Banking, Crypto, Trading: Where is the Challenger Bank Revolut Heading?
The U.K. fintech startup Revolut was launched in 2015 with the idea to revolutionize banking. Since then the company has been launching a lot of products – cheap money transfers, currency exchange, cryptocurrency exchange, recently even business payment accounts, commission-free share trading and loans. The company has a very aggressive approach and already competes not only with banks, but also with global scaleups such as Robinhood. Furthermore, while waiting for its EU banking license, which will allow the company to act completely as a banking service, Revolut is negotiating with local authorities to launch in U.S., Australia and Asia. With $336M funding, a $1,7B valuation, close to 3 million users and team of over 500 and growing by 20 employees monthly, the company seems to be growing rapidly.
Of course, having in mind the aggressive approach towards markets and segments, it is a logical question whether this company is stable enough to act as a bank.
Trending Topics met Dimitris Litsikakis, Revolut Country Manager for Greece, to talk about the way Revolut is approaching different market niches, what are its goals and plans.
Trending Topics: Revolut has been launching product after product recently and this approach contradicts the popular strategy of startups to focus on one product. Why are you doing that and do you think that’s sustainable?
Dimitris Litsikakis: We work a lot through communities and this is our way to source information about new product demands. That was the case for instance with our crypto product. Our community wants something and we deliver it, so they are grateful and use it. In every country, for example we have ambassadors who help us a lot with community building. Don’t forget that Revolut has reached 3M users without any paid marketing, it’s all based on word of mouth and that’s validating our effort in releasing new services all the time.
At the end of the day, however, banks are the traditional secure way to keep money. Why do you think users should keep their money in a startup, as we know the failure rate?
I personally think Revolut is safer than a bank, because unlike banks that use deposits to lend or invest, we don’t. I will give a practical example from Greece. Some years ago during the crisis, the banks shut down because people were lining to withdraw their savings in cash. Recently a bank in Malta shut down and we experience growth in our user base there. Which means it is a recognized service.
So once you have the European banking licence, what is going to happen?
First of all – loans, then overdrafts and third – all the deposits will be under the European protection. The EU will protect up to €100K. The money of Revolut is anyway safer here, because we don’t use them to invest in something else.
Why do you think Revolut would beat the banks in their game?
They don’t innovate enough. They have legacy systems that are difficult to change and a culture that doesn’t favor change. Banks spend money on branches and bonuses. We invest in technology.
Revolut has different types of products – for end users, for businesses, even for traders. Which are the most popular ones and are there any geographical specifics?
Our crypto product is one of the most popular ones now. When we launched it, it just exploded. Probably because it was the right time as well since there was a huge buzz around blockchain. Revolut is a great platform because we could relate to different user groups. There a lot of different use cases and users – travellers, people working and studying abroad, traders, international business owners etc.
What’s your gain with volatile assets such as the crypto currencies? How does Revolut profit from something that’s going up and down all the time?
That’s the magic behind Revolut. That’s our hidden complex technology. A regular user doesn’t need to know what we do behind that. We do make money out of that. There’s 1.5% fee when you buy exposure to Bitcoin, Ethereum, Litecoin or Ripple. It’s still much cheaper than other platforms (e.g. Coinbase charges 3.9%) and we give a lot of incentives for people to use it.
You have also launched a business product recently. Who is that product targeting?
The corporate banking is broken. It takes weeks to open a business account. With a startup for example you don’t have the time to waste on that when you need to invoice your first customer. In this case, a founder could as an alternative open an account through Revolut online. If everything is fine and you are compliant, that’s it. It would take several moments. There are, however, businesses we don’t accept.
What about the legal part? Is such a business account compliant with different local legal frameworks?
I don’t know the specifics of every country but the beauty of the European Union lies in directives that are the same for any country. The e-money directive, for instance. No country could say it doesn’t recognize an e-money institution like Revolut, regulated by the Financial Conduct Authority (FCA) who is the UK regulator.
What do you expect from the zero commission trading product? What is the goal?
The strategy here is to democratize investing. Now it’s for people who have a lot of money and could afford to spend 20€ per transaction. We want to give the opportunity to people who want to invest €100, to do that. Especially if you think about NASDAQ companies, why shouldn’t people like us have the access to this? The strategy is to expand out user base. Judging by the crypto, this could also explode.
Probably the most frequently asked question is where Revolut is launching next. You operate mostly on the EU market, but plan to go to U.S, Asia etc. Also with the Greek office – that’s seems like a sign for interest in SEE region. What are the plans?
The strongest market sofar is the U.K. We have more than 1M users there and it’s not a surprise as we have our HQ there, and that’s where we started. Second market is France, because they have a lot of people working abroad, same with Poland. The currency conversion is critical for them.
There are challenge with the German speaking space for example Austria and Germany, since these are still cash based countries. If you think about it, for me personally, that’s strange.
Not all the markets in SEE are a target for us right now. Bulgaria and Romania for example are markets that started growing organically. We already have the license for the local currency in Romania. In Bulgaria, we could experience a huge growth if we have licence for the local currency. It’s comming soon, we are working on it. The moment we have it, it could go through the roof with a well executed strategy in which we already have great experience from the past. We’ve seen that on markets like those of Romania and Poland.
Regarding other SEE countries such as Macedonia, Kosovo, Albania etc., we don’t have them on our roadmap yet. A lot of people are asking about this, but it’s a matter of priorities.
And the markets outside Europe?
We are negotiating with local authorities. U.S. is the next market we are launching. We have the potential user base of 400 million there. There’s also a lot of business between U.S. and Europe. We already have 60K people on the waiting list.
In Australia, Japan, New Zealand, Singapore, Hong Kong and Canada we have huge progress in the negotiations. This, of course, takes time. We were too ambitious in the beginning. I will only say we are very close on those particular markets and we have already started working on Latin America.