Revolut has become quite a prevalent app in the fintech industry. You are on the right page. This article will uncover how Revolut makes money and what this fintech start-up offers.
In a nutshell, Revolut is a neobank started in 2015 in the fintech domain that provides banking services to its customers. It also offers financial products. Unlike traditional banks, Revolut makes banking services convenient to its users.
It earns through various strategies such as subscription plans, trading, insurance, loans, and interchange fees.
How does Revolut make money? Its marketing strategies and business model are all explained here. Therefore, let’s dive into the article straight away.
1. Origin and Growth of Revolut
Nik Storonsky and Vlad Yatsenko Revolut launched Revolut in 2015. Storonsky earlier worked with Credit Suisse and Lehman Brothers as a trader.
Similarly, Yatsenko was a software developer at Deutsche Bank and Credit Suisse.
Storonsky was tired and frustrated by the high fees or transaction fees that traditional banks charge while exchanging international currencies.
Spending massive pounds on these exchanges and foreign expenditures seemed like a significant loss to him.
This made him team up with Yatsenko and build an easy-to-use application that will charge sensible transaction fees on international exchanges on specific terms, like exceeding the limit.
Therefore, it launched a multi-currency card that users can register for and use to spend money in multiple currencies.
Because of convenience and lower charges, it quickly earned popularity.
1.1 Growth of Revolut
In 2017, Revolut began its crypto services and let users trade. Revolut got its challenger bank license facilitated by the Bank of Lithuania the following year.
Then, it became a unicorn in 2017 by raising $250 million in series C funding.
After this, it grew and added insurance, trading, and peer-to-peer banking features.
Later, it started offering deposit and lending services across the European Union.
Currently, Lithuania and Australia have given banking licenses to Revolut. Although Revolut is a British startup, it has yet to get a UK banking license along with the US.
As of 2023, Revolut has over 30 million customers globally and operates in over 35 countries.
Most users are from the UK and France, followed by Australia, the US, and other European countries. Canada, Japan, Australia, and the USA also launched Revolut recently.
In the next section, let’s see how Revolut works, its features, and its advantages.
2. How Does Revolut Work?
Revolut is a neobank, which means it doesn’t have a physical bank and operates digitally. One can register in a matter of minutes following verification of online identification on the Revolut application.
After that, the card will be dispatched in a week or two, depending on your location.
Following are some of its features.
- Revolut has its application on both iOS and Android, offering several banking features. You can use the card for transactions, and changes will be reflected in the application accordingly.
- You will not be charged any fees or commissions, whether national or international transfers (conversions) or purchases among varying currencies.
- You will not be charged when withdrawing money from an ATM while travelling abroad.
- One can convert one’s balance into another currency without any exchange fee. That means you will have transparent exchange rates.
- Revolut users can convert or spend in over 150 currencies.
- One can also view their spending habits on the Revolut application. Categorization is based on merchants, amount, etc.
- On weekdays, one can spend freely using their card, and you will only be charged at interbank rates.
- Revolut makes currency exchange or money transfer services easier.
3. Revolut Business Model
Revolut began with one idea: reduce the transaction fees when exchanging currencies. The fees charged by traditional banks were high.
Thus, Revolut built its business model to overcome this and developed a neobank in the fintech domain.
Unlike traditional banks, Revolut does not charge any exchange fee when converting one currency into another. One can exchange money at interbank rates.
For this, people must have a multi-currency account and a prepaid card that Revolut provides. Visa and MasterCard are linked to Revolut’s card.
Moreover, to cut the exchange fees, you should get a subscription plan to Revolut according to your needs. Below is how Revolut built its business model.
3.1 Types of Customers
Revolut has two main types of customers mainly. The first one is individuals who live abroad or frequently travel.
They may have to send money to their home country or convert it while travelling. Users can exchange multiple currencies using the Revolut mobile app. If you want to make purchases, you can use a debit card from Revolut.
The second one is enterprises or companies. These may work internationally depending on their size and reach. Thus, enterprises do require international payments for foreign supplies or operations.
Therefore, Revolut supports both B2B and B2C markets and is interested in them. Both markets can use its standard mobile applications and services to get its features.
3.2 Unique Value Proposition
Unlike traditional banks, Revolut does not charge exchange fees while converting money from one currency to another.
Instead, it asks you to purchase a subscription plan to exchange currencies.
This attracts consumers as money can be transferred at interbank rates. One doesn’t have to pay an exchange fee for every transaction or conversion. Thus, subscriptions are attracted here.
3.3 A Digital Alternative
As we know, Revolut does not have a physical bank like a traditional bank. Unlike conventional banking services, which require you to be physically present, Revolut allows you to do your tasks anywhere.
Also, the cumbersome process involving papers is removed from the Revolut business structure via a mobile application.
One can also make international purchases internationally via a MasterCard or Visa card. Revolut offers these for every multi-currency account these cards.
3.4 Pricing Structure
Another one is Revolut’s pricing structure, which is very transparent and attracts consumers. A Revolut customer can choose any one of the three subscription plans offered.
