Revolut business model: Working of the most valuable private tech startup

Revolut business model is a fintech solution for new banking systems. Like Volt in Australia, Monzo in the UK and Germany, this banking solution is gaining a lot of attraction.

Seeing the success of fintech solutions like Revolut, many business owners and entrepreneurs are planning to get platforms with a similar business model.

Revolut does not own any physical customer branching. It is operated digitally. This payment app business model may seem childish, but it is dyadic.

Revolut growth statistics

Revolut’s banking system is one of the fastest-growing banking systems in Europe. It has an enormous user base. The idea has secured funding from renowned business investors. Below are the statistics of Revolut business growth:

1. Funding

Last year, Revolut secured a gigantic sum of $800 million from Tiger Global Management, Target Global, and Softbank Capital. Below is the Revolut funding history status covered:

Date	Investors	Sum Invested
July 2015	Balderton Capital	1.5 million  Euros
Feb 2016	Balderton Capital, Index Ventures, Point Nine, Seedcamp, Venrex Investment Management	$4.8 million
July 2016	Crowdcube	1.0 million  Euros
July 2017	Seedrs, Andy Murray	$5.3 million
July 2020 for the last few years	TSG Consumer Partners	$80 million
July 2021	Tiger Global Management, Target Global, Softbank Capital	$800 million

2. Valuation

Revolut is the UK’s biggest fintech company. It has a current valuation of $33 billion. After a whopping $800 million investment by Tiger Global Management, Target Global, and Softbank Capital, this figure got released.

The valuation figure increased close to six times before ($5.5 billion) after the investment last year.

3. Last earned revenue

According to the company’s balance sheet, revenue has increased by 57%, and made Revolut funding history in 2019-2020. The revenue was 166 million Euros in 2019, and it climbed up to 261 million Euros in 2020. 

As per Quarter 1, 2020 and Quarter 2, 2021 balance sheets, the overall revenue increased by 130% in one year. Plus, the gross profit margin was at a 300% rise.

4. Investors

There is a long list of investors. It has 43 investors, including Red Lions Capital and Target Global. The total funding raised by Revolut is $1.7 billion. Below is the list of some investors:

Balderton Capital	Point Nine	Crowdcube
DST Global	Global Founders Capital	Softbank Capital
Target Global	TSG Consumer Partners	Tiger Global Management

5. User-base

As of June 2021, Revolut Banking System has over 15.5 million users. It started in 2016. Back then, it only had 0.1 million users. The total number of users onboarding the system inflated as its popularity increased. It reached a 2 million user count in 2018 and touched 12 million in 2020.

6. IPO potential

Revolut has not announced an official IPO date. But the CEO Nik Stroronsky             informed in an interview that the company is waiting till it generates at least a few billion dollars of revenue. Revolut may launch its IPO at some point in 2022.

7. Founders 

Nikolay Storonsky and Vlad Yatsenko are the co-founders of Revolut. They founded Revolut on 1st July 2015. Nikolay Storonsky is the CEO of the company.

Nikolay Storonsky has completed his master’s degree in Physics from the Moscow Institute of Physics and Technology. He has also completed masters in economics from New Economic School in Moscow. Nikolay Storonsky, Revolut founder’s net worth, is $6.69 billion.

8. Future potential

The current company’s valuation tells us the scope of this technology. It has become the most valued private business in the UK in just a short period.

Revolut’s business idea had helped its employees as well. Seventy-six confirmed personnel had become millionaires. It tells us the growth and success potential of Revolut.

Idea origin and success story

Nowadays, personal finance has become tough to handle. Multiple investing applications allow individuals to perform money transactions in traditional ways. These traditional systems have been stagnant with very little innovation for the last few years. That was when the UK’s most valuable startup decided to challenge the established order.

In 2018, Revolut earned a European banking license and is now under Fellow Chartered Accountant (FCA) regulation to obtain a full UK banking license. It started as a pre-travel card and became a digital bank.

Revolut business model offers three subscriptions, including their basic free account:

1. Premium account

A premium account for free travel insurance, instant access to crypto, and free global access delivery.

2. Metal account

A metal account includes a metal card, cashback rewards, and complimentary airport lounge access when your flight gets delayed.

Storonsky and Yatseno founded Revolut in July 2015. The idea of Revolut came due to the power frustration of the lack of digital innovation- especially when younger people prefer to access their money through apps on their phones.

This app has grown since 2016. It just had a hundred thousand users and raised hundreds of millions of users. It allowed Revolut to expand across Europe, America, and Asia.

In 2019- 2020, Revolut’s business model gained almost five million new users and doubled its business customers.

The growth story of Revolut hasn’t been straightforward and has its highs and lows. Today, it is-

• The world’s largest Neobank.
• A global financial super app offering a range of services

A complete working model for Revolut

Customers or travelers pays a lot of money in currency conversion or foreign transaction fees. To overcome these liabilities, Revolut’s business model got introduced.

