Deciphering Valuations in the Banking Industry Through Employment Statistics

Despite what many people think, banks can face financial struggles too. The recent pandemic caused many individuals to lose their jobs, default on loans, and pull money out of their accounts due to fear. All of these factors impact a bank’s financial health.

Two businesses that have had to navigate these uncertain times are Revolut and Klarna, both of which retain specific mission statements and operating goals. Revolut is a relatively new financial institution that was created to reduce foreign exchange transaction fees and provide innovative saving and spending habits for consumers.

On the other hand, Klarna is a post-purchase payment system that allows individuals to buy goods and services, but spreads the payments out, much like a loan. The 2005 company has had increasing difficulty maintaining valuation due to high operating losses with their valuation plummeting from $45.6 billion to a mere $6 billion in 2022.

Revolut still maintains a high valuation despite only being founded in 2015, ranking in at $33 billion. The employees that make up both of these companies have a direct impact on the valuation and profit a company generates. After all, one of the top resources that businesses utilize is their labor.

This article will dive into the employment similarities and differences to uncover if there are any factors that explain the rapid drop in valuation for Klarna and show how Revolut is maintaining their success. The employment specifics are provided by Osterus, a software program that combines multiple different data points to generate value-added employment information.

Let’s first analyze the average work experience by job title. We see that the most experienced category of workers is in the software development sector with 6 ¼ years of experience in Revolut and 5 ½ years of experience in Klarna. The next highest category of experience in job titles is the C suite with 3 ½ and 4 ½ years for Revolut and Klarna, respectively.

The other job title categories range between 2 and 4 years of experience for both companies. We would like to see more experience in some of these categories; however, this can indicate that these companies are moving employees around or recently went through a hiring effort to bring on more talent.

The work experience distribution is very telling as we see that most employees have over 3 years of experience, supporting the previous theory on hiring efforts. The highest category of experience is found in the 5–10 year category with 43.7% and 39.9% for Revolut and Karna, respectively. The 10–15 year category also holds a good amount of employees with 20.4% and 28.6% for Revolut and Klarna, respectively.

After the 15-year mark, the employee experience begins to trail off with only 10.7% and 16.2% of employees for Revolut and Klarna, respectively. The 0–1, 1–3, and 3–5 year categories are minimal. This tells us that the company went through an extensive hiring process to find experienced labor to support operations.

The current employment duration distribution supports this as we see a high amount of employees in the 0–1 and 1–3 categories with 38.2% and 39.6% and 51.1% and 40.3% for Revolut and Klarna, respectively.

Both companies have hired additional employees within the past couple of years. The sharp incline in the current employee duration distribution could be to market demands and a competitive environment causing a high turnover.

The previous employment retention distribution highlights similarities between these two companies. Both Revolut and Klarna have the highest retention of employees for between 1 and 3 years with 60.3% and 58.2%, respectively. Since both companies are older than 3 years, the high retention rate in the 1–3 category indicates potential work environment and management issues.

Nevertheless, due to the recent hiring efforts, we would expect this retention distribution to begin moving right as more employees hopefully stick with the company for over 3 years. In the near future, Osterus is launching a competitiveness score that will help benchmark the workforce and shed more light on company retention.

The next informative employment category is the number of employees in each job title. Both companies place an emphasis on software development and data science and analysis. Revolut holds 16.77% of employees in the software development category and 11.31% in the data science and analysis category while Klarna shows 14.49% and 10.77%, respectively.

This tells us that both companies are prioritizing a creative and innovative software program that consumers want to use. The new generation wants convenience and top-of-the-line features. If these companies can tailor their apps and programs to that group, they will see more success compared to older generations who may still prefer to go to brick and mortar banks.

Finally, let’s take a look at the companies that employees previously worked at. The top previous companies at Revolut are Hsbc, Ernst & Young, Accenture, Epam Systems, and Citi while Klarna shows Ernst & Young, H&M, Accenture, Ericson, and Freelancers. Some of these companies do overlap, showing similarities in the talent found at each company.

The top previous companies show the diversity that is found throughout both of these companies with employees bringing innovative ideas and creative solutions to the table from different industries, promoting growth.

Both Revolut and Klarna showed similarities in the average work experience by job title, current employment duration, and retention despite having different valuation metrics. Both companies have qualified talent that can promote growth through strong operational controls; however, we can only hope that these resources are being effectively utilized through strong management and detailed procedures.

These comparisons are only the beginning of the inferences we can make from employment information. In fact, Osterus is launching a new competitiveness score that will help us compare two companies based on a single metric. This is important to apply the employment information to your everyday life, from investing decisions to employment considerations.

To learn more about the new competitiveness score or to schedule a demo with a team member, reach out to contact us directly or on LinkedIn.