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Revolut defending itself on cost cutting and audit issues

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If you are a Revolut trading client in the UK, you might be starting to wonder what is going on at the broker this week. It went into bat Thursday in City AM denying that it was currently engaged in a cost cutting exercise. Indeed, it is claiming that its overall headcount has increased. The broker says it is matching its projected headcount to its forecast growth.

Concerns have been raised about the exodus over the summer of senior members of Revolut’s regulation and compliance team. This includes the chief risk officer, the UK data protection officer, and both the UK and global heads of regulatory compliance. Revolut has also been frustrated with the pace of the authorisation of its banking license with the FCA. Founder Nik Storonsky intimated in an interview with City AM that the regulator was understaffed and needed to put in place KPIs for its personnel.

Revolut is obviously keen to be able to provide cryptocurrency trading services, at a time when more institutions are looking at serious participation in the market. But to do that may require more than it was bargaining on.

Rescinded job offers and sub-par audits

According to the Financial Times, Revolut had revoked some job offers to graduates as part of a cost-cutting exercise named Project Prism. This followed a business review the broker commenced in May. Revolut told the FT that the rescinded offers occurred because of the changing needs of a specific team.

The other major issue Revolut is currently grappling with criticism from the Financial Reporting Council over its audit by BDO. There was, the FRC said, an inadequate approach to revenue recognition and also an unacceptably high risk of material misstatements. This will mean more pressure on the auditors to kick the tyres at Revolut and potentially even hold up the speed at which accounts are filed.


This brings us back to the banking license. Banks are expected to have a very solid back office, operational controls which ought to be among the best in the financial services sector. This goes beyond the expected regulatory requirements for either fintechs or brokers.

Banking is a conservative business

Over the summer City AM reported that Revolut had lost the five executives, which include Victoria Stubbs, the UK chief risk officer, and Justine Wootton, head of regulatory compliance. One of the resignations was Deirdre Halligan, head of global affairs, who was meant to be looking after relationships with the regulator.

The implications for Revolut could be significant if it does not get its house in order quickly. Aside from its ambitions to get a bigger slice of the expanding cryptocurrency market, there had been talk of it possibly going public. A recent fund raising valued the broker at a staggering £24 billion, but given current numbers and losses of £200m, that is highly unlikely to be realised in the public markets.

The world of banking remains a conservative one: the dominant players in the space, while boring in many respects, got there through a very conservative value set. To compete against them, Revolut needs to look after much of the more tedious elements of its operational culture that regulators understandably expect to be in place before banking licenses get handed out. Delays in getting one are looking increasingly understandable.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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