When a new idea disrupts the traditional model, it becomes revolutionary. So is Revolut.
Revolut is a neobank that provides its customers with all the services they would desire from a traditional bank, but with a twist. Their business model and the customer experience they provide are much better than what traditional banks offer.
That is the reason why neobanks are getting popular worldwide. May it be Volt in Australia, Monzo in the UK, or n26 in Germany, these solutions are disrupting the banking industry by getting more traction every day. Users too love them because of added convenience.
As a result, Fintech Solutions like Revolut are a nightmare for traditional banks.
Now seeing the amazing success of Financial Technology Companies and Apps like Revolut, several entrepreneurs and business owners are trying to replicate their business model to launch in different countries where these solutions are not yet known.
If you are one among them, this blog is for you. Here, we will discuss everything you need to know about Revolut’s business model, how it works, and how it makes money.
So, let’s get started.
With the vision to become the Amazon of banking, Revolut was launched in the year 2015 by Nikolay Storonsky and Vlad Yatsenko. From the beginning, Revolut’s team planned to disrupt the traditional banking sector and failure was never an option for them.
One of its founders, Yatsenko, had a background in FinTech before starting Revolut. He worked as an app developer for various tier one investment banks and gained experience and insights into the FinTech World. On the other hand, CEO Storonsky studied Physics and Technology at the Moscow Institute. After his studies, he did a job as a trader at an organization before working on Revolut.
The idea of Revolut came to the mind of Storonsky when he was traveling and spending a lot of money on foreign exchange rate commissions and transaction fees. Because of his financial background, he knew how much extra money he was paying and the rates he should be getting. At that time, he thought of getting a multi-currency card and found it was not possible. It was then that the idea of Revolut stuck in his mind.
In just a few years, Revolut made 7 Million people get used to its platform in over 30 countries. This finTech organization offers all things finance – from everyday banking, currency exchange to stock trading, credit and debit cards, insurance, and much more. All via an easy-to-use and engaging mobile application.
Revolut was launched in July 2015 and in the same month, the startup acquired £1.5m in investment. In February 2016, it again raised £1.5m in a seed funding round and there is no looking back. In July 2021, the company completed a fresh fundraising campaign worth $800 Million. This round was led by well-known tech investors Tiger Bank and SoftBank.
After this round, Revolut’s valuation increased to $33 Billion, resulting in it becoming the most valuable startup in the UK and the second-most valuable startup in Europe. With this valuation, Revolut even beat traditional banking stalwarts like NatWest in the UK. At present, the company has its offices in London, Moscow, Paris, Berlin, and many other cities in the US and Germany and it plans to take on the Middle East, North America, and Asia very soon.
Now let’s find out the secret ingredients behind this revolutionary success.
Revolut is a neobank that operates via a native mobile application to provide its customers with various money-related services. As a neobank, it operates digitally only and does not own any physical customer branch. Even though it presents a triadic business model, Revolut’s main business model is dyadic. Let’s understand its working using Revolut Business Model canvas:
1) The company has two main customer segments: individual customers who require to send or receive money from international peers/family and businesses with international operations that want easy and cheap international transactions. Thus, it serves B2C as well as B2B customer segments using a single mobile application and technical infrastructure.
2) Revolut’s value proposition lies in the app allowing customers to send money internationally and do so by spending 10 times less money than they would spend in paying fees of any traditional bank. It offers fast, free, and secure money transfer services to a bank account in more than 129 countries, using the real exchange rate.
3) The Revolut app differentiates itself from competitors by using the interbank rates on payments for services and products using multi-currency cards, instead of MasterCard exchange rates as Starling and Monxo. It beats services like PayPal and TransferWire by not charging a fee on every transaction.
4) Every Revolut bank account accompanies a prepaid debit card (VISA or MasterCard) which is accepted worldwide. Customers can make purchases with this multi-currency card and send money via social networks using the Revolut app.
