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Stripe cofounder John Collison interviews founders, builders, and leaders over a pint.
John Collison
Do you want to go head-to-head Amex Platinum and Chase Sapphire?
Nik Storonsky
Yeah.
John Collison
How will you compete?
John Collison
Nik Storonsky is the co-founder and CEO of Revolut, one of the world's leading neobanks. They started with foreign exchange, but now do everything from bank accounts to business services to mobile plans. And they're expanding to the United States.
John Collison
Cheers.
Nik Storonsky
Cheers.
John Collison
As you look back on it, how did Revolut get to scale? What worked and caused growth?
Nik Storonsky
I mean, to be honest here, I was never optimizing to get scale quickly. I was just working on the product and then solving problems end-to-end. Initially when I started, we had probably 1–10 customers per day. Then it went to 100 customers, then to 500, and then to 1,000. Now we have about 100,000 customers joining every day. I was never trying to optimize to get as many customers as possible. I was more focused on building product, gaining licenses, and so on.
John Collison
But you presumably thought a lot about distribution dynamics and how to get customers to refer other customers and things like that. Like, kind of the growth, consumer growth side of things?
Nik Storonsky
Yeah, we actually started doing growth, I think, 2022. First time when we started having serious budgets on growth.
John Collison
But you didn't for the first seven years of—
Nik Storonsky
No, we didn't. It was purely organic, yes. And that's when we built all the models, paybacks or TVs per customer, and then also built a referral marketing product as well.
John Collison
But the first seven years was just organic, building financial products you thought were good?
Nik Storonsky
Yeah.
John Collison
How did people discover them?
Nik Storonsky
Word of mouth. Plus we've done, obviously, PR as well.
John Collison
What were the best products from an acquisition point of view?
Nik Storonsky
Well, best product was initially the first product that we launched. It was a multi-currency card with zero FX fees.
John Collison
It's interesting that both you and Wise were able to get to scale based on consumers' frustrations with FX fees. The frustration with the incumbents in that product was so high that it has birthed multiple successful fintechs.
Nik Storonsky
Probably. If you look at banks, majority of products, they're actually very bad, right? It's not only kind of multi-currency transfers, but also credit, business credit, business products, almost every single product is really bad. I mean, acquiring used to be the bank, right? I think it wasn't about multi-currency transfers or card. It was more that we picked up a certain product, and we made it so much better. It could have been acquiring that you've done. It could have been maybe credit as well, wealth and trading. Robinhood did it.
John Collison
So, you think there's nothing special about starting with multi-currency cards. You think you could have, in another universe, started with checking accounts—
Nik Storonsky
Yeah. I think as soon as you build a much better product compared to banks, which is also much cheaper, then it's pretty easy.
John Collison
What was the second product that worked? When did you prove to yourself that this wasn't a fluke, and that you could repeatedly build financial products?
Nik Storonsky
Well, business accounts. We built business accounts. The offering wasn't about multi-currency cards anymore, it was a digital bank account. Without any marketing, we first started probably with 10 business customers a day. Now we're onboarding maybe 1,500 business customers a day. And then only... I would say, 30% of it is paid marketing. The rest is still organic.
John Collison
One of the things that, looking at Silicon Valley... Successful product companies tells you is there are many, many paths to heaven. There are many ways to build a successful product organization. And you have Apple that famously doesn't do any focus group testing. They just build the products that they know in their heart of hearts are right in this very functional organization. And then you have... Google or Facebook develop products in totally different ways. What is the Revolut system for building products?
Nik Storonsky
We just separate a small team of 10 people. Smart people. Smart product owners. Good designers. Good developers. We just build what makes sense from a first-principles point of view. It can be either replicating an existing product but building it so much better, or trying new products which we think make sense. But to be honest, everything new is forgotten old, right? We haven't built any product which worked, which wasn't an old product built badly by other organizations. We have, internally, a 'new bets' process when everyone in the company can raise an idea, and then it goes through validation. Then if the idea is validated, then it goes to... We'll call it a committee of people who've done it before, and then they decide whether to fund the idea or not.
John Collison
What's validation?
Nik Storonsky
First, I think it goes to the team which validates unit economics, financials, and so on. Whether it makes sense. In the majority of cases it makes sense, because the cost of the team is pretty low compared to if the idea is useful for customers. They pay for it, you can generate 10s of millions of dollars, right, compared to the cost for the team, which is small. Then it goes to the people who have built new bets before, and then general managers. They also validate it from, again, a purely common sense perspective. If everything is approved, then we separate a small team. We hire people there, additional people. Then they build a product within... 9–18 months? And then we look at the growth of the product. If there is a lot of growth, then we scale up the team. One team becomes two teams, three teams, four teams, department, and so on. For the bets which don't grow, we sunset them. For bets that grow but not very fast, we just leave them alone.
John Collison
I'm surprised that ideas would need to be validated economically, because you're distributing products across millions of customers. Won't the cost of a... Can't any idea support a 5–10 person engineering team to go develop a V1 of it? It's very unlikely that a product won't work economically when you have such a large customer base and you can fix it with pricing.
