Cycle Time in Fintech

Last week Revolut announced their $66M Series B, and that they have signed up 700,000 customers since their launch just two years ago.

There are a number of impressive things about Revolut that have led to this success, but to me the most important is their rapid Cycle Time (the time it takes to move through the cycle below):

Two years ago Revolut was a simple app that allowed you to hold $, € and £ and convert between them. Now they cover 16 currencies, have a business product, offer insurance and wealth management, include IBANs, bill splitting etc etc etc. As an investor it is hard to keep up with the breakneck pace of new product iterations.

To me the ability to iterate at this speed is the biggest asset fintech and insurtech startups have in their fight against incumbents. They can develop dozens of new approaches, A/B test them, figure out what works and push out — all while banks are still writing a gantt chart. Customers love this, which has led to the word of mouth growth of Revolut (and also Monzo and N26). It also allows the startups to quickly react to ideas that don’t work or turn out unprofitable.

However it is not something to be taken for granted, and the bar is getting higher. Back in 2009 banks were ignoring fintech, and so the likes of ZOPA and Funding Circle had years to iterate on product and build critical mass. Online banking was painfully cumbersome and required a separate card reader just to log in. Now all the UK banks have decent mobile apps, and are fairly quick to copy significant new features (e.g. fingerprint login).

For fintech startups to continue to stay ahead they need to ensure they can iterate at 10x the speed of the banks. Most new ideas they try won’t work, so the ability to develop many in parallel is what will determine long term success.

However, we have a global shortage of the skills to iterate fast (across leadership, product, tech and marketing), and the company culture that reinforces it. This is true across all tech companies, but is particularly true in fintech. Partly due to regulatory constraints, partly as fintech perceived as less exciting to work in than AI or games, and partly a vestige of the banking background of some participants. I meet a lot of fintech startups in my job, and my biggest concern is that so few have the rapid cycle time that will enable success. I see too many that are 24 months in and yet to launch, or where I see no discernible change in product over a 6 month period.

The skills challenge can be countered through education, immigration policy and education (Lean Startup, Reforge etc.). Also through attracting talent from consumer internet: there is a lot of talent out there (just look at mobile games sector) but they need to be convinced that they will be working in a product-first innovative company.

The cultural point is a tricky one, in particular resisting entropy as your company grows from 10 to 100 to 1000 people (particularly given the relatively easy supply of angel, VC and strategic investment right now). There are a huge number of factors that influence company culture, but the most important is founders’ behaviour — how hard they work, whether they do what they say they will, their tolerance of work that is sub-par etc. Great companies also develop a strong rhythm of setting ambitious but achievable deadlines and hitting them. And good VCs help ‘keep them honest’ on this path.

There are too many fintech startups in Europe with interesting ideas but which aren’t moving fast enough. Here’s to building more Revoluts…