This is my kitchen table and also my filing system. Over much of the past three decades, I've been an investor. The highest calling of mankind, I've often thought, was private equity. And then I started interviewing. I watch your interviews because I know how to do something. I've learned in doing my interviews how leaders make it to the top. I asked him how much he wanted. He said 50. I said, Fine. I didn't negotiate with him. I didn't do due diligence. I have something I'd like to sell. And how they stay there. You don't feel inadequate now because being only the second wealthiest man in the world, is that right?
In 2015, Nik Storonsky started a small company designed to help people with their foreign currency exchanges. Today, that company is Revolut. It is the most valuable pre-IPO company in all of Europe. I had a chance recently in Washington, D.C., to sit down with Nik Storonsky to talk about his amazing story, how he grew a very small company into such a giant financial behemoth.
Let's talk about Revolut, because it's a company that's based in the U.K., focused more on Europe than the United States. And we'll get to that in a moment. But let's talk about what it does for the American audience, for example. What is Revolut? What does it actually do?
Well, Revolut is a digital bank. So we provide global banking services for our people in more than 40 countries. So everything is packed into one simple app. So you can get banking, you can do wealth management, stock trading, savings bonds, crypto, you can borrow money. And you also have lifestyle services, for example, that can get you a hotel. It can earn a hotel allowance. You can book a hotel and so on. So everything is in one app for your financial services.
Do you have a partner to start it with?
I actually started alone. So I built a product, I hired a team, then built infrastructure. Then I hired someone late, that made him, I think it was till '18, I made him co-founder as well, because it was easier for him to kind of, you know, recruit engineers if he had the title co-founder.
So you start the company and the mission you had was to enable people to do what that they couldn't do. What was your purpose in starting the company?
So I was a trader back then. I learned very quickly in calculating numbers in my head. And then every time when I went abroad or when I sent money, I could calculate like I was here, $10, $50 and so on. And my initial idea was to build a product, a simple app with a card attached to it that allows you to spend money anywhere in the world at interbank rate. So saving effectively 50 to 70 dollars on every $1,000 that you spent.
In other words, you weren't trying to convert people's currency, you were letting them have a card that would enable them to buy something in whatever currency they wanted.
Yeah. So it's both, right? You can exchange currency or you can buy directly from your existing currency. And normally throughout Europe, when you go to Europe, you see everywhere currency exchange places, and they always charge a fee. I don't remember what it is, six, 7%.
So you decided to start a currency exchange business without charging a fee?
Well, you can call it a currency exchange business, interbank rate without charging a fee, correct.
You didn't go out and build a physical bank. You did it all online. Is that right?
So how did you get people to know about this service? Did you start advertising online or anything?
We didn't spend any single dollar on marketing for the first 5 to 7 years of our being in operation. So it was all word of mouth. So I remember when I finally launched the product, it was summer 2015, and I physically was selling my product to friends, family, even people I don't know.
Okay. So if I go to London today and I say, Here's $10 and I want to exchange it on a regular place, and I would get back pounds minus about a six or 7%, 8% fee. Correct. So if I went on your service, what would I get back? And I would I get back everything for essentially no fee?
Then you make the money in effect on the float because you're getting paid by somebody and then you kind of can invest that money and then you don't have to pay somebody for a while. Is that how you make the money?
So then when you spend with the card, the merchant effectively pays the base 2 to 3%.
Yeah. Okay. But that's not the customer paying, but rather a business itself. Although I want to be clear that it was initial product in 2015. Now, especially for US customers, we are fully licensed digital bank providing all the services.
You have a European banking license now, is that right?
So we have a European bank, so we are regulated by European Central Bank. We have a UK bank, a license regulated by PRA. Then we also have multiple other licences, for example, Mexico, Colombia, Lithuania.
And you're now applying for a US banking licence.
How long does it take to get a US banking licence?
Right now it should take us up to 12 months. But again, it depends. So official target is four months. Well, there are multiple steps involved. It can be longer.
Are you confident that you can get a banking license in the United States, or do you think you'll get it?
