftBank and Tiger Global, whose backing in 2021 made Revolut the UK’s most valuable tech group and Storonsky a paper billionaire many times over. That is despite the fact Revolut has yet to report a profit. It last revealed a £208m loss for 2020, even as revenues rose 34% to £222m.

With plans to eventually list the company on the stock exchange, a banking licence could help Revolut claim a much higher valuation.

“Obviously, they can continue doing their current business very successfully: acquire more and more clients, just scale and scale,” said Philipp Paech, an associate professor covering law and financial regulation at the London School of Economics. “That’s great. But the banking licence allows them to access another level of doing business … it’s more profitable and you can do the same things as, say, JP Morgan.”

Culture issues

While Revolut’s workforce has swollen, it has struggled to hold on to some key staff, who, since 2019, have been turning to reporters to air grievances about tough working conditions and an aggressive corporate culture.Some suggest Storonsky’s management style is to blame. While internally, Storonsky’s team describe him as “hyper-ambitious” and someone who “gets things done”, one former employee claims this contributed to what they described as a “toxic environment” at the company.

Revolut has partly acknowledged and tried to fix problems with its culture, initially in 2019 when Storonsky wrote an open letter saying it had tackled “mistakes”, and again last month when it told the Guardian it was launching a cultural “shift” and dedicated behavioural team that would track whether staff were being “approachable” and “respectful”.

In 2019, it emerged that the FCA had investigated Revolut after a whistleblower claimed in 2016 that it was failing to conduct adequate money-laundering checks, or properly flag suspect payments. One former employee told the BBC at the time that “the chief executive refused to listen to the compliance team”, leading to the exodus of key staff, including the chief risk officer and money-laundering reporting officer.

The FCA informed the whistleblower that it had closed the investigation in 2017. And although Revolut told the BBC at the time that it had been unaware of the regulatory investigation, the resulting media coverage prompted Storonsky to write his open letter.

Several compliance staff at British high street banks – who ensure businesses follow regulations, including those on sanctions and anti-money-laundering – said some peers in the industry were still concerned about the company. Several claimed there was high turnover of compliance staff at Revolut. One said working at the fintech company was a “reputational risk too far for most well-regarded staff who work within compliance”.

This staff churn is one reason why Revolut has spent twice as long as some smaller rivals trying to win a UK banking licence, according to insiders at the FCA and within financial law enforcement.

Revolut denied that it had a toxic workplace culture or a problem with departures from key positions. It said it received thousands of applications for risk and compliance jobs, and that the team had grown from 147 to 220 staff between 2021 and 2023. It did not address questions about turnover of compliance staff. “We have a high-performance culture, which we are incredibly proud of, as it has got us to where we are today,” it said.

The company said it complied fully with anti-money-laundering and terrorist financing regulations. “Risk and compliance is and always will be a top priority for Revolut,” it said, while its lawyers stressed the company had a “sophisticated suite of financial crime detection systems, including customer due diligence and transaction monitoring”. It added that rivals Starling Bank and Monzo were much smaller when they tried to obtain their banking licences.

Accounting delays

UK regulators will also be aware of the problems that their counterparts uncovered in Lithuania, where Revolut secured its EU banking licence in 2018. There, it has faced two parliamentary investigations over its Russian links and been penalised for regulatory failings, data breaches and failing to file its financial accounts on time. The last of these is also a problem in the UK, where Revolut faces a fine for missing a 31 December deadline for group accounts covering its 2021 financial year.

In September it emerged that BDO, which has been Revolut’s auditor since 2018, had been chastised by the accountancy regulator for the “unacceptable” quality of a string of company audits, which – according to the Financial Times – included Revolut. The FT report claimed Revolut was the unnamed company behind accounts that the Financial Reporting Council said suffered from an “inadequate” approach to the way revenue was recognised.

Revolut said the question over the delay was one to be answered by BDO. “Our accounts are finalised and they will confirm the previously reported news that we are profitable. We are very proud of this,” Revolut added. BDO said it was unable to comment on specific audits.

City grandees

Storonsky and his team have been working to repair Revolut’s reputation, which has involved a wide-ranging public relations drive. The boardroom is stacked with high profile figures including ex-Goldman Sachs International co-chief executive Michael Sherwood; its chair is City grandee and former Standard Life Aberdeen boss Martin Gilbert.

The 67-year-old Gilbert plays a double act with Storonsky. Insiders say the chief executive’s dislike of what he sees as regulatory bureaucracy is often padded by Gilbert’s amiable disposition and relationship with officials at the Bank of England. There, Gilbert’s calls are understood to be taken without hesitation – he chaired a panel at a division of the Bank until 2020.

Gilbert’s appointment at Revolut was described by one tech investor as “reputational cleansing”. “They had to get somebody that looked really credible,” the investor said.