Nik Storonsky
An example is we launched Revolut Lite across many countries, 100+ countries, without the banking license and without our e-money license. Purely a money transfer business. The idea was to build Venmo internationally. It didn't really work out because we thought distribution costs would be much lower. It didn't really grow organically fast enough, so we had to do performance marketing. And then unit economics with the performance marketing didn't really work in terms of payback. So in the majority of cases, 90% of cases, yes, you're right. If it works out, it works out very well financially. But, there are some cases— exceptions—which you still need to validate.
John Collison
Brian Armstrong from Coinbase has talked about how when he was first pitched USDC, he thought it was kind of a silly idea. He wasn't convinced. But sure, okay, if you guys want to go work on that, have at it. Are there ideas that came to you that you were initially not fully convinced, but ended up being successful?
Nik Storonsky
To be honest, in 99% of cases, I'm always up for new ideas and just try them—
John Collison
You're just open-minded, yeah.
Nik Storonsky
Yeah, the reason why—
John Collison
Maybe it's an idea that surprised you. You didn't expect it to work. You were open-minded, but you were pessimistic. But then it outperformed your expectations.
Nik Storonsky
I just had too many failures in the past when my judgment was wrong, so now I'm fully optimistic. I think it's not about the idea, even though ideas are important. I think it's about execution, to be honest with you. You can make almost any idea work.
John Collison
Can you? Even the bad ones?
Nik Storonsky
If it's not that bad, then you can make it work, provided you spend enough effort and enough time on it.
John Collison
And people are bringing you the plausible ideas.
Nik Storonsky
If the team is very strong, then even if the idea is average, you can still make it work. There are cases when the idea is great, the business model is great, the team can be bad. It can still fly.
John Collison
What's your favorite example of the 'great idea, great team' intersection?
Nik Storonsky
Well, I think our subscriptions team is very good. When they came and said: "Okay, we want to launch additional Ultra subscription." I thought it was... Idea was okay, right? It ended up being an amazing bet, because it's a very expensive subscription. Ultra is effectively the Ultra bank account. You pay about, I think it's €50 per month, but then it gives you a lot of additional benefits. I thought: "I mean, the idea is okay. This business probably won't be very large." It ended up being a very, very large business.
John Collison
The closest comparison... It's kind of like an Amex Premium card—
Nik Storonsky
Amex Premium, yeah.
John Collison
Yes, yes.
John Collison
I'm so interested to hear you say that growth dynamics were not critical in the early days of Revolut. Because firstly, so many financial products spread because a payment transaction has two legs. It's just very well suited to viral product growth, whether it be Bill.com or PayPal, where you can send money to an email address even if they are not signed up for PayPal. It's a very classic acquisition dynamic. It's interesting to me that that wasn't the case for you. And also... The peer-to-peer product is now so successful.
Nik Storonsky
Peer-to-peer is definitely an acquisition driver, especially in countries where they don't have a very good payment system.
John Collison
Yes.
Nik Storonsky
So, for example, in certain markets in Europe we—
John Collison
Ireland.
Nik Storonsky
Ireland, yeah, is one of them. Romania is another. So, yes, it worked in many markets where the bank payment system is pretty old.
John Collison
Okay. I would draw—
Nik Storonsky
But I wouldn't say it was primary kind of acquisition.
John Collison
Yeah. Because I would draw a distinction between word of mouth, where someone has to go to a bar and be telling you: "Hey, I discovered this great new product last night." And then viral product adoption mechanics, where if I want to pay you money, you become a Revolut user, and then you can tune it. It's like, have you thought of sending money? You can promote that. Meta does a very good job at this, where when they want to grow new parts of the product, they promote them in the app. Again, you have knobs and dials, similarly, that you can use. The in-product growth stuff feels to me—
Nik Storonsky
Yeah, of course. I mean, we tried a lot of things, P2P included. The problem with the banking products, KYC onboarding, right? There's a lot of friction. Even if you have these viral things, then, you know—
John Collison
There's a steeper drop-off.
Nik Storonsky
Yeah. There's a lot of drop-off, yeah. It's not really viral. Plus, you cannot really sell it worldwide, right? You always need to sell into countries where you have licenses.
John Collison
Yes, but it can be viral in the same way that, you know, Facebook was viral in the early days where they would go college campus by college campus. You can't do the cross-border transfers, but there's so much activity within a country that you can get viral growth within a country.
Nik Storonsky
Yeah, if you can onboard subjects through one click. Yeah. As a Facebook, then yes.
John Collison
Yeah, yeah. Which again, you think the KYC is a bigger impediment?
Nik Storonsky
When we first launched, there was a lot of virality because we were doing onboarding. I think it was up to €1,000 or €100, you can do it without KYC. Back then this regulation allowed us to do it. So, there was a lot of virality, but then I think it was stopped 2017 or something.
John Collison
So, the KYC changes actually made the viral growth loop a little harder.
Nik Storonsky
Oh yeah, 100%.
John Collison
Though, you can presumably still do a lot of nice viral growth. Where, if there's money waiting for you and you just need to go through KYC to claim it, then you can do one leg of the transaction and not complete it, right? And that will still be plenty enticing for a customer.
Nik Storonsky
That's true. Yeah, we also have it. But again...This K-factor is never a legitimate one. You cannot really experience exponential growth. It's always less than 1.
