Revolut Business Model | How Revolut Makes Money?

Revolut is an English fintech firm that provides users with banking and financial services. Nikolay Storonsky and Vlad Yatsenko founded the company in 2015 with the idea of creating a low-cost travel card. 

During Storonsky’s frequent travels, he was frustrated by paying hundreds of pounds in currency conversion and foreign transaction fees. 

You can use both Revolut’s app and core account completely for free. 

However, Revolut Business Model is based on subscription fees, transaction fees, bonuses, and additional revenue services.

Each Revolut online bank account comes with an internationally approved pre-paid debit card (MasterCard or VISA). 

Revolut’s business concept is implemented via a mobile phone application that enables users to convert currencies at interbank rates, send money via social media, and spend with a multi-currency card linked to their current bank account. 

The online application enables customers to manage their accounts in real-time, establish daily spending restrictions, conduct transactions, and receive payments in any currency. 

The business strategy for Revolut products is built around charging private users and corporate owners for premium metal and junior subscription plans.

What is Revolut?

Revolut is a neobank that offers consumers and businesses a range of financial products. 

It is possible to do so via its mobile application, which can be used on iOS and Android devices. Revolut has no physical branches, like a neobank.

Revolut Business Model

Revolut’s business model is based on several levers, including subscriptions from consumers and companies, fees for international transfers and withdrawals, and interest on loans and overdrafts. 

Moreover, it offers financial products such as trading, insurance, and a cashback program.

The Russian duo behind Revolut, which became one of the best-funded FinTech startups globally, founded it with extensive experience in the financial sector. 

Today, the company has over 10 million members, 2,000 employees, and operations in nearly 30 countries.

Company NameRevolut
Company TypePrivate
FoundersNikolay Storonsky, Vlad Yatsenko
ProductRevolut
OwnerNikolay Storonsky, Vlad Yatsenko
Founded DateJuly 1, 2015
HeadquarterLondon, England, UK
Websitehttps://www.revolut.com

How Does Revolut Work?

Revolut is a British neobank that operates a mobile application that provides access to various financial goods. The service is available on iOS and Android devices. 

As a neobank, Revolut operates entirely digitally and hence does not have any physical customer branches.

The account is created using online identification. Customers should often receive their account within a few minutes. The real card will arrive a few days later, depending on your region.

The physical card is linked directly to the mobile phone’s digital account. Once a payment or transaction has been completed, it is immediately accessible on the app.

Within 60 seconds, you can create an account with Revolut and begin using the huge selection of options available. 

Revolut allows users to keep and manage 25 currencies while also allowing them to spend internationally in over 130 currencies without incurring any fees using Visa or Mastercard. 

It sends you immediate spending notifications and assists you in budgeting your expenses.

The application has been developed to be extremely secure and is capable of controlling contactless/wireless transactions, among other things, while always preserving the interests of its users. 

The company also offers device and travel medical insurance for its consumers to use their life insurance products. 

Premium accounts also provide exclusive card designs, international medical insurance, and access to airport lounges.

Revolut’s many features have attracted customers in the Fintech sector, resulting in rapid growth in a short period. 

Money placed in Revolut is held at Barclays or Lloyds, which safeguards your funds following regulatory standards. 

You will be able to access monies in your Revolut accounts even if Revolut goes bankrupt, assuring the safety of your money. 

Revolut enables you to route your salary directly to your bank account by creating an IBAN and providing it to your employer.

Some other features of Revolut Includes:

  • Transferring money domestically and internationally is possible.
  • Managing funds through budget planning and expenditure dashboards.
  • Savings accounts that set aside money automatically.
  • Investing in a variety of securities and cryptocurrencies.
  • It is possible to increase your travel insurance coverage by hiring a concierge.
  • Participating in a wide variety of organizations, including the WWF.

You can also use Revolut as a business owner or freelancer. The user account includes various accounting tools, API connectors, corporate cards, and the elements shown in the consumer account.