This model enables users to convert their currencies at interbank rates. Revolut allows users to have a low-cost multi-currency account and a card (Mastercard or Visa).

Revolut cuts down transaction fees involved in transferring or converting the money. After choosing a subscription plan, this feature is accessible to private users or corporate owners.

 1. Crucial customer segments

Revolut serves both Business Customer (B2C), and Business to Business (B2B) needs. It has two main customer groups:

1. Individuals– For a person with financial needs in at least two nations.
2.  Business– Large or small enterprise which requires frequent international transactions and payment

2. Value addition and unique selling proposition 

Revolut allows all users to conduct transactions within the application. It offers real-time services.

The uniqueness of this system is that it allows users to create an account for free. It prohibits users from paying hefty international transaction fees and currency exchange rates.

So how does this idea work? Instead of charging for each transaction, Revolut offers users its services as a subscription at a predetermined rate. This unique proposition attracts millions of customers. 

3. Execution channels 

Revolut projects itself as an execution-only service. It is a trading-only service that focuses only on the execution part of the transactions.

The client does not receive any advice about the risks involved in the investment. It just focuses on the successful execution.

4. Mission statement 

Like every other business platform, the business model focuses on building a sustainable environment. It aims to provide a digital alternative to the traditional banking system.

In addition, Revolut improves financial conditions worldwide. It provides financial cohesiveness across multiple operational communities.

5. Costing structure

Revolut offers users transparent pricing plans. Three basic plans are- Standard, Premium, and Metal. The only difference is between the features and the Annual percentage yield on the savings available in the account.

Standard subscription holders earn 0.5% as APY (Annual percentage yield) on the savings. This percentage increases to 0.7% in the case of Premium and Metal subscription holders.

The standard subscription plan is useful for a freelancer customer. They just have to pay a 0.4% fee as the foreign exchange rate and 3 Euros per international transaction.     

Plan	Subscription Cost (Per Month)
Standard	0 euros
Premium	6.99 euros
Metal	12.99 euros

6. Revenue streams

Revolut is a private company. Overall, the Revolut revenue has had a tremendous increment. It generated a total of 221 million euros in revenue in 2020, which was 57% more than the previous year.

Year	Revenue (In euros)
2016	2.3 million
2017	13 million
2018	58 million
2019	166 million
2020	261 million

Along with revenue generated, the Revolut profit has also increased since 2016.     

Year	Profit (In euros)
2016	15 million
2017	11 million
2018	33 million
2019	106 million
2020	167 million

How does Revolut work?

The workflow of Revolut is simple. It has two main customer segments.

● Customers who send and receive money from their international friends or peers.

● Businesses that have global operations and want easy and cheap transactions.

Hence, it serves both B2C and B2B customer segments. Revolute’s value proposition allows its customers to spend ten times less money on international transactions.

It offers free, fast, and secure money transfer services in more than 129 countries. Revolut is very different from its competitors as it uses interbank rates for services with the help of a multi-currency card.

The business model beats Paypal and transferware by not charging a transfer fee. The bank account has a prepaid multicurrency debit card that is acceptable worldwide.

In-depth study of Revolut revenue model

Under this section, we will look into all the crucial services which make Revolut what it is today. The unique model focuses on reducing international transaction fees and on implementing a new digital banking system.

Moreover, it offers customized rewards to the users, resolution in gaining more attraction. Below are some more pointers explaining workflow and features provided by the Revolut business model:

1. Insurance commissions 

The users can buy two types of insurance in the Revolut application itself. Revolut Travel Limited offers these insurance packages, which is a sub-company of Revolut.

It provides two insurances. These are device insurance and international medical insurance. Revolut travel Limited works as an agent for two other insurance companies- Simplesurance GmBH and White Horse Insurance Ireland.

Simplesurance GmBH provides insurance for devices, and White Horse Insurance Ireland covers travel insurance.

A commission is given to Revolut for each insurance plan bought within the Revolut application.

2. Revolut trading

In addition to money transfer services, Revolut also allows trading in the stock market. It recently launched a stock trading platform in the US, where users can trade on Nasdaq or on New York Stock Exchange.

Revolut offers to trade, sell, and buy stocks like any other trading application. It processes limit as well as stop-limit order too. The only benefit is that Revolut does not charge users for commission in buying and selling a stock.

Revolut is not limiting its platform to the stock exchange. It also focuses on the ability to make it possible for traders to manage/trade cryptocurrencies.

Being a UK startup, UK users have access to more prominent features than US customers. 

3. Loans to other financial institutions 

Revolut lends money to other financial institutions like banks, multinational corporations, etc. The money lent is then collected by adding the Net Interest Margin (interest on the lent amount).

According to a survey conducted by Statista in 2019, the net interest margin was around 3.35% for all US banks. 