John Collison
Could you not? There could be a K-greater-than-1 product. I'm not too pessimistic.
Nik Storonsky
Everything what we tried so far, last 12 years, always less than 1.
John Collison
Okay. You're in the K-is-less-than-1 business. The other thing I find interesting about Revolut's business is you're a bank whose primary revenue source is not net interest margin, which is obviously unlike other banks. Did you arrive at this accidentally? Was it part of your thesis for Revolut? You're very different in that way, and it's quite asymmetric versus other banks.
Nik Storonsky
I think it's pretty... The answer is pretty simple. Because we started in the UK and Europe. The UK and Europe conditions are very tough for startups. Interchange is very low, plus credit is extremely regulated. You cannot really charge customers a very high interest rate, same as you can do in Mexico or Brazil, for example. So, for example, you'll have 10, 20, 30 startups starting in financial services, and then the majority will die, right? We were forced to optimize our transactional business, and to effectively make it profitable. If we would have started in Brazil or Mexico, we would obviously be focused on credit business because it's less regulated compared to Europe. And we would make a lot of money on credit business. But in Europe, it's not possible.
John Collison
But aren't you developing a balance sheet? Because you have one side of it, which is the deposits. You could build the other side of it with loans.
Nik Storonsky
Yeah, but before we got deposits, we couldn't build a credit business. Now we're doing credit business. Now, now, yes, now, yes, we—
John Collison
Will you build a traditional bank credit business where you have the deposit side and you have the loan side? Or will it look atypical in some way?
Nik Storonsky
Well, I think our business model, and then my personal opinion, is we want to have the least amount of risk. Even if we lend, it won't be a large portion of the balance sheet. At the moment, target state is less than 10%, and then the rest we would securitize.
John Collison
Why?
Nik Storonsky
Well. First, the simpler the model, the better from a regulatory point of view. Plus, again, if we want to be a tech business, we would rather be in the subscription business. As soon as you go into the lending business, your multiples become similar to banking multiples. If you look at tech business multiple, you can usually get like 40-50 PE. In the banking business, you'll be lucky if you get 10 PE.
John Collison
But is that because... I'm always skeptical of multiples-based arguments because, ultimately, the business is good or it isn't. And, you can educate investors if the business is in fact, good. When we started Stripe, people thought payments businesses were horrendous and deserving of low multiples, and everything like that. Over time, they came to appreciate payments businesses more. But, if we had been fixated on the multiple that people ascribed to the business, we might have been scared off this path. I think you just need to decide: "Is this lower quality or higher quality as a profit pool?" And so, do you think it's actually a lower quality profit pool, or investors just have a weird hang-up?
Nik Storonsky
I think it's more the business itself. If you look at the credit business in banking, general credit business—every time you do a loan or credit card, you need to put provisions against it. In reality, the amount of these provisions is highly dependent on the models that you use, on economic conditions. Because in reality you don't know... In three, or four, or five years, will you receive the loan back, right? You kind of model it. On average you hope to receive money back, but really things can change, right? This uncertainty is being priced in by investors and generally by lower multiples. Because the bank can produce a lot of money now from the credit portfolio. But look, in 2-3 years' time unemployment goes from 3% to 6%.
John Collison
Yep.
Nik Storonsky
And all profit is gone, right? Plus they're losing money. So I think this strategy—
John Collison
Okay. You think, fundamentally, making your money via credit is this very cyclical profit stream that can be entirely wiped out in a downturn. It's very sensitive to you doing the math right. Whereas, the nice thing about subscriptions is, ultimately, people are paying you this money on a recurring basis and... Yeah, in a downturn, maybe some people cancel their subscriptions. But, you can't make negative money on subscriptions. You can only shrink the book slightly, and so it's much higher quality.
Nik Storonsky
Yeah, exactly. It's similar to selling options, right? You kind of collect premium for 10 years, and then year number 11, you lose it all, right? That's a problem.
John Collison
Okay. I want to go back to your product development methodology, though. So, okay. You're describing the early... The early stages of there's some "tops-down" product ideas, there's some "bottoms-up" product ideas. They have to be validated that, if it works, it can actually be interesting economically. You have a talented product leader and a few engineers working on it. Then what?
John Collison
How do you decide which products get the in-product distribution? How do they earn that? How much are you willing to give them credit for, "Oh, I think this will become a good product over time"? Product developers always tell you: "I would be doing very well if you just gave me more distribution." But, the product people like to blame distribution. The distribution people like to blame the product. Maybe you can talk a little bit about how the scale-up works.
Nik Storonsky
Basically, it's pretty simple, right? We've got the team. They'll work on the product for up to 18 months. Then hopefully, they'll launch the product.
John Collison
They'll work up to 18 months before launching anything?
Nik Storonsky
From the moment we decide to launch to launch is usually 12–18 months. It takes time to get the team, onboard the team, build the product, go through all this approval process on the banking side. So, 18 months. Probably a good number.
John Collison
Because you're a regulated bank, you have to go to your bank regulator to get sign-off on the product?
Nik Storonsky
It's not a bank regulator, but more like, the internal governance process.
John Collison
Oh, I see. You're internally... Yeah.