Revolut Business Model

Nikolas Storonzky and Vlad Yatsenko created Revolut in 2015 with the audacious mission statement “To turn the financial sector on its head.” 

With a strong foundation in banking and expertise in designing financial systems for tier-one investment banks, the founders created Revolut to address gaps in the Fintech space. 

Their primary goal was to prevent money from being wasted on international transaction fees and exchange commissions. They accomplished this by giving users a multi-currency card that managed transactions in multiple currencies without putting them at a disadvantage.

Revolut enables free international money transfers and fee-free global currency exchange at the interbank rate. 

Additionally, it enables users to manage and transact in cryptocurrencies such as Bitcoin, Ethereum, and others, making it possible for consumers. 

Revolut’s ease of registration and use has drawn consumers from all over the world to its numerous features and capabilities.

How Does Revolut Make Money?

Revolut earns money through premium and metal accounts and commissions from merchants who pay a small fee whenever customers use the Revolut card.

Revolut’s primary bank account is free, but customers can earn money through other products and services.

Revolut also earns money from customers who top up their bank accounts or wish to expedite payments between friends or business associates. 

Revolut Business Model

Users may also be penalized for excessive withdrawals from ATMs and transactions that exceed certain monetary limits. 

Furthermore, Revolut receives a share of every foreign transaction made by users between 1-1.5 percent.

Let’s examine the various sources of income generated by Revolut.

Subscription Fees

Consumers can choose from three different programs offered by Revolut. There are three types: Standard, Premium, and Metal. 

This may surprise many, but unlike many other neo banks, Revolut gives its users subscription plans. 

The user may select one that meets their requirements. The first plan is a free Standard plan. 

This package lets you convert your money into 150 different currencies, with a free conversion maximum of £6,000. 

The premium plan, priced at €7.99/month, is the second option. Apart from the normal plan’s capabilities, it enables unlimited currency conversion and access to five cryptocurrencies. 

The third option is the Metal plan, which costs €13.99 per month. There are no restrictions on money transfers or currency exchange if you subscribe to this plan. 

You are welcome to do so for free. It offers 1% cashback on purchases made outside of Europe and 0.1 percent cash back on purchases made within Europe. Additionally, it provides travel insurance.

While the Standard plan is free, the other two will require payment.

  • The paid plans include additional features and services, such as A premium card with an elevated design with the Premium plan and a metal card with the Metal plan duh.
  • Customer support has been prioritized.
  • Withdraw cash without incurring costs up to $900.
  • Passes to lounges are complimentary for delayed flights.
  • Cashback.

… and plenty others.

Interchange Fee

Revolut (and MasterCard) will deduct a fee called Interchange Fees from each successful physical card transaction. 

Although the commission is not published publicly, it should be comparable to ordinary MasterCard fees.

Revolut enables you to send and receive money without incurring any transaction fees. It is true for the country in which you live and for international money transfers. 

However, this does not guarantee that you will not lose money in the transaction. 

Although Revolut may not charge a transaction fee, the receiving bank will charge for a transaction that has nothing to do with Revolut.

However, this does not imply that you can send and receive a limitless quantity of money overseas. It has a limit. 

A person is only allowed to transfer up to £5000 every month without incurring charges. Any amount over that will incur a transaction fee. 

However, it remains a terrific deal. Another excellent feature of Revolut is that it does not charge exorbitant transaction fees. 

Once you’ve exceeded the limit, it simply charges a little commission. It typically charges a commission of 0.5 percent, which is quite low for an international transaction. 

The commission would then be split between Revolut and MasterCard.

Perks

If a customer pays with a Revolut card at one of the selected partners, they will receive a discount after making ten successful transactions.

There is already knowledge that partners from the travel, dining, grocery, shopping, and entertainment industries will participate in the program when it goes into beta testing.

Revolut will almost certainly take a percentage of each payment made using its card, depending on the terms of the partnership.

Trading

The company can purchase and sell stocks from various companies through its subsidiary Revolut Trading Ltd.

Customers on the Standard and Premium plans can trade three and eight equities per month, respectively. 

