Bubbles and how they burst… or don’t
"Revolut just raised $500m: so, let’s put this in perspective for a second. The latest round values them at $6bn post the raise; higher than Standard Life Aberdeen with £2bn revenues and Intercontinental hotels with £4bn revenues. 80% of their £170m revenues still come from interchange rates of 20 basis points, but as anyone in the card industry will tell you, interchange does not even cover transaction and scheme costs these days. Their valuation is a 25X multiple of their revenues, and three times their last raise on losses as of 2018 of £33m. Where next then, let’s look at how they might exit; after all, at the end of this people who invested want to make money. If we take for instance an IPO, then there could be challenges; last year tech IPOs of SaaS companies had 11X revenue multiples. But maybe they are assuming the Fintech bubble will keep going like the dot.com bubble, after all Yahoo got a 238X revenue multiple when they IPO’d at the height – oh yes but then the bubble burst."
We’d like to share some quotes from other industry experts whose views and opinions were also expressed in the Financial Times article:
- “There will be consolidation within fintechs – the survivors will be those that made it to scale fast enough” (Michael Mueller, CEO, Form3)
- “For the overall growth of the industry and the halo effect for UK fintech, Revolut’s growth is undoubtedly beneficial” (James Lynn, Co-founder, Currensea)
- “So far, Revolut’s global expansion is a testament to the success of the business model digital banks have designed to take on the leaders in the industry. But they have a challenging future ahead of them, and it’s certainly an interesting space to watch” (Ian Bradbury, CTO for Financial Services, Fujitsu UK)
To sum up, we’re really excited about all the changes that are happening in business banking and we’re looking forward to seeing how things develop in the future. Something’s cooking and, as already said, “the Fintech bubble will keep going” – only time will tell if it will burst or not. But the good thing is that progress is ongoing and there’s always room for more players, more improvements and more ideas.