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$1.7bn startup Revolut's bank plans could face tough culture questions

Revolut’s founder and CEO Nikolay Storonsky attends a session at the Paris Fintech Forum in Paris on January 30, 2018. Photo: Eric Piermont/AFP/Getty Images
Revolut’s founder and CEO Nikolay Storonsky attends a session at the Paris Fintech Forum in Paris on January 30, 2018. Photo: Eric Piermont/AFP/Getty Images

Revolut, the British “unicorn” fintech startup, will likely face tough questions from regulators over its internal culture when it applies for a banking license, according to experts.

Wired magazine ran a feature last week on what it called “the human cost” of Revolut’s rapid rise. The story detailed people being asked to work for free as part of job applications, excessively long hours, a culture of “hitting targets at all costs”, and high staff turnover.

Revolut has pushed back, insisting in a blog post that it has already addressed the issues raised in the article. CEO and founder Nikolay Storonsky told Yahoo Finance UK in an email that “the allegations in the media over the past week are not an accurate reflection of the company that we are today.”

But recent employee reviews on website Glassdoor suggest there could be more work to do. Compliance and regulatory experts that Yahoo Finance UK spoke to also said the UK’s banking regulator, the Financial Conduct Authority (FCA), would likely apply extra scrutiny to the startup’s culture in light of the report.

Culture is incredibly important to the FCA,” according to Gillian Roche-Saunders, a partner at law firm Bates Wells Braithwaite and head of its compliance practice.

“Do the sum of the parts across the management team proposed, will they actually be able to deliver in a way that meets the FCA’s objectives? That would be a question anyway but this backdrop would mean it’s really going to be at the fore of that process,” Roche-Saunders said.

‘PR crisis’

Revolut is one of Britain’s hottest startups. It was founded in 2015 by a former Credit Suisse currency trader and began as a prepaid card linked to an app that let people buy ultra-cheap currency. It has expanded into everything from insurance to cryptocurrencies.

The startup was valued at $1.7bn (£1.2bn) last year and has raised money from top venture capitalists in Europe and Silicon Valley. Revolut has 3m users globally and signs up thousands of new accounts each day.

Revolut currently operates in the UK using an “e-money” license, but the company wants to gain a full banking license in the country. It is already licensed as a bank in Lithuania, and is currently recruiting someone to spearhead efforts to get licenses in the UK and US.

However, the startup is suffering through what marketing magazine The Drum dubbed a “PR crisis,” after recent press reports questioned its advertising techniques, sanctions controls systems, and internal culture.

While sanctions control issues made by The Telegraph may sound the most serious, Revolut has pushed back strongly in a company blog post. Revolut said it was simply testing new systems and no laws or regulations were ever breached. The FCA told Yahoo Finance UK that it is talking to Revolut to “understand and assess the issues the article raises.”

‘Not the same company’

Experts Yahoo Finance UK spoke to said the culture questions raised by the Wired article may be more of a sticking point for regulators when it comes to signing off on any banking applications.

“To be a bank, actually you do end up having to change your culture somewhat from being a ’startup,'” Sandra Quinn, founder and director of The Compliance Foundation, told Yahoo Finance UK.

“Revolut, the perception out there is they are actually very different and they’re trying to do things in a very different way. I think the process of becoming a bank will actually naturally both probably oblige them to develop and make them want to evolve. Success is all about evolution.”

Revolut has pushed back on claims of a toxic culture. Storonsky, the company’s CEO, said in a blog post that while “we haven’t always gotten things right” Revolut is “not the same company that we were 12-18 months ago.” He said that staff turnover is now just 3% and Revolut will “share our plans around culture and wellbeing in the coming weeks.”

According to the media, we are a sweatshop of tribal and submissive employees hunched over and chained to our desks, working tirelessly over the weekends at the direct orders of our founders,” the company’s lead data scientist wrote in a Medium blog post.If you seriously believe this — I am not sure you should be on the internet.”

‘Not the place if you value your mental health’

However, recent reviews on Glassdoor, the website that allows staff to leave anonymous reviews of their employers, suggest that there’s still more to do.

Revolut has a rating of 4.2 out of 5 on Glassdoor. Twelve five-star reviews have been posted since the Wired article was published, eleven of which were published on Sunday, 3 March.

However, reviews prior to the article’s publication suggest a more mixed picture. Several comments draw attention to issues around intense working hours and high targets.

One posted on 28 February complained of people working insane hours to meet the unreasonable KPIs [key performance indicators] set by management.” Another posted on 30 January said, This is not the place if value your mental health or work/life balance.” Others from within the last year complained of the culture and work-life balance.

Twitter user @syswarren also tweeted a picture of a push notification she received from Revolut on 5 March asking her to post a review of the app on Trustpilot to help the person “not get fired.” Wired’s article featured a Slack message sent by Storonsky last spring saying staffers would be “fired without any negotiation” if they were too far below targets set for them.

Multiple fintech industry insiders told Yahoo Finance UK that Revolut has a reputation for having a hard-charging culture that raised eyebrows elsewhere. Four people independently compared the startup to Uber and its former CEO Travis Kalanick.

“You have a Travis Kalanick — Russian version — who wants to build a regulated business and do it faster, better, bigger than anyone ever has,” said one London venture capitalist who didn’t want to go on the record.

I’m the first to admit that we’re on a constant journey when it comes to our culture, but we have come a long way in a very short space of time,” Storonsky told Yahoo Finance UK in an email.

Culture comes from the top down, and I’m committed to demonstrating that these allegations are not a reflection of who we are today. Going forward, I’ll be making our cultural roadmap public, so that people can get a real-time view of the initiatives that we’ll be introducing, but also to give people an insight as to what it is like to work at Revolut today.”

‘How are senior managers setting the tone?’

Long work hours and high targets may strike many as the norm in banking — particularly in investment banking, where Storonsky and his co-founder came from. But in the wake of the financial crisis, regulators have been increasingly concerned about culture at banks, realising that poor cultures can often create compliance problems.

“[The FCA] do ask questions that try to draw out how things are working in practice, the governing compass, essentially, of the firm,” Roche-Saunders, the head of compliance at Bates Wells Braithwaite, told Yahoo Finance UK.

“How are senior managers really setting the tone and also making sure that further down the ranks everybody is acting in line with the ethics of the firm, which shouldn’t be growth solely.”

The claim that Revolut sets aggressive growth goals — KPIs — could be an issue.

It’s always a challenge with fintech businesses wanting to grow incredibly quickly,” Roche-Saunders said. “Is there enough, literally, margin to make the business work and also to be able to meet all of the regulatory requirements?

Essentially, the business model needs to support the FCA’s own objectives — things like consumer protection, market integrity.”

I have internally made some recent announcements about improvements that we believe will make our processes around employment engagement first class! These include a revamp to how we onboard new talent, talent retention, and performance management,” Storonsky said in an email.

Quinn, the director of The Compliance Foundation, said that the company’s recent “PR crisis” may in fact be a useful spur to address issues that may have become even bigger problems down the line.

“The more your head starts to go above the parapet, the more this kind of thing happens, and the higher people’s expectations are because you move from being a great funky app — this is new, this is a brilliant addition to my life — to: I’m actually depending on this,” she said.

“It’s that change in expectation that I think is so key for consumers and so key for public perceptions and clearly the regulators obviously have regard for that as well.”

“In some ways, actually getting that sort of focus actually helps you change. It probably doesn’t feel like it at the time, but it’s almost helpful,” Quinn said.