For several months now, some of the largest fintechs (Klarna, Checkout) have registered significant declines in valuation. And recently the question has arisen as to how much exactly two of the brightest are worth.
Specialized in online payments, created in 2009 in the United States by two Irish brothers, Stripe enjoyed lightning success, before benefiting from the development of online commerce with the health crisis (60% increase in its turnover in 2021).
This favor, however, had its backlash. With the return to business as usual, Stripe laid off 14% of its staff and its valuation dropped 28% as of July 2022. Most recently, Stripe raised $6.5 billion to proceed with a mammoth share buyback plan, in particularly for the benefit of its founders. and employees Either way, Stripe has indicated that it doesn’t need as much capital as it has. Its valuation was reduced from 95 to 50 billion dollars. But what do those numbers mean? How can tens of billions be erased like a pen stroke? How much exactly is Stripe worth?
Launched just ten years ago, headquartered in the UK, Revolut is the neobank that has enjoyed the most impressive international success. Today, Revolut is valued at £27bn, making it the third largest retail bank in the UK, after HSBC and Lloyds, but ahead of Barclays (valued at £22.1bn). However, this almost sounds like a joke! Alongside the billions of results generated by HSBC last year, Revolut, which doesn’t even have a UK banking license, has earned a small £38m, for a turnover of less than £700m (having has also been the subject of strong suspicion on the part of the British Financial Information Council).
rudimentary business model
Revolut offers no credit, overdraft, and offers little insurance. Their economic model seems quite rudimentary (payment exchanges, subscriptions to their premium services, margins on gold and cryptocurrency trading, etc.). Next to it, Starling, the other profitable neobank, whose banking offer is much more developed, is valued at 3.3 billion pounds. It looks more realistic. So a recent article from sieved was able to report doubts internally and among investors about Revolut’s valuation, which could be cut in half. So how much exactly is Revolut worth?
As for Stripe, there is no easy answer to this last question because the two fintechs offer little points of comparison, if not with each other.
First, both have achieved what no bank has really been able to do: they were international natives. Very quickly, Stripe made it possible to work on 135 currencies. Revolut immediately targeted pan-European development and the neobank is now considering expanding into India, Brazil and New Zealand.
Second, Stripe and Revolut never set out to be banks in the classic sense. However, Stripe, a major competitor to Paypal, is not focused on account management and is instead trying to develop a service platform for and between businesses. Revolut also pursues the goal of a “superapp”, based on a banking platform model closer to that of the Chinese internet giants than to traditional European banks. This is what sets it apart from its competitor N26, also of pan-European origin but which evolves according to a more traditional online banking scheme.
Finally, the two fintechs have never targeted the mass banking market. Instead, they have chosen to support certain new modes of consumption.
500 million potential customers
So we can say that, its clients, Revolut was going to pick them up at the airports. Not to target tourists, but frequent travelers to whom the neobank first offered not to pay more exchange commissions for their expenses in other currencies and to which it very quickly -a significant detail- facilitated access to halls. A population of young executives, often with international profiles; a segment of customers limited to the scale of each country but that HSBC, which targets it, has been able to estimate at around 500 million people worldwide. A wealthy or promising mass clientele (massive tributary) from which, according to a classic banking scheme, HSBC wants to capture rents and finance real estate acquisitions.
Revolut, on the other hand, strives to keep up with your expenses (numerous cashbacks, integrated chat with transfers, expense sharing and sub-accounts by destination), take care of children’s money and facilitate lifestyles (vacation accommodation reservations, plane ticket plans). plane and car). rent, interest in cryptos,…). Like Stripe, Revolut is driven by new consumption patterns. Successfully because, with the elementary sources of income that we have listed, the neobank’s 27 million clients must use its services and means of payment a lot to make it profitable.
As a bank, Revolut probably isn’t worth much, but Revolut isn’t a bank like any other. As for Stripe, its growth momentum is now enough that it doesn’t have to resort to the astronomical fundraising that has pushed its valuation to new heights. So this can be greatly reduced without tarnishing its stature as a new payments giant.
The two fintechs invent their own economic model, which exposes them to many misunderstandings while, in the banking market, we always think in terms of replenishment, of fighting the old against the modern, rather than from the perspective of scaling up to complete reconfiguration .
Source: BFM TV