Nik Storonsky
We will launch the product, and then we release it. We first release it in a test country, for example, Ireland or UK, or whatever. Then if it works—if everything is fine, we release it to more countries, and more countries, and more countries. We add it to our cross-sell engine as well, which is automated. There is no distribution problem, right? It's automatically being added to, hopefully, the whole user base if everything works fine. And because we've done it for a long time now, we have already historical data on performance of about 100 bets.
Nik Storonsky
Then we just look at month one after launch: "What is the gross profit compared to previous bets?" Month two. Month three. Month four. Month 12. And then: "How is it stacked with all the other bets?" If it is top 25% quantile of all the bets, we just scale it up. We hire more people. We have two teams. Three teams. Four teams. And so on. Bottom 25%, we don't do much. We redistribute the team to do something else. Then in the middle, sometimes we keep the team. Sometimes we don't keep the team.
John Collison
Is a new product like that actually an option, or are there costs to shutting it down? Are consumers annoyed if they were relying on a product, and then it goes away? Or are there some products you kind of... I don't know, if you had a pension product, you can't—you actually just can't turn that off because it's their pension. Do you think about the cost of shutting off a product when you decide to fund it? Does that differ by product?
Nik Storonsky
Yeah, of course. We look at customer detriment, right? If there are already customers using the product, if there is detriment, we just keep it as it is. We stop investing in it, so we just maintain it.
John Collison
Can you tell me about the automated cross-sell machine?
Nik Storonsky
Automated cross-sell machine. Well, basically we have many products on the platform. Then we effectively have a machine learning model that decides based on certain events, based on customer profile, which is the most suitable product at this point of time, right? For example, it can be... You land in Ireland, you have a UK account with Revolut, and then we offer to you an eSIM, right? Because, for example, you're landing in Ireland and then you spend money on Airalo, right? Because we see all the transactions, we can offer you a single product from ours. And on top of it, we also have an LLM model which effectively behaves as an account manager, right? It through... Human reasoning, it looks at all the products, at all the events, and all of the suggestions generated by machine learning model, and then decides which product to push to the customer in this particular point of time. It's kind of all automated.
John Collison
I hadn't thought that you are in a much better position to cross-sell products than anyone else because you see what people are spending money on—
Nik Storonsky
Yes, as well, yeah.
John Collison
You can just... If they're overpaying for something, you kind of know.
Nik Storonsky
I mean, we don't see the full details of the bill, right? We just see the transaction.
John Collison
The cross-sell engine has some propensity model for the customer. You're basically trying to find the conversion-maximizing sale, like the thing that they are most likely to buy next?
Nik Storonsky
It's a bit more complex than that. It's not only conversion. It also takes into account GP, the product, and we also try not to spam customers, so there is a certain negative value of our message to a customer. Altogether, the model makes a decision.
John Collison
It's interesting that you describe products needing to perform well on a revenue cohort curve. It's a little like a race, where, your job is to stay in the pack, or stay at the front of the pack, but you are judged relative to other products. Have you ever had slow-burn products that, for whatever reason, had a gradual start? Maybe the team was just learning exactly how this works, but that wasn't actually any negative signal about the product. It just took a while for them to get going, and then really took off?
Nik Storonsky
To be honest, it's almost never happened. I don't even remember the example when it was slowly growing and then started growing fast. Usually trend is your friend. The thing is growing very quickly in the first 12 months. It will continue to grow very quickly.
John Collison
Because, a classic bigger company behavior might be to say: "Oh, this isn't working yet, but there's a good reason for it and blah, blah, blah." You think that's all excuses and the trend is your friend?
Nik Storonsky
Yeah. I mean, the general statistical trend is your friend, yeah.
John Collison
Yeah. Why don't other companies operate in this Revolut model of developing many new additional products to cross-sell the customer? It feels applicable to many other consumer companies. Grading them against the curve of how other products have done at a similar age, I don't think most companies, even that sell multiple products, are that strict. Instead, they make excuses for why the product isn't performing: "Oh yeah, we just need more staffing." They're not as strict.
Nik Storonsky
I think the majority of companies, they don't do many bets at all, right? Because we've done a lot of bets, and we had a feedback loop compared to other companies. Because of that, we are very strict.
John Collison
Yes.
Nik Storonsky
Other companies, they do probably 7–8 bets. And the feedback loop is delayed, plus management changes. As a result, they never end up implementing any strict process on new bets.
John Collison
Yeah. Are there products you've done that have not been well suited to this model? I can imagine, say, a product that involves changing many different parts of the Revolut experience would be hard to fit into this new bet model. Because it's fundamentally much more infrastructure rewiring, or something like that. I don't know. Do you sometimes have to do products that don't fit into this standalone bet model?
Nik Storonsky
To be honest, you can fit any product into this model, even if it is a product which is very new to us. For example, not a financial product. It can be a B2B product. For example, we've done a bet, Revolut People. We built internally an HR system for ourselves, and we decided to make it a new bet. Then we separated it into a standalone team, plus we sell it externally. It's kind of a new bet, but we cannot really cross-sell it to our retail customers.
John Collison
What about products that just don't generate revenue at all, by design? Imagine if I'm a product leader and I'm building a financial insights product. It generates a lot of engagement with the app, because it sends people a summary of their transaction activity, and ways to spend money, and blah, blah, blah. The point is not revenue. The point is app engagement. How would you grade my success?
