As we mature as a company and put product people — data scientists and engineers — into traditional banking functions such as compliance, risk and fraud we realized we can innovate there as well. So fintechs become better and better, but banks just stay the same. – Nikolay Storonsky, CEO, Revolut

About Revolut

Revenue Model:

Revolut sets itself apart in the highly competitive neo banking market by offering core banking products and add-on products with enhanced digital and security initiatives.

Revolut has three revenue streams:

1. Subscriptions and account plans
2. Cards and transactions
3. Other revenue streams

1. Subscription plans

It follows a freemium model. While the core functions of the neobank are available for free, customers will have to pay a recurring fee to get access to premium functionalities.

1. Retail: Revolut has a 3-tier retail subscription plan:
   • a. Standard: With a Revolut Standard account, users get access to free domestic and international spending with lower limits. They will also have a multi-currency Revolut card with no premium designs.
   • b. Premium: The international withdrawal and spending limits are higher for premium users. Customers also get free access to digitally enhanced and security products such as disposable virtual cards. Moreover, premium users also get access to insurance coverages (currently not available in Australia and Japan).
   • c. Metal: Metal customers enjoy the highest international transaction and withdrawal limits. In addition to the products offered to premium customers, metal customers also get a multi-currency premium design metal card. Customers get a cashback for every transaction made with the Metal account and card.

2. Business: Revolut offers an all-in-one business banking application for businesses to manage their transactions, payments and invoices. Much like the retail accounts, the business account is also a multi-currency account with options to:
   • a. Spend and transact in 150+ currencies
   • b. Hold and exchange 26+ currencies with interbank charges
   • c. Open multiple multi-currency accounts
   • d. Aggregate all Revolut multi-currency accounts and other bank accounts to a centralised dashboard

The availability of subscription plans differs for each country. While Australia and Singapore have all four plans available, Revolut has maintained a focused cost leadership strategy in Japan since its launch. It only targets non-premium retail customers. Only standard and premium plans are available for Japanese customers. Revolut will launch its metal and business accounts in the country soon. We believe that Revolut will follow the same strategy in India as well.

2. Cards and transactions

In addition to the subscription fees, Revolut earns a major portion of its revenue from:

1. The commission collected from interbank fees made for every transaction.
2. The additional fees charged for international transactions and withdrawals exceeding the plan’s limit.

Other revenue streams

Due to low overhead costs, Revolut can provide its customers with higher interest, digitally advanced banking solutions, and high security. It staples value-added and third-party services to digitally enhanced core banking products, thereby tapping into multiple revenue streams. It also earns a commission on third-party integrations and consumer add-on services, like cryptocurrencies and commodity accounts.

Product stack analysis:

Table 2: Unique value propositions offered by Revolut in Australia, Singapore, and Japan

Accounts

1. Multi-currency account: While retail customers can spend in over 140 currencies and exchange in more than 26 currencies, Revolut offers an exclusive multi-currency account to its business customers. In addition to the mentioned features, multi-currency account holders can create multiple accounts to categorise their transactions according to their spending segment and country. Moreover, customers can manage all transactions and accounts single dashboard. Businesses can also generate account statements and streamline everyday transactions and workflow with integrated partner applications, such as Xero and FreeAgent.
2. Junior account: Revolut launched a junior account to educate children between the ages of 7 to 17 about responsible spending, saving and budgeting. Revolut members get a minimum of 1 complimentary junior account, depending on their plan. Parents can reward their children for completing tasks, set weekly allowance limits, and automatically transfer money to the junior account. Moreover, children can also spare-up excess change to boost their savings. The junior account can only use the base currency of the primary account and does not have a multi-currency option. Unlike other teen-only neobanks such as Walrus (India) and Fampay (India), parents can monitor and control the finances of their children using their own banking applications and accounts. The Revolut junior account acts as an acquisition funnel since it will be easier to convert junior customers to regular customers when they turn 18.

Expense management

Revolut vaults: Users can create savings vaults to achieve their financial goals, individual vaults to achieve personal goals or group vaults with family members or friends to achieve group savings goals. it also offers users unique options to achieve their savings objectives:

1. One-off payments
2. Recurring payments
3. Spare-up change
4. Convert spare change to cryptocurrency

Figure 3: Personalised saving vaults for retail customers of Revolut

Security

1. Personalised security settings:
   • a. Location Security: Location-based security feature is extremely useful for travellers. It monitors your location to detect and prevent any fraudulent transactions. For example, if a transaction from your account is made in India while you are in Japan, then the transaction and card are blocked.
   • b. Blocking payment methods: Users can disable magstripe payments, contactless payments, ATM withdrawals, and e-commerce transactions based on their preferences.