4. Personal loans from Revolut

Revolut is a digital bank without any actual physical banking structure. The application allows verified users to apply for loans. The loan amount can range from 500 euros to 25,000 euros. The loan tenure falls within 12 to 60 months.

Like any other bank, Revolut asks for a pre-determined interest rate to be paid on the loan sum. The customer’s credit card score, loan amount, and previous records are taken into consideration for determining the interest rate. 

5. Subscription plans 

Revolut basically offers 4 plans- Standard, Plus, Premium, and Metal. Revolut is completely free for the user opting Standard plan. For users with Plus, Premium, and Metal plans, a monthly fee of 2.99 euros, 6.99 euros, and 12.99 euros is paid, respectively.

Below is the list of major features covered under each plan.      

Features	Standard	Plus	Premium	Metal
Exclusive Revolut Metal card	❌	❌	❌	✅
Cashback on Payments	❌	❌	❌	✅
Revolut Junior Accounts	1 Kid.	2 Kids.	2 Kids.	5 Kids
Daily Interest on USD savings	❌	0.4% Annual Equivalent Rate (AER)	0.65% Annual Equivalent Rate (AER)	0.65% Annual Equivalent Rate (AER)
Free Card Delivery	❌	✅	✅	✅

6. Customized rewards 

Depending on the user’s subscription, multiple benefits, and customized rewards are given. The metal subscription holders get free lounge access (User+3 friends).

Theft and accident coverage is basic everyday things covered under all subscriptions except Standard.

Cashbacks, winter sports cover, car hire excess, refund protection, and many more rewards are applied to all subscription holders (except Standard subscription). 

7. Interchange fees 

Interchange fee is best described as the fee paid between banks for allowing card-based transactions.

For Revolut account holders, local transfers of money are free. All transactions falling under the SEPA (Single Euro Payments Area) region of Europe are completely free. Whether you transfer the amount to another Revolut customer or a non-Revolut account, there is no transaction fee involved. 

8. Money transfers internationally 

Revolut allows users to send money globally to other Revolut users or non-user. A transaction fee applies to all International transfers outside SEPA (Single Euro Payments Area) regions. This amount is calculated in real-time (at the time of transfer).

The Revolut transfer fee amount is calculated depending on the currency and country you make the transfer.

However, all Revolut Premium and Revolut Metal card holders are exempted from any exchange or transfer fee globally.

Learnings from Revolut business model

Revolut Business Strategy is an out-of-the-box thinking solution to existing banking systems. Storonsky, in an interview, said that as a trader, he traveled across the world. He paid hundreds of Pounds on foreign transaction fees and exchange rate commissions, which was not right according to him.

Storonsky came up with a revolutionary idea to overcome this problem and started developing Revolut, a money exchange service.

1. Efficient, improved, and secured solution

Revolut uses machine learning Technology for securing all the transaction details of the user. This technology also focuses on reducing card fraud activities.

This solution is also beneficial because it can detect real-time suspicious activities and can log them for future reference.

Moreover, the company is also focusing on using artificial intelligence (AI). It aims to improve personalized services and the security of the user’s details.

2. Targeting an existing problem

Paying a hefty amount for currency exchange was a problem. The Revolut group and Storonsky targeted it. He started developing a system that can free users from paying thousands of pounds for just initiating a transaction.

Hence, the Revolut banking system was created.

Wrapping up

Revolut’s banking system is a digital banking system. It allows customers to perform all the functionalities that are provided by any physical bank entity. The only benefit is that this system does not charge its users for performing International exchange transfers.

This feature in itself is handy and has pulled multiple small-scale businesses and individual users for performing everyday transactions.

In addition to this feature, it also provides users with a plethora of rewards. Paypal, N26, Chime, Wise, and Skrill are major Revolut business competitors.

For more detailed information you can reach out to the experts of Idea Usher at the following contact information

• (+91) 946 340 7140
• (+91) 859 140 7140
• (+1) 732 962 4560
• [email protected]

FAQs

1. What is the monthly deposit for Revolut users?

Revolut allows customers to make an average deposit of 305 euros every month. 

2. How many countries support Revolut transactions?

All countries falling under the SEPA (Single Euro Payments Area) region and in Europe allow users to perform Revolut transactions. The total number of countries is 37.

3. How many currencies are supported by Revolut?

Revolut users can hold and perform transfers of 25 different national currencies. Moreover Visa or Mastercard debit card with a Revolut account allows users to withdraw more than 130 currencies. 

4. Does the UK Revolut application offer more features than the US?

Yes, as the platform was initially launched in Europe. Hence, it offers multiple facilities in the UK. But, new features are being introduced to the US platform too. 

5. How does Revolut work in the USA?

Like in the UK, it offers users both free and paid subscription accounts. It also offers rewards to free user accounts, like- allowing 5 junior accounts (which is not available in the UK). This is done to compete with major Revolut Business competitors like- Chime or Paypal.