Nik Storonsky
We still have P&L attribution to it by indirect attribution of P&L, because you can also calculate it.
John Collison
You have some churn model.
Nik Storonsky
We'll have two numbers. One is direct GP, and another one is indirect GP.
John Collison
And so I have some synthetic profit that I can attribute to myself, because I saved this many customers from churning by having them come back to the app and/or had them spend incrementally.
Nik Storonsky
I'll give you an example. We got RevPoints. It was also a new bet.
John Collison
What is RevPoints? Is that rewards?
Nik Storonsky
RevPoints is more like a rewards system, yes. You get points, and then you can effectively use these points to buy additional products that we offer. As accounting GP, it's very small, but then if you calculate indirect GP, that's very high.
John Collison
That's very interesting. I feel like a lot of the most successful companies get to an understanding of their economic equation, and then take that very seriously. Where, Amazon says: "Oh, an incremental Prime subscriber is extremely valuable, and so we're going to set up a movie studio so that we drive more Prime subscriptions." It sounds crazy, but if you really believe the math on how much a Prime subscriber is worth, then it makes sense. Or Google was always very fixated on just how valuable the incremental search customer was, because of the lifetime value of the advertising revenue. And so they'd do all sorts of crazy things, pay a lot of money to become the default Safari search box. But again, it was all that attributed P&L. You think the attributed P&L revenue is very important, so that you can actually then create accountability with product teams to know if something's working.
Nik Storonsky
Yeah, ultimately you need to have one number which defines whether a product is successful or not.
John Collison
Yeah. I think a lot of companies actually don't do that to a surprising extent. Chase through the full accountability with a synthetic revenue number.
John Collison
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John Collison
How important is the way people think about neobanks. As I understand it, whether there's an account or "an account," is whether people deposit their paychecks. You can use Revolut. A majority of Ireland uses Revolut in some degree. They might just use it for peer-to-peer, or something like that. But, they have an account. Then there's using Revolut as your primary bank account, which in the banking industry people basically think of as: "Do you get your paycheck deposited there?"
John Collison
How important is it that you move people from being a lightweight user to a heavyweight user, from occasionally using certain features to actually being the place that the paycheck is deposited?
Nik Storonsky
I mean, it's super important, obviously, right? Because as soon as you get salary into the account, then people use a lot of other products that we have. If they're just using P2P, they, I don't know, load $20, send money to someone. It's not very profitable for us. We spend a lot of effort to move salaries of these people to Revolut. Overall, I mean, it depends on the country. 10–20% of monthly active users we have are salaried accounts.
John Collison
What moves people over?
Nik Storonsky
It's a very slow burner, right? We actually spend a lot of time and effort building products for kids. As soon as we capture kids, then we can easily move them to the 18+ account, because it's very hard to move adults.
John Collison
Yes. It's a tale as old as time. I remember when I was in secondary school, maybe a similar experience. The local bank came and they gave us a soda and a bag of chips to sit through a presentation on how to save money. And then they gave us all a bank account. But, they were in the school, age 13 or 14, doing customer acquisition on the theory that bank accounts are very sticky. But, okay. You see very different behaviors from the people. Presumably, if you have 10–20% primary banking share amongst the regular population, presumably, that's way higher amongst the younger population because they're Revolut-native.
Nik Storonsky
If you look at different cohorts of users, then we probably capture more than 50% of users up to 35 years old in almost every single country where we're in, in Europe. Where we have difficulties capturing 50, 60, 70+ people who still hold majority of liquid assets. It's very hard for them to move from a legacy bank to a digital bank.
John Collison
Sorry, what's that 50% of under-35 statistic?
Nik Storonsky
Well, basically, if you take all the countries in Europe, then if you take kids, people from 18–25, 25–30, 30–35, and then older. In majority of countries, we already captured more than 50% of people up to 35 years old.
John Collison
Having any kind of Revolut account?
Nik Storonsky
Yeah.
John Collison
How is this product development engine different as a regulated business versus if you were just a normal tech company?
Nik Storonsky
Well, I think in a normal tech company it's much easier to do. In banking you need to go through many approval processes. The way we're structured... Because we have many banks, so then the way the approval process works, we call it NPAP, New Product Approval Process.
John Collison
How do you minimize churn?
Nik Storonsky
Well, trying to build the best product.
John Collison
But more than that?
Nik Storonsky
More than that—
John Collison
Because again, you're very quantitative, you're very product-oriented. This is the thing that quantitative product-oriented people obsess over.
Nik Storonsky
Yeah, we used to have this framework of state machine. You're probably familiar with it. How many people were onboarding. How many people went through... From being P2P customers to seller customers. How many of them churned. Then it just became too complex. We ended up just having a cohort of customers which joined per country, and then how many of them are still with us within 12 months, 18 months, 24 months. What we observe is that we have a "smile," right? Out of 100 customers, monthly active can be, say, 60 people can be monthly active. But then after two years, it will be 65, 70 customers. People return to us. We actually have, I would say, negative churn.
John Collison
Why do people come back? Why do people leave but then come back?