2. Sherlock: Using AI and ML technologies, Revolut built its state-of-art fraud detection system, Sherlock, in 2019. Sherlock continually monitors and evaluates users’ transactions in under 50 milliseconds. If it spots an anomaly in the spending pattern, it automatically blocks the transaction, freezes the user’s card and sends a push notification to the user. If the user confirms the transaction as valid, the neobank automatically unblocks the purchase and card. Otherwise, the bank terminates the card and issues a new one to the user. According to the neobank, Sherlock prevents 93 out of 100 fraudulent transactions.

Insurance

Revolut offers its premium and metal customers in Singapore various complimentary personalised insurance plans. These include:

1. Emergency medical and dental treatment that is accessible worldwide.
2. Compensation for delayed luggage, loss or damage of purchased items.
3. Travel insurance by Tokio Marine Insurance Singapore Ltd. with assistance services provided by AWP Services Singapore.

Wealth management

Cryptocurrency and commodity accounts are the next step Revolut is taking towards becoming a financial super-app. Currently, this option is only for Australian customers in the Asia Pacific. Unlike other traditional offerings in which users have to open and download a separate account and mobile application, Revolut Australia has an in-built capability to invest cryptocurrencies and commodities in over 26 currencies.

1. Cryptocurrencies: Bitcoin, Bitcoin Cash, Ethereum, Litecoin, Ripple and Stellar
2. Commodities: Gold and silver

Customers can set price alerts and get push notifications when the commodities or cryptocurrencies they are interested in hits the set target.

Marketplace integration

Revolut has embraced the open banking initiatives taken by APAC countries to build a robust open banking system. Rather than creating in-house wealth, insurance and lending products, it allows third parties to integrate their products into its platform, giving customers a wide range of options to choose from. Revolut uses the data collected from these third-party applications to examine and understand its customers’ spending, financial health, and goals and creates personalised financial solutions.

Some of the neobank’s marketplace integrations are:

1. Xero Expense Management and FreeAgent integration for expense management.
2. Xero integration for financial account management.
3. Slack and Zapier for automation.

Rewards and offers

Rewards and offers have always played an integral role in increasing customer base, loyalty, and retention. Revolut offers various offers, discounts, cashback, and reward points to encourage its customers to spend and save more.

1. Revolut shopper: In 2021, Revolut launched its browser extension- Revolut Shopper. This extension automatically finds and applies discounts and deals at selected retailer websites. The extension includes discounts on e-commerce websites, utilities, entertainment, and travel. Moreover, customers can get up to 42% cashback at select brands, including Apple, Nike and Myprotein.
2. Travel: In addition to discounts and cashback, premium and metal customers get complimentary LoungeKey access and Lounge passes if their flight is delayed by more than an hour.
   • a. Premium members: LoungeKey Pass access and free Lounge passes for the account holder and an additional person.
   • b. Metal members: LoungeKey Pass access and free Lounge passes for the account holder and three additional people.

Social initiatives

Donations: Revolut members in Australia and Singapore can now instruct the neobank to round up their spare change to the nearest dollar for any transaction. They can make a one-time donation or set up recurring donations to give effortlessly. Users can also make a one-time donation to the charity of their choice.

How can you match up to Revolut:

1. Create digitally enhanced products to make your platform more intuitive and engaging.
2. Launch a comprehensive multi-currency account to increase your premium customer base.
3. Develop wearable banking technologies to achieve invisible banking.

Top priorities for Revolut:

As leaders of Revolut, you should focus on the following two areas to retain your position as the leading neobank in the Asia Pacific.

1. There has been an increase in the number of complaints regarding random account blocking by Revolut. To create an enriching, intuitive, and simple banking experience, you should improve the efficacy of “Sherlock” to build a spotless fraud detection system by using improved AI-ML algorithms. This move will increase your Customer Satisfaction and Net Promoter Score.
2. Revolut has a surcharge for international transactions made on weekends and public holidays. Moreover, the rates differ by country. This charge makes the banking experience expensive and complex for customers. You could face heavy competition from neobanks that do not charge additional rates for international transactions. By eliminating surcharges on weekends, you can drive customer engagement and acquisition rates.

Endnotes:

How Revolut’s ‘Super App’ Strategy Could Shake Up U.S. Banking

Revolut AU

Revolut SG

Revolut JP