After a long wait for last out of the gate Revolut, the UK’s top three neobanks have all finally filed their 2021 annual accounts.
And it was a landmark year for the fintechs. After spending the first half-decade of their existence making heavy losses, Starling and Revolut have made neobank (and fintech, and European startup!) history by posting their first annual profit.
Monzo has said it’s “on track for profitability” by the end of the current financial year.
So what do the figures we have available tell us about how their performance compares?
The bottom line
Revolut has made the most dramatic turnaround when it comes to its bottom line. In 2020, it logged the biggest loss of all three digital banks (£221m) but managed to reverse that to clock the biggest profit (£39.7m) in 2021. It attributes this to significant growth of its customer base and revenues across higher margin products, which it said included crypto trading.
Starling’s swing to profit was driven by a 93% revenue increase to £188m in 2021, after it muscled in on the mortgage loans market.
Monzo, meanwhile, was left in the red — though it made a modest improvement of 9% on its total losses, from £131m to £119m between 2020 and 2021.
Both Revolut and Monzo have — rather unusually — issued guidance on what we can expect for 2022 revenues. Starling has shared no such clues with us yet.
In a recent investor update, seen by Sifted, Monzo said it had bagged record revenue growth in 2022, setting it on course to achieve annual profitability by the end of 2023.
Monzo’s annualised revenues shot up 250% to £440m in the 12 months to December 2022 — a huge uptick from the 92% revenue growth to £154m that the neobank reported for the year to February 2022.
Revolut CFO Mikko Salovaara, meanwhile, told Sifted this week that it had increased revenues by 30% to £850m. This was a relative slowdown from the near tripling in revenue growth it reported for 2021 at £636m, up from £220m in 2020.
So what business lines are responsible for this uptick?
Revolut has the most diversified revenue streams
Card transaction fees (known as interchange fees) still made up an important part of all three bank’s business models in 2021.
But both Starling and Revolut have diversified how they make money significantly — which played a big role in getting them to profitability in 2021.
Revolut’s foreign exchange and wealth division — which includes its crypto trading arm — accounted for over half (55%) of total revenues in 2021. It benefitted hugely from the pandemic crypto boom in the period: Salovaara told Sifted that crypto made up around 30% of total revenues in 2021.
He also said this has dropped to around 5-10% of overall revenues in 2022, and that Revolut has seen a “big shift back to payments” as its main moneymaker — so this chart will likely look quite different when we have its full 2022 results. The neobank also increased the number of retail and business customers paying subscriptions in 2021 by 75% — which includes its business banking arm as well as its different paid subscription accounts.
Starling, meanwhile, pivoted away from focusing on retail customers to businesses when Covid struck, and its participation in the UK’s Covid rescue loan schemes meant it increased lending to small businesses by more than £2.2bn in 2021. At the same time, its acquisition of Fleet Mortgages in July 2021 marked the neobank’s entry into mortgage lending. Both these moves pushed up its net interest income — which was its biggest revenue stream at 65% of total revenues.
Card spending still makes up the vast majority (69%) of Monzo’s revenues . In 2021 it grew this revenue largely by increasing its customer base, but said in its financial report that customers had a strong appetite for the subscription products it launched in 2021. We could see subscriptions make up a bigger proportion of total revenues in 2022.
Starling is making much more money per customer
By dividing revenue by the number of active customers in the year, we can get a rough estimate of how much each user generated in 2021.
On this metric, Starling came out on top, making £69.62 per customer per annum. Revolut followed with £39.75 and Monzo with £26.50. But it’s worth noting that Starling’s pivot to targeting SMEs with loans likely skews these figures — as business loans are far higher than the average consumer loan.
Revolut’s presence in non-European markets where interchange fees are higher will also push up this metric.
Both Starling and Monzo are currently only available for UK customers. Starling has abandoned plans to scale its consumer offering to Europe, instead choosing to expand its banking-as-a-service offering abroad.
Meanwhile, Monzo’s COO Sujata Bhatia recently told Sifted that the neobank is now focusing on US expansion, and hiring a US CEO to do so.
Revolut has the highest staff spend
All three neobanks have managed to survive the last couple of years without making employee layoffs — unlike many of their European fintech peers.
Instead, they’ve all been gradually growing their headcount — and their total staff costs reflect the size of their respective employee base.
A note on this comparison:
Each of the fintech’s annual results can be read in isolation at their corresponding websites. All three companies follow a slightly different reporting practice, and their financial years differ from one another.
For the purpose of presenting the figures, we’ve taken each 2021-2022 financial year as ‘2021’ and each 2020-2021 financial year as ‘2020’.
That said, it’s worth bearing in mind that for each of the three, 2021 comprised:
- The 12 months to March 2022 for Starling
- The 12 months to Feb 2022 for Monzo
- The 12 months to December 2021 for Revolut
And another extra note on Starling: The bank changed its reporting period last year, so its 2020 figures actually comprise 16 months, from December 2019 to March 2021 — thus it’s not directly comparable with the other two for 2020 figures.
We use profit and loss before tax figures.