The three subscription plans are standard, premium, and metal. The features and annual percentage yield can vary depending on your chosen method.
Standard is free and has a 0.5% yield on APY. It increases to 0.7% for premium and metal.
- The standard subscription plan costs 0 euros.
- The premium subscription plan costs 6.99 euros.
- The metal subscription plan costs 12.99 euros.
4. How Does Revolut Make Money?
Below are the strategies Revolut uses to making money using the Revolut business model. Let’s get started with the Revolut revenue model.
Yes, Revolut does let you trade using its application. One can buy and sell stock from various companies.
If you are a standard or premium user, you can trade around 3 to 8 monthly stocks. However, metal users have no limits. Revolut trading is more accessible with its mobile application.
Moreover, if standard and premium users exceed their limit, they must pay a flat fee. Users can trade stock or cryptocurrencies like ether, bitcoin, and stellar.
4.2 Insurance Commissions
Revolut earns commissions for every insurance bought by its users on its application.
Revolut Travel Limited is a sub-company of Revolut. Simplesurance GmBH lets users have device insurance, and White Horse Insurance Ireland offers travel and medical insurance. Revolut gets a commission when people buy these on its app.
4.3 Subscription Plans
This strategy is pretty standard for all industries. Like others, Revolut also offers subscription plans to its customers.
This attracts many consumers as it is based on removing exchange fees on international transfers, etc.
Revolut offers three paid plans: standard, premium, and metal.
4.4 Personal Loans
Personal loans are another way Revolut generates income. Like traditional banks, Revolut offers loans to people and charges interest on them. Users can pay back the loan amount in around 6 to 60 months.
The interest charged on the loan amount may vary depending on the credit score, the loan amount, and other factors.
Moreover, you can borrow a loan from 500 euros to 25000 euros.
4.5 Payment For Order Flow
Revolut does not ask for any commission and is commission-free for users. For trading, Revolut collects payment for order flow, i.e., PFOF; thus, it works as revenue for Revolut.
4.6 International Money Transfer
A Revolut-free user can transfer up to 5,000 euros every month. But if you exceed the limit, then 0.5% of foreign transaction fees are applied to your transactions.
If you purchase one of its plans, the transfer rate or limit will be higher according to the plan.
4.7 Customized Rewards
Many apps these days provide rewards and perks to their customers. Just like that, Revolut does the same; for its customized users, Revolut offers rewards and cashback. You will get bonuses and rewards.
Merchants pay Revolut a commission for providing them with customers. Therefore, rewards are an income stream for Revolut.
4.8 Loans to Institutions
Revolut also offers loans to institutions and banks for which it charges interest; therefore, it is an income stream for Revolut.
Revolut lends the amount in the user’s account as a loan to other institutions, such as banks, and collects interest on these loans just like any bank.
4.9 Interchange Fees
For every transaction made using Revolut’s prepaid debit card, an interchange fee is charged, which is not disclosed publicly. MasterCard and Revolut share the commission, similar to the MasterCard fee.
5. What are Revolut’s marketing strategies?
Revolut has seen pretty good growth over the years. Revolut used the following marketing strategies to reach a wider audience.
5.1 Referral Program
Revolut encourages users to refer the app or service to friends and family. This has helped Revolut gain more customers in less duration.
5.2 Social and Influencer
Revolut also collaborates with influencers on social media. Traditional marketing methods, such as billboards and advertising, are also followed by Revolut.
5.3 Content and Product Features
Its site has a blog page that clarifies and explains Revolut’s features.
Furthermore, Revolut has iOS and Android mobile applications with a pretty good user interface and features such as pop-up notifications, an app vault, a budgeting tool, and many more, which attract consumers.
Here is the strategy: the better an application performs, the more satisfied the user. This leads to good reviews and more promotion.
6. Key Takeaways From the Revolut Model
Below are the facts you can learn from Revolut when trying to develop something of your own. Also, these learnings apply to every industry and not just fintech.
6.1 An Innovative Solution To Actual Problem
Whenever you develop a program, software, or anything, ensure you have an idea that makes it worth the time you or others invest.
You have to find an issue and devise a valuable solution. The answer you present should solve and satisfy customers’ problems.
Just like Revolut did to avoid the hefty charges on international exchanges by banks, it built a model with an easy-to-use Revolut mobile app. It has various features, reducing the fees and making it reasonable.
Thus, Revolut’s business model is exciting and has secure money transfer services.
6.2 Efficient, Better and Easy
One has to make sure that when building or developing anything, it has to be efficient, better than previous or currently used ones, and not very complex.
For this, the idea can be brushed and brainstormed with colleagues and partners, which will help deliver efficient results. It also depends on what technology, software, tools, etc. to be used.
It must be noted that the user’s requirement is satisfied, which gives any company a huge benefit. Revolut app can be seen as an example of being efficient, easy, and better than before.
That was all about the Revolut business model and how it makes money. It is an excellent example of how to learn if you are creating something new or how a strategy should be.
I hope you found the article helpful. Feel free to tell us your views in the comment section.