Nik Storonsky
I think it's because a larger and larger portion of population started using Revolut. So, people who got churned because of different reasons. They still hear about it from friends, family, and then they come back.
John Collison
I see. You have multiple word-of-mouth shots on goal. Okay, so, yeah. I was curious to ask you about AI. How AI-pilled are you in how you run the company?
Nik Storonsky
Well, I obviously started with AI about two years ago. The goal was just to optimize customer support, translation. Now it's almost in every single area of the company. Obviously engineering as well, marketing. Now we're even trying to create an AI employee, end-to-end. Yes, we're very involved. Last 10 years I optimized a lot of things in the company just based on people, based on advantages and disadvantages of people. We build all the systems of KPIs, roadmap, processes, hiring, performance management. Now it might be all redundant, right, because of AI in 2-3 years' time. So... We're all reinventing how the company should work.
John Collison
How has it changed how you hire either at an overall company level, or at an individual team level? Are the eight-person teams... Should they now be three-person teams? Can you have higher aspirations for what an eight-person team can accomplish?
Nik Storonsky
Technically, one person can accomplish much more now. I would even say, you don't really need to have separate Android developers, iOS developers. One frontend developer can do things. You can even have one developer covering frontend, backend, and possibly data science as well. So, you can have one person doing all aspects of the product. You should probably still have a designer. Although it's so much easier to design, so one developer can do design as well. A team can be two people, probably.
John Collison
You work in this relatively standardized way of product bets where you put a small team on something to initially test it. Has the size of that product bet initial team changed, and shouldn't it change if not?
Nik Storonsky
I mean, not yet, to be honest with you. We're still operating in the old framework.
John Collison
Isn't that very old-fashioned of you?
Nik Storonsky
It's pretty old-fashioned, yeah. But I just prefer to continue doing things that work. Then in the meantime, experimenting with new things. When we have a proven track record that new things really work for us, we will start changing.
John Collison
That's interesting. Because you think that a four-person team is too... Cannot bring a new product to market, even with all the new productivity enabled by AI?
Nik Storonsky
No, four-people team definitely can. It's just because all the processes within Revolut are... We are still set up by specialization. So, okay. You need to have an iOS developer. They have the system, they know how the system operates. Then Android developer, then backend developer, then data science, then Ops manager. It will be very hard to just hire one person who will get access to all the systems, and then produce, with AI, all the required code.
John Collison
I see. So, partly it's just you need to reorient Revolut a bit.
Nik Storonsky
We need to change process, yeah.
John Collison
How does this change the shape of the Revolut organization?
Nik Storonsky
Well. First of all, we're just trying to automate a lot of things. Hopefully when automation is done, we can start hiring less people. Because at the moment, I don't think we're at the stage when automation is done.
John Collison
You traditionally competed with legacy banks. People might go to their bank for FX, or they might use a Revolut multi-currency card. You had a lot of advantages where you had no tech debt. You had no retail branch presence to have to afford, and many other advantages versus traditional banks. You're very successful. As you go to Brazil, you compete with Nubank. And as you go to Kazakhstan, I guess, you compete with Kaspi? Is that their name?
Nik Storonsky
Yeah, there is a Kaspi.
John Collison
Kaspi, yeah.
Nik Storonsky
We're not in Kazakhstan, yet.
John Collison
Okay, but when you do... How is the world going to look different when you're competing with neobanks rather than traditional incumbents?
Nik Storonsky
Well, obviously it's more difficult, right? Ultimately, when we go into the country, the decision to go into the country is a combination of, "how bad the banks are," right? Because there's less competition, and then what is our unit economics per customer, and how difficult is it to get a license. Obviously, if a country has a lot of digital banking competition, it's difficult to get a license. Unit economics is not great, we will not go there. Or, we try to de-prioritize it. Then, we try to prioritize markets where there are a lot of legacy banks. Unit economics is great. Then, hopefully, it's easy to get a license.
John Collison
Okay, so you look for markets with sleepy incumbents.
Nik Storonsky
Exactly, yeah.
John Collison
That's a good market for Revolut. What predicts the unit economics of a market, other than how rich people in that market are?
Nik Storonsky
Well, it's interchange legislation or laws, and then legislation on credit rates as well. Generally, if inflation is high, then credit rates are even higher, and then the margins are even higher.
John Collison
Isn't it surprising then that you grew up in Europe where both interchange rates and lending rates are regulated? Wouldn't that be a bad market in this rubric?
Nik Storonsky
Yes, a very bad market, yeah.
John Collison
Does the rubric miss something?
Nik Storonsky
I think it's just because we started in Europe, where it is very hard. I think, out of 50 digital banks, probably three, four survived. We really survived in tough competition. But then, that means we are more fit to compete in other markets.
John Collison
Let's talk about the US market. The US has historically been very resistant to neobanks. Remember Simple?
Nik Storonsky
Yep.
John Collison
That was what? 2012, 2013?
Nik Storonsky
I think they were the earliest one, yeah. Even before Europe, yes.
John Collison
Yeah, around then. Various foreign neobanks have tried to enter the US market. Why... The US is such a quick adopter of so many technologies, and invents so many of the technologies. Why is... Leaving aside Revolut for a second, we'll come back to that. Why is the US so slow to get neobanks?