I think it's obviously much easier for us in the other administration, plus that we have so many other banking licenses. Plus, we have a medical center. So for us, it became much easier compared to two years ago.
Do you have a credit card business as well?
Yeah, we have credit cards in several markets.
Yes. Is that and you have credit cards and debit cards.
We have debit cards in every single market. Credit cards, I think in five or six markets. So in Europe, we have 20% penetration. So one out of five adults in Europe, they use Revolut. It calls and then I said, Don't like us. We have much higher penetration. For example, in Ireland we have four out of five adults using Revolut.
So younger people seem to like things that are called cryptocurrencies. Are you involved in cryptocurrencies? Do you trade cryptocurrencies or make markets for people?
So as a business, we have a pretty large crypto currency business. I think we the largest we have the largest crypto business in Europe with our volumes. Personally, I don't speculate crypto, but I use it sometimes for transfers.
So in the United States, what do you hope to be able to do with your banking license if you get it? What is the market gap that you think you can fill that maybe others aren't doing?
So basically I mentioned already our retail business. So it's one simple app where you can do everything, everything what you need for your financial life. And the second direction, we also provide the business accounts for businesses and again, end to end services that you need to run your business. So payments, banking, credit will come as well. Wealth Management or Treasury, we'll call the Treasury about acquiring as well. So for example, or a North American company I'll need to start. So Stripe for acquiring, then JPMorgan for my business banking, and something else for plus something else for payroll. So we provide all the services in one product.
While if you conquer the U.S. the way you've conquered the UK and Europe, is China next or you're you're not going to focus on that.
Asia where they've been focusing. So spending a lot of time studying Asia. And then as a search, we applied for multiple banking license in Asia as well, and then some more than what we've got already around, like China is on the list as well. And our one day I hope we can set up our business there.
Now, some people have written that your bank Revolut is worth $75 billion. Have you ever thought of taking your organization public?
Well, the way I think about it, we kind of will be ready probably in two years time. But then again, depends on how good the market is.
Since you don't have an IPO, how do the people who work for you make some money? You make a market for people to sell their shares internally.
Yeah. So we do secondaries every one or two years. One, people can sell a certain portion of their stocks to investors.
So you've done secondary sales for your employees, so employees can then get some liquidity. Do you expect before you go public you'll do any more of those or you just want to wait to go public before you liquify any more stock?
Yeah, I think so. We might do second thoughts as well before we do IPO because we do it every one or two years. So we made the second order as well.
All right. Well, if anybody wants to sell their shares to me, let me know. And have any investment bankers told you why they're the best to do the IPO for you?
Yeah. Obviously, every single one is the best. Everyone is the best.
You're not in a rush to do it. You don't need the money.
So we're a bank. And then for the bank, it's super important to have trust. And then the public companies are trusted more compared to private companies. So there's a reason.
What are you most proud of having done so far, and what do you most enjoy?
Well, it's basically designing something, designing solutions to solve a problem that I see are being realised and I'm using it. That's what I enjoy when I see some elegant solution.
Many people think that companies like yours, which are often called fintech companies, financial technology companies, are changing the world dramatically, but they could be changed dramatically. So, for example, artificial intelligence is coming along. Are you worried about artificial intelligence or do you use artificial intelligence to help grow your company?
Well, this additional tool that we obviously use and the thing with alarm bells. So it's another AI surface on top of the infrastructure that we build because our banking is not the simple app on the app. You have a lot of background, a lot of systems in a lot of regulatory systems and so on. An app is a fairly interface to all this backend logic and then AI can be something on top of the app or directly interacting with our back end logic to call it another interface. That's what we're building as well, allowing people to interact with all our products through channel.
Let's talk about how you came to start the company. So you are starting. Doesn't sound like you're a native of England from your accent, originally from Russia.
So it came to UK first in 2006 for the internship, then then 2007, then came for another internship. And afterwards I stayed to be employed by Lehman Brothers as a trader.
And at what age did you leave Russia?
