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Asia will test Revolut’s belief it has the best of both worlds

James Shanahan, the fintech’s new Singapore CEO, epitomizes a shift to a regulated business model.

James Shanahan, Revolut

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Revolut’s recently appointed head for Asia Pacific says he was given a straightforward mandate: expansion, in terms of both product and markets.

“We want to be seen as a global bank,” said James Shanahan, its new Singapore CEO, who joined in January. “We went live in Singapore in October. This is a good market but it’s also a regional hub, and we are reaching out to the surrounding markets.”

This is not the same kind of drive for users that characterizes many software companies, although Revolut is still eager to do so: Shanahan said the company is racing to win 100 million users, from its current 12 million. But it is striving to grow in the guise of a regulated and mature firm, rather than as a move-fast-and-break-things disrupter.

In other words, Revolut thinks it can enjoy the best of both worlds, as both a nimble, pacey fintech, and as a global, regulated financial institution. It’s a model created in Europe, and making it work in Asia is Shanahan’s biggest task.

New blood

Shanhan’s appointment reflects this shift. He is a seasoned financial executive, with Asian operations and technology roles at ANZ and AXA, as well as heading M&A at financial technology vendor Avaloq.

He has fintech experience, too: at digital hybrid Singapore Life, and at Railsbank, a “banking as a platform” tech company helping large banks access consumer and SME businesses. It’s a background that marries tech nous with traditional regulated incumbent banking.

We want to remain the fastest-growing challenger bank…

James Shanahan, Revolut

This profile is a contrast to that of the regional MD he replaced: Jakub Zakrzewski, a young (“Forbes Under 30”) leader from the tech industry, who had previously worked at e-commerce platform Lazada and digital logistics startup Easyship. Zakrzewski is steeped in the tech startup culture: he left Revolut in January to head the Singapore office of Kraken, a U.S.-based digital asset exchange.

The contrast in personalities is part of a trend. Revolut worldwide is evolving from tech upstart to a digital bank. Despite a recent $5.5 billion valuation, the company has never made money; in the post-WeWork climate, that is no longer tenable, particularly for a firm that now has a banking license (in Europe). Its co-founders have pledged to their shareholders to be profitable by the end of 2021.

Becoming a bank

Revolut got its start in 2015 by offering rock-bottom foreign-exchange rates to travelers via an app, with a debit card on top, including a premium metal card for those who wanted to pay more. The app has expanded to stock and crypto trading, personal finance management, and other financial services, but not deposits or lending.

Last year however the company acquired a Lithuanian bank license, placing it under the supervision of the European Central Bank. It is pursuing bank licenses for the U.K. and the U.S.

…but our message is that we are regulated

James Shanahan, Revolut

“We want to remain the fastest-growing challenger bank,” Shanahan said, “but our message is that we are regulated. We need to build our banking and regulatory credibility before we launch products into new markets. Revolut is maturing, as we build a global bank without undermining our fintech credentials.”

This raises the interesting question to incumbents: would they rather compete with Revolut as a fintech stealing their margins in forex and stock broking? Or as a full-fledged rival trying to navigate the world of compliance, but with a nimble culture operating a global business on a very efficient tech stack?

Asian partnerships

Asia presents certain limitations to Revolut. The company is not chasing a virtual banking license in Singapore, as it does not expect a foreign player to receive a full-blown retail license. Shanahan says it may look at digital banking licenses in other local markets, but the plan in Asia is to try to act like a bank without actually being one.

“We are operating a full bank stack here, which is attractive to partners,” he said, noting that all arms of Revolut around the world operate off its single European tech architecture. In Singapore, it is regulated as a “major payments institution” under the country’s new data privacy laws.

Revolut is looking to team up in other markets, offering its operating capability and brand. What it wants in return is access to a local license and regulatory relationship; distribution that will afford Revolut gross profitability to meet its overall P&L goals for next year; and capital. Shanahan says such a partner could come from a range of backgrounds: transportation, remittances, supermarkets, or telecom companies, for example.

He reckons Southeast Asia offers an addressable market of up to 200 million users, over time. The company is in beta testing in Japan, has gone live in Australia, and is also looking at New Zealand and India.

Beyond regional expansion, Shanahan is also overseeing the Singapore office’s move into other products. In Singapore, Revolut only offers the basic forex app and card; by early 2021 it should offer the full spectrum of capabilities on offer in Europe.

Shanahan’s third facet of expansion is innovation: designing products in Asia that can be scaled and sold back to users in Europe.

Still spending

Given Revolut’s roots are in travel, one might expect it to be suffering from the COVID-19 pandemic. Shanahan disputed that assertion, although the company has ceased marketing efforts for the time being. “Consumer spending behavior is changing almost overnight,” he said. “The business is still growing, just not as rapidly.”

By Thursday we were 100% working from home

James Shanahan, Revolut

He says the company’s forex transaction volumes have remained steady. “Travel shrank,” he said, “things like hotels, buying tickets, T&E spending. But overall spend is not down, and movement has not completely stopped. In Singapore, transaction volumes are lower, but overall spend is close to pre-COVID levels.”

The pandemic and the need to work from home did create another challenge for him, though. “I started work on a Tuesday, and by Thursday we were 100% working from home. It took longer for me to meet the team and understand the dynamics.”

Another challenge for the firm is how to keep its user outreach on track: the company is known for hosting “Rev Rallies” at the local pub with its most enthusiastic users. COVID-19 has put an end to that for now. Shanahan says the company is looking to relaunch these virtually. “But this will require some experimentation,” he said. “It’s going to be a long time before anyone can host large gatherings in Singapore.”

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Asia will test Revolut's belief it has the best of both worlds