Nik Storonsky
Well, I think historically it was a very tough regulator. US regulator was one of the toughest ones. That's number one. Number two, all these startups couldn't really get a banking license. So they chose not to get a banking license, because it was difficult. The traditional tech companies, they don't want to be regulated because it kills their business. And as a result, they jumped into partnerships with legacy banks. And it doesn't really work. Because, okay, you've got one tech and then you've got compliance people in banks. It's a different company. They don't really match together. So, the model was wrong.
John Collison
You think you have to be willing to own the stack, end-to-end, including all the licenses.
Nik Storonsky
Including licenses—
John Collison
Which was tricky in the US because it was such a stern licensing regime.
Nik Storonsky
Yeah. Plus the culture was: "Okay, you need to have tech separate to compliance."
John Collison
You need to have tech separate—
Nik Storonsky
In reality, it's one business, right? So you also need to automate tech, automate compliance with tech, and so on.
John Collison
Yes. Why did we not see a version of Simple that worked? Where, again, Simple tried to do the tech via partners. But, why didn't someone try it... Why didn't someone try to start a neobank that owned the licensing end-to-end in the US?
Nik Storonsky
I think it was very difficult to get a license. I know Square, Cash App, I think they have a banking license now. They now activated it, but it took them 4–5 years.
John Collison
Yeah.
Nik Storonsky
Now times have changed, definitely, with the new administration.
John Collison
Is the current regulatory environment better in the US?
Nik Storonsky
Process quicker, yes. Now you can get a license within a year. Before, it took you... It could take 4–5 years.
John Collison
And you guys have gotten that? You will get that?
Nik Storonsky
We received the conditional approval. There are two more approvals that we need to receive.
John Collison
This is from the OCC?
Nik Storonsky
OCC, yes.
John Collison
Okay, very good. And so, you guys will be going big in the US soon? When you get the—
Nik Storonsky
Around next year. Yeah, hopefully.
John Collison
The rest of the licenses. What will need to change about the product to be successful in the US?
Nik Storonsky
Well, it definitely needs to be credit card-led. You've got a lot of benefits in the US from Amex, from Chase. We'll do the same, which will be a credit card-led proposition, with a lot of benefits as well.
John Collison
Okay, so you want to go head-to-head with Amex Platinum and Chase Sapphire?
Nik Storonsky
Yeah.
John Collison
How will you compete?
Nik Storonsky
Well, offering the same benefits or better. Plus, the whole proposition that we have. They're offering just payments products. We're offering wealth, crypto trading, and so on.
John Collison
Why launch your own euro stablecoin?
Nik Storonsky
It's good business, obviously, that's number one. Number two is... Basically there is USD stablecoin and there is no equivalent or credible equivalent for euros, the other way in Europe. We should do it.
John Collison
Yes. You said you've been doing this for a very long time. It's been multiple years?
Nik Storonsky
Yeah, tech was built a long time ago.
John Collison
How do you organize your day? Are you waking up and going wherever your curiosity takes you, or is it hyper-scheduled?
Nik Storonsky
Monday to Friday it's hyper-scheduled, in 15 or 30-minute slots. Usually it's business reviews, product reviews, one-on-ones. Then Saturdays, Sundays is more freelancing and free thinking.
John Collison
Revolut's the kind of company that has a work-from-home policy of you can work from home two days a week: Saturday and Sunday.
Nik Storonsky
Yes, true. I try to limit our external meetings as much as possible and spend 95% of my time internally.
John Collison
Do you think most CEOs are too externally facing in how they spend their time, going to conferences and all this kind of stuff?
Nik Storonsky
100%. I think... I do have allocation for conferences. Maybe, 2–3 times a year, but that's it.
John Collison
Yeah. You just want to be within the building, reviewing the actual product?
Nik Storonsky
Exactly. Products and the business process. Yeah.
John Collison
What are you actually reviewing? Are you looking at metrics dashboards with people? And what are you, Nik, adding? Versus, you could also have an automated system that shuts down any product that's failing to meet its revenue goals.
Nik Storonsky
Yeah, basically we have all these KPIs, roadmaps, and processes targeting execution. Before I was doing it manually. Now it's all semi-automated with the performance team also reviewing everything, reviewing if the KPIs are correct, that the roadmap is executed for each team department on the company level. What I do is obviously product, right? Product direction, product features, and then detecting bullshit as well, right? There can be a lot of cases when everything is rosy, KPIs are good, everything is met. But then... Things can be even better, right? Then I just know it.
John Collison
What is the bullshit that you're detecting if the KPIs look good? In what way are they trying to bamboozle you?
Nik Storonsky
You need to dive deeper than KPIs, right? KPI can be met because of external factors and because of luck. Then you dive deep, and... You look at the product, product features, and speed of development as well. I'll give you an example. For example, wealth and trading product, I think two or three years ago it grew 60–80% year-on-year. Then I thought it's not enough, right? It should have been like 300%. Then, I dived deep and what I realized is the quality of the product wasn't great. Features were not good. Then we changed the team, and now it's growing 300%. You need to have intuition for these things.
John Collison
What's the easiest way to annoy you in a product review?
Nik Storonsky
Incompetency.
