Revolut

Product Model






Revolut.com is a “challenger bank” using a dyadic-product business model to offer banking products including a pre-paid debit card, currency exchange, cryptocurrency exchange, and peer-to-peer payments for personal and business customers. Even though Revolut is a platform firm presenting elements of a triadic business model, the main business of Revolut is a dyadic digital-only banking model allowing customers to spend fee-free with the real exchange rate in over 130 currencies, save, and truck money from their smartphone.

Every Revolut online bank account comes with a pre-paid debit card (MasterCard or VISA), accepted worldwide. Revolut’s business model is operationalized through a mobile phone application allowing users to exchange currencies at interbank rates, send money through social networks, and spend with a multi-currency card linked to a current bank account. Customers can use the online application for real-time account management, set daily spending limits, make transactions, and receive payments in any currency. Revolut product business model is based on charging private consumers or business owners for premium metal, and junior subscription plans.

Revolut’s current competitors include both the retail banks (i.e. Lloyds, Barclays, HSBC amongst others) and traditional currency exchange dealers (i.e. Western Union, Post Office, Thomas Exchange amongst others), as well as other fintech companies such as Monzo, Starling, and N26. Revolut differentiates themselves by using the interbank rate on payments for goods and services when using the multi-currency card, rather than the MasterCard exchange rate as Monzo and Starling, and differentiates from TransferWise, and PayPal by not charging fees on every money transfer.

Revolut reported revenue of £12.8 million and monthly transaction volumes of $1.5 billion (Laurent, 2019). In 2020, Revolut counts a 10 million customer base. The company operates in the European Economic Area (EEA), Switzerland, and Australia, with plans to expand further across the world (Revolut, 2019d).

REVOLUT HISTORY

Revolut was founded in London in 2015 by Nikolay Storonsky and Vlad Yatsenko, both co-founders having previously worked in the finance industry at large investment banks. In July 2015, Revolut launched its freemium service in the UK, offering free currency exchange and money transfers at the interbank rate up to £500, with the ability to transfer more if users invited friends to the platform or signed up to a pricing plan. In 2016, Revolut has been valued at $1bn becoming a unicorn company and is currently in a later stage round of Venture Capital funding.

Revolut has currently over 4 million customers and has processed over 350 million transactions at a combined value of over £40 billion. Revolut reported revenue of £12.8 million and monthly transaction volumes of $1.5 billion in 2019. The company currently operates in the European Economic Area (EEA), Switzerland, and Australia, with plans to expand further across the world.

REVOLUT CUSTOMERS – WHO THEY ARE:

Revolut has two main customer groups: individuals – who have financial interests in at least two countries, for example, a person living abroad who needs to send money to their home country and business; and businesses – small to medium-sized enterprise with international operations or suppliers, requiring easy international payments. Thus, Revolut serves both the B2C and the B2B markets. Both customer groups are served through the same mobile phone application and technical infrastructure.

REVOULT ENGAGEMENT – VALUE CREATION PROPOSITION:

How Revolut creates value for individuals and businesses:

Revolut operates a ‘pre-designed’ approach to customer engagement, creating value by providing a tier-based account model for B2C customers and a “one-size-fits-all” service for B2B customers, repetitively from a single, standardized, mass-production platform. Revolut redefines the value proposition by offering currency exchange and money transfer with more convenience and lower cost than traditional currency exchange dealers (i.e. Western Union and retail banks) have previously been able to offer.

There are no strong network effects in the business model, however, the ‘freemium’ service offered to ‘Standard’ account holders in the B2C segment is subsidized by attracting more customers to the fee-paying ‘Premium’ and ‘Metal’ accounts.

REVOLUT DELIVERY – THE VALUE CHAIN:

How Revolut works for individuals and businesses:

Revolut allows customers to purchase goods and services in real-time (meaning the rate is constantly changing in the Revolut mobile phone application), utilizing the multi-currency Mastercard linked to their current account.

The fintech company also allows international money transfers to nominated recipient’s accounts. Revolut makes currency exchange and money transfers at interbank rates on weekdays, and on weekend days, it fixes the rate they provide to protect themselves against fluctuations. The interbank rate is the dynamic rate at which banks swap currencies between one another and is the best rate available to consumers. It is a real-time rate, meaning the rate is constantly changing in the Revolut mobile phone application (Revolut, 2019e). Customers can fund their Revolut current account through a variety of methods, including bank transfer, credit card, Apple Pay, Google Pay, or cash.

REVOLUT MONETIZATION – VALUE CAPTURE:

Revolut makes money primarily from its tier-based account model in its B2C service and a tier-based account-model within the B2B service.

For the B2C segment, ‘Standard’ customers transfer money abroad in 30 currencies with the interbank exchange rate and pay nothing when they transfer up to £5,000 per month, but Revolut adds a fee of 0.5% for anything above this amount. A monthly fee of £6.99 is paid by ‘Premium’ customers and £12.99 is paid by ‘Metal’ customers. All transactions on a weekday involving the Thai Baht and Ukrainian Hryvnia currencies also have a 1% markup added. On weekend days, Revolut applies a markup of 0.5% to all transactions involving major currencies (i.e. USA dollar, Great British Pounds, Euros) and a 1% markup to all transactions involving the Thai Baht and Ukrainian Hryvnia currencies.

For the B2B segment, monthly fees of £25 (for ‘Start’ customers), £100 (for ‘Standard’ customers), £1000 (for ‘Professional’ customers), and £6.99 (for ‘Freelancer’ customers) are paid to Revolut.

REVOLUT DIGITAL TECHNOLOGY

Revolut uses machine learning technology for customer protection, mostly to reduce card fraud. Revolut’s anti-fraud system can detect suspicious activity in real-time, based on abnormal spending behavior. Separately, Revolut has launched new machine learning technology for detecting money laundering, a dynamic mathematical model that calculates a risk score for each user based on their activity history. It processes all transactions in Revolut live and statistically determines the probability of money laundering based on the profile of the user and various features extracted from the transaction. In the future, the company should use AI to increase its customer engagement, providing more personalized services, moving from a “product” to a “solution” business model.

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Disclaimer:

Written by Nathan Griffiths and revised by Francesca Hueller under the direction of Prof Charles Baden-Fuller, Cass Business School. This case is designed to illustrate a business model category. It leverages public sources and is written to further management understanding, and it is not meant to suggest individuals made either correct or incorrect decisions. The information contained here should not be used for investment advice and is simply indicates the individual’s understanding of the company’s business models as of May 2020. © 2020


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