Gilbert is understood to have encouraged Storonsky to address the gruelling working environment and problems with its internal culture. Revolut said it “categorically reject[ed]” the suggestion that Gilbert was brought in to clean up its reputation, adding he was chosen for his experience in launching and growing international businesses. Revolut has also previously denied that the planned cultural shift is directly meant to appease the FCA.

The company said it “welcomed regulation and oversight”, adding: “Revolut has been approved for a number of licences globally by several regulators, including a full ECB [European Central Bank] bank licence in Europe. This would not be possible without proper regulatory controls and governance.”

Russian links

In 2004, at just 20 years old, Storonsky emigrated to the UK, where he eventually secured British citizenship. However, the young banker, who was born in Dolgoprudny, just north of Moscow, and secured a physics degree in the capital, has family connections that western intelligence officials and UK law enforcement agencies find challenging. His father, also named Nikolay Storonsky, holds a senior role in Russia’s state-owned gas behemoth Gazprom. After Russia’s invasion of Crimea in 2014, Gazprom was placed under US sanctions.

After Revolut secured its EU banking licence through Lithuania in 2018, politicians in the ex-Soviet country launched two parliamentary investigations into national security concerns related to the Storonsky Sr’s state links and whether they made the company “politically vulnerable”.

They eventually concluded there was no evidence to suggest Revolut posed a threat to national security. The Lithuanian parliament continued to raise concerns over Revolut’s operations, but failed to secure backing for a third inquiry in spring 2019.

Then, in October last year, Kyiv targeted his father with sanctions, saying Storonsky Sr was “responsible for the material and financial support of actions that undermine or threaten the territorial integrity, sovereignty and independence of Ukraine”.

Storonsky himself has long denied any affiliation to the Kremlin and claimed concerns over his father’s job were “a bit funny”, given he was “effectively a professor” and engineer in a company that employs half a million people in Russia.

Western intelligence officials struggle to see the joke, apparently. Embassy staff working in sensitive roles within the Five Eyes alliance – the intelligence-sharing network comprising Australia, the US, Britain, Canada and New Zealand – are discouraged from using Revolut because of Storonsky Sr’s Russian links, people familiar with the matter told the Observer. However, Revolut stressed Storonsky’s father – who is of Ukrainian descent – was “entirely unconnected with Revolut”.

Storonsky announced he had given up his Russian passport in October, weeks after his father was hit with sanctions – which have not been repeated in any other jurisdiction. Revolut said the chief executive started the process of renouncing his citizenship shortly after the invasion of Ukraine.

The company said Storonsky had lived in the UK for 20 years and had taken a “clear stance condemning the Russian invasion”, describing the war as “wrong and totally abhorrent” in an open letter last year. Revolut had also supported affected Ukrainians and closed its Russian office, it added.

Cautionary tales

Revolut’s Lithuanian troubles have not quite gone away. By early 2022, the country’s central bank revealed it had discovered what it said were shortfalls in Revolut’s controls, including that it failed to ensure senior managers were alerted when accounts were opened for politically exposed clients, or those at higher risk of money laundering or terrorist financing.

It was separately fined €200,000 for failing to gather adequate information about clients and their transactions. Revolut said at the time that it had taken action that would fix and help prevent future breaches. It said it had collaborated closely with the Lithuanian regulator to improve its processes over the two matters, the majority of which had been fixed. It said the remainder were “in the final stages of being addressed”.

In November last year, the fintech company was also fined another €70,000 by the Lithuanian central bank for failing to file audited financial accounts on time. Revolut claimed the delay in filing the accounts was due to “technical reasons” and related to the migration of some customers after Brexit.

The road ahead

Conveniently for Revolut, the UK government is now forcing regulators to consider how the competitiveness of companies is affected by their decisions – such as licence approvals. And despite the string of controversies, Revolut’s approval for a banking licence may be granted within weeks, it is rumoured. “We can’t understand how that could be the case,” a source at a rival bank told the Observer. “Some might complain that they’re not reaching the standards the regulators demand of us, like filing accounts on time. Why is this OK and what are you doing to the sector by allowing this?”

A senior official at the FCA, speaking on condition of anonymity, said the regulator must be pragmatic: “We may find it’s better to have Revolut pissing into the tent, so we can get a better look at what gets wet, than if it’s outside in the dark. After a certain point, it has become so big that we need it in our regulatory orbit.”

An FCA spokesperson said: “All firms seeking authorisation must be able to prove to us they meet minimum standards. This is crucial to the UK’s competitiveness, as it helps ensure people and businesses can trust the financial services being provided.”

A Treasury spokesperson said the chancellor had “ambitious plans for the UK to become a technology superpower” and that Hunt had held talks with “a range of promising tech firms in the UK to explore how we can grow the sector – boosting investment, jobs, and opportunity right across the country”.