John Collison
What kind of incompetence? There's many forms.
Nik Storonsky
Well, I mean. We have certain standards for quality, right? Everyone knows these standards. Then if somehow I see a product below the standard of quality, and we've done many products so far, then it really annoys me.
John Collison
Okay, so shoddy product quality is the criteria—
Nik Storonsky
Yeah, that we need to kind of—that we're going into the same mistakes.
John Collison
Yes. How's your AI hedge fund going?
Nik Storonsky
It's actually going well. It's now, in terms of returns, top 3%, top 4% of funds in the world. The model really works.
John Collison
What is the model?
Nik Storonsky
I mean, our model is a machine learning model, so... Effectively it's trained on a lot of data on startups. Based on—so it's a feature-based model. Then based on our number of features, it effectively tells you which startups to invest in.
John Collison
It's not a hedge fund, it's a venture firm.
Nik Storonsky
It's a venture firm.
John Collison
It's an AI venture firm. Okay.
Nik Storonsky
They already invested in 40-50 deals in the last 2-3 years, and the returns are good.
John Collison
Isn't the classic problem with this kind of approach that with private company investing, it's about picking the right companies and then being able to invest in them?
Nik Storonsky
Exactly.
John Collison
Sometimes it's very obviously good companies, but you just can't invest in them.
Nik Storonsky
Yeah.
John Collison
How does... How does that work here?
Nik Storonsky
So basically. As you correctly noticed, the first part is to create a good model which will tell you with high precision which startups to invest, which not. Then second, to enter the deal. Our sales proposition to founders is that: A) We will help them with Revolut operational playbooks. We tell them how exactly Revolut hires people, how does performance management and so on, so they don't reinvent things from scratch. That's number one. Then number two, I help with my personal advice. Then number three is we help them to sell either into Revolut or into customers of Revolut as well.
John Collison
I see. So, you're a desirable investor and—
Nik Storonsky
So, added value investor.
Nik Storonsky
Exactly. You can trade the added value for that. When's Revolut going public?
Nik Storonsky
Well, I hope 20—it's now 2026. 2028. In two years' time, subject to market being good.
John Collison
What needs to be true for everything else to be ready, or is it just already ready?
Nik Storonsky
I mean, it's still a work in progress, right? We need to launch US. We need to launch a lot of new expansion markets. We need to still prove that we can be as successful in Europe, in the markets outside of Europe. Especially credit-led markets.
John Collison
Do you actually need to launch the US before going public? Isn't Revolut a huge bank already with billions of dollars in profit? You're plenty scaled already.
Nik Storonsky
No, of course. I mean, it's not necessary, but it's good to have.
John Collison
Because investors are based in the United States? Again, this home country bias means they'll be more interested in Revolut if they're familiar with the product?
Nik Storonsky
I mean, I'm not really optimizing on valuation or readiness for IPO. It's more: "Okay, this is the roadmap that we want to complete. Let's focus on the roadmap."
John Collison
You mentioned helping startups understand the Revolut playbooks. Where do you think the Revolut playbook is most differentiated? You talked about performance management. You talked about a few things.
Nik Storonsky
Yeah, obviously hiring, performance management, or product building as well. I think with AI, it might be irrelevant in the next 2-3 years.
John Collison
How do you do performance management differently?
Nik Storonsky
I think it's very important to do it quarterly. The majority of companies do it once a year, I think that's too long. Problem is a lot of managers, they are inherently biased against... Exiting underperformers.
John Collison
Mm-hmm.
Nik Storonsky
By having a process once a year, you're not really helping the company, right? Then you're forcing managers to exit on the performance once a year. In reality, you need to do it as fast as possible, right? You cannot really do performance management once every month, because it's too time-consuming. But, once every quarter you can.
John Collison
Do you try and make performance more quantitative than other companies? The mapping products to where they should be on the cohort curve is maybe one example of that. Do you try to do that in other places?
Nik Storonsky
Yeah so, we are trying to be as quantitative as possible. Every person is assessed on their skills, deliverables. And deliverables are measured by roadmap plus KPIs, and then culture. All these three aspects are assessed by the manager, plus the functional manager. Plus there is a performance review on top of it. Checking that everything is correct, and then a person is assessed.
Nik Storonsky
Some domains are just fundamentally more quantifiable than others, right? A salesperson, you can measure how much they sold. Whereas a lawyer, you can only make that so quantifiable, right?
Nik Storonsky
Well, in our case, we have metrics for almost each lawyer, I think. Definitely for the team of lawyers. What lawyers do, for example, if you look at commercial lawyers, they process contracts, right? And then... Are they keeping with their SLAs? That's the number one metric. How many deficiencies are within the contracts? Again, you can measure it, and so on. On the team level, we definitely have KPIs. On individual level, I'm not sure, but it's possible to build.
John Collison
Do you think most companies are... Because I don't think most companies really believe that you can measure lawyers on a grid of KPIs. Do you think that, again, you can be more quantitative than you think?
Nik Storonsky
You can definitely be more quantitative than the majority of companies, I think. Can you quantify everything? No. You need to have some other leading indicators rather than some KPIs.
John Collison
Okay, we'll leave it there. Thank you, Nik.
Nik Storonsky
Thank you.