Curve's 2019 Performance

Curve have filed their accounts covering up to end 2019 which we can see here: https://find-and-update.company-information.service.gov.uk/company/09523903/filing-history

They restated their accounting period by a few months, and still filed it 11 days late (causing a rebuke from the FCA) to ensure it was filed only after their latest funding round was completed, which made me wonder what they didn’t want analysed in detail beforehand… so I had a little look :laughing:

Firstly, I have to say I am really, really impressed with these accounts. They have spent £120k on a proper audited set of accounts, and I think managed to get their prim and proper auditors to sign-off on a typical set of Curve comms, which are very misleading when you first look at it. I’d appreciate another set of eyes on the document as I’m no expert, but it seems to say that due to a change of accounting period, they are comparing a 14 month period (Nov 18 - end Dec 19) with their income over a 12 month period (Nov 17 - end Oct 18):

Assuming that they are comparing 14 months to the previous 12 (which is a bit cheeky as their crowdfunding investors might not notice the small print) I’ve reduced the 2019 numbers by 13% to make a fairer comparison. Obviously not exact, but eye-opening:


The subscriber numbers are an estimate assuming an annual fee of £100.

Would be good to get your take on the numbers, but there’s a few things that jump out to me.

It’s a great increase in users - to 860k - but well below the 1m target that Curve were aiming for and suggested to crowdfunders just 3 months previously.

They nearly quadrupled their user numbers, but note the money they got from interchange fees only went up by 50%. The value of all the transactions went up almost in line with user numbers, but the shift from giving everyone business cards to personal cards has slashed their profit here - looks like it’s 0.5% of spend.

In late 2019, their CEO was really clear that their average active user spends about £1459 per month. With £708m being spent on Curve in 2019, that means they count about 40,000 users as ‘active’. Doesn’t really match up to their 860,000 user base - the real average spend of all users is £69 per month.

Looking at their subscription income, and assuming an average spend of £100 per year, then they have nearly 11,000 premium subscribers - meaning 98.5% of users are not paying any fees.

Another page in their account says that 70% of their income comes from UK users. It’s clear from the year on year trends that the business would struggle to scale in the UK now it can’t give personal users business cards (with higher interchange fees) and will need to find new revenue streams - which it seems to be planning to do by offering Klarna-style credit (although this was announced about 18 months ago and hasn’t yet launched) and getting users to upgrade so as to pay HMRC.

The new $95m funding they announced today is clearly marked at a US entry - where interchange fees aren’t limited in the same way they are in Europe. Perhaps they’re using the last few years as a way of making the tech reliable and understanding the customer support needed, and are now pivoting to a new market to focus on profit?

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I suspect the early launch period was still thought of as beta in all but name, and only now is Curve finally becoming the product that was originally envisioned.

My guess is that they will look to streamline operations in the medium to long term, to create a very small profit margin from each user on average - probably keeping the freemium model but with more reasons to upsell.

They will then be happy with a low-margin, high-volume set up in markets like the U.K., but will seek to enter other markets like the US as well (it’s big, and banking is very much in the dark ages ripe for modernisation, where even a contactless card is seen as cool) where they have both appeal and ability to charge higher fees.

I would then expect a gradual international expansion across profitable markets.

I’m not sure that the “interchange/cards” amount listed is actually interchange arbitrage. I understood this to be purely interchange revenue, while interchange expense would be included in the “cost of sales”. I would find it hard to believe that they’d make 0.5% profit on interchange when their personal cards are capped at receiving 0.2% (before paying interchange to the underlying cards). Unfortunately, being Curve, they don’t break down the cost of sales so it’s impossible to know whether they made a profit on interchange.

The reduction in interchange percentage isn’t surprising given that prior to 2018, they only issued commercial cards, so the proportion of personal cards subject to the interchange cap has no doubt grown over time.

On the active users figure, it definitely doesn’t look good. I remember at the crowdfunding event, the CEO claimed that they didn’t present active user numbers because they were meaningless - he seemed to think there wasn’t a sensible way to define them. The fact that they quote the growth in active users in this report, however, belies that - obviously this is a metric that they do in fact track and care about. The fact that they only quote growth and not the actual number is not a good sign.

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Great point, I am sure you’re right. And if so, that means Curve are likely to be losing more money as they grow - it’s just not a sustainable business in Europe.

That meeting was September 2019? As these accounts are the state of the business at December 2019, it was clear that he was rather incorrect with a lot of his statements ahead of raising funds from customers (and that is a positive and polite way of putting it).

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I’m not sure that the higher fees will benefit them in the US, as they’ll also get charged higher fees by the underlying cards. For companies like Monzo or Revolut, the higher interchange in the US market is a potential boost, but for Curve their costs will increase at least as much as their revenue.

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Won’t there be a big gap in interchange if they issue world debit but underlying cards are standard?

That may add up to a significant amount?

Yeah I guess that’s possible. I’d expect in the US market though that most underlying cards would be credit, and the customers that would use curve the most would probably have higher tier cards.

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If that’s true than your previous point would be right, so a risky strategy for Curve.

I believe there is also an increase in interchange for cardholder not present transactions in the US, compared to in-person. As Curve has the effect of “converting” the transaction type, this may also be a problem?