5) Customers can also use the mobile app for real-time money management, making transactions, setting spending limits, and investing in a variety of cryptocurrencies.
6) The app’s easy onboarding process, beautiful interface, and amazing value proposition have drawn customers from all over the world to its several capabilities and features. Let’s now find out how Revolut makes money while offering such a great experience to customers.
While the Revolut mobile app is free to download and the core banking account is free to use, the revenue of the app comes from a combination of different sources, including:
When you buy a subscription plan, you get access to some advanced features in addition to the core account. There are three subscription plans available, Free, Premium, and Metal.
With the free plan, you can convert up to £6,000 into 150 currencies. When customers upgrade to a premium plan, they can convert unlimited amounts of money into different currencies and also get access to 5 cryptocurrencies. Other benefits of paid plans include cashback, a premium card, customer support, passes to lounges, and a lot others.
Just like other popular apps, Revolut also provides awards to its customers to enjoy customized cashback offers on eligible purchases. These bonuses are credited to customer accounts directly and Revolut receives a commission from merchants for sending them customers.
Revolut lends money to other institutions and banks from user accounts. They then charge interest from these bodies which is called the Net Interest Margin. According to a report by Statista, the net interest margin for all the banks in the USA was 3.35% in 2019.
Again, like any other bank, Revolut provides loans to customers and charges interest on them. These loans range from 500 Pounds to 25000 Pounds, and customers can pay them back within 12 to 60 months. Revolut determines the interest rates on these loans according to the loan amount, customer’s credit score, and other terms.
Revolut is also a trading platform that lets users trade stocks and cryptocurrencies like Ether, Bitcoin, and Stellar. Customers can start trading for as little as 1 Pound. Also, premium customers get access to a specific amount of free monthly trades. Each extra trade is charged.
Check out the Business Model of Robinhood – another successful Stock Trading Application that is said to be Silicon Valley’s Hottest Startup.
Revolut also generates revenue in form of the commission it gets for facilitating insurance transactions.
To build a great product, it is crucial to learn from the success and mistakes of others. Here is what you can learn from the Revolut Business Model and the way it works:
When you launch a product that solves an existing problem for customers and adds convenience to the task, it becomes revolutionary. There was no solution in the market before Revolut that made international money transfer as easy as local money transfer. Revolut made it possible and the rest is history.
Digital banking solutions usually have a lot of data that users find overwhelming. Revolut solved this problem by integrating neat features like real-time filtering and predictive search to help users find anything they need in a single tap. None of the traditional banking apps is as seamless as Revolut.
Revolut can be defined in three words “Banking as a platform.” Their goal is to help people manage money in a cheap, efficient, and secure way.
It is an end-to-end application for all things finance. From transferring money to managing funds, making an investment, getting insurances, and more – Revolut provides all services to its customers and never lets them leave their app for anything related to finance. Plus, all their tech stack is handcrafted so the platform is highly secure and reliable.
Here is what its Founder Nikolay Storonsky said in one of its interviews that proves this statement right:
We are trying to build a 10X better Fintech Company that is 10X cheaper as well. Thus, we are not just building a product, but a platform with several products on top of it.
Revolut is an excellent example of how revolutionary products are created. The founders of this platform faced a problem and struggled to solve it for the world. It is an amazing idea that is disrupting the entire banking and financial sector in many developed countries as of now.
However, the concept of neobanks is still gaining traction in Asia and the Middle East region. So, if you are determined enough to build and scale a product like Revolut, you can be the next success story. Our Expert FinTech App Developers can help you conquer the world. So, are you willing to build a profitable and revolutionary FinTech company?
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Nikhil Bansal is the Founder and CEO of Apptunix, a leading Software Development Company helping startups as well as brands in streamlining their business processes with intuitive and powerful mobile apps. After working in the iOS app development industry for more than 10 years, he is now well-equipped with excellent problem-solving and decision-making techniques.
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