When this amount is exceeded, a flat cost is imposed on each subsequent transaction. This cost is 1 GBP for British users.

Revolut Business Model

On the other hand, metal cardholders are not restricted and can trade an unlimited number of stocks.

If you choose a normal or premium subscription, you will have access to a limited selection of stocks. There are three in the Standard plan and eight in the Premium plan. 

If a trader exceeds this limit, they will be charged. After exceeding the limit, each transaction will incur a cost of one pound sterling.

Insurance

Users of Revolut can purchase two types of insurance, namely device, and international medical insurance. Several insurance packages are offered by Revolut Travel Limited, the company’s subsidiary.

Revolut Travel Limited is an agent for Simplesurance GmBH (for devices) and White Horse Insurance Ireland (for travel). As a result, Simplesurance and White Horse Insurance will provide insurance services.

Revolut will receive a commission for facilitating the insurance transaction.

International Money Transfers

Customers can send up to £5,000 abroad for free each month. The fee increases to 0.5 percent for amounts above this amount.

Money transfers to foreign countries can be difficult for those who haven’t done them before. Today, you can do so pretty easily. 

The service may, however, charge a substantial transaction fee. Revolut, on the other hand, is not like that. If it does charge a transaction fee, it is significantly less than what others charge.

Clients who subscribe to paid programs have their monthly limit increased.

Loans & Overdrafts

A loan application is also available to customers. These loans range from £500 to £25,000, with a repayment schedule of 12 to 60 months.

Revolut earns money by collecting interest on each loan. The interest rate is determined by the customer’s credit score, loan amount, and term.

If a customer is late with a payment, a penalty of an extra overdraft fee is assessed.

Interest On Cash

Revolut, like any other bank, lends money from user accounts to other institutions, such as banks.

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They then collect interest from these financial institutions, which is referred to as the Net Interest Margin. According to Statista, the net interest margin for all US banks was 3.35 percent in 2019.

Business Accounts

Business users and freelancers can choose from various subscription options.

Among the features are the following: 

  • Expense management tool for tracking your employees’ expenditure.
  • Payments in bulk.
  • Employee benefits at Amazon and Starbucks.
  • Connect to your accounting software using an open API.
  • Assign separate staff to distinct responsibilities and permissions.

You can cancel subscriptions at any time, as you can cancel consumer plans.

Is Revolut Free To Use?

Revolut is completely free to use if a consumer chooses the Standard plan. While the bank account is free to use, consumers will be charged for the physical card’s delivery.

Cash withdrawals over a certain amount are also subject to a fee. The free account is also available to business users and freelancers.

What is the Funding and Valuation of Revolut?

Crunchbase reports that Revolut has raised approximately $836 million in 14 fundraising rounds. Revolut raised $500 million in its most recent investment round (Series D) at a valuation of $5.5 billion.

The company is backed by Greyhound Capital, Lakestar, DST Global, Global Founders Capital, and Index Ventures.

What is the Revenue of Revolut?

Revolut, a fintech firm, has submitted financial results and is sharing them with the press. Revolut generated revenue of $361 million (261 million pounds) in 2020, up 57 percent year over year from $229 million (166 million pounds) in 2019.

Success Story of Revolut

Nikolay Storonsky (CEO) and Vladyslav Yatsenko founded Revolut in 2015. (CTO). Storonsky spent seven years as a financial trader at Lehman Brothers and Credit Suisse before founding Revolut.

He left his lucrative trading profession in 2013 after growing unhappy with the restrictions and behavioral changes that followed the financial crisis.

Yatsenko, on the other hand, has been developing software products for the banking industry for nearly a decade. 

Revolut began as a money exchange service. Storonsky, who traveled much during his trading career, noted in an interview with Forbes that “he was traveling extensively and paying hundreds of pounds on foreign transaction fees and exchange rate commissions that simply didn’t feel right.”

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Revolut first emerged from Level39; a start-up accelerator focused on the development of FinTech solutions.

Soon after its February 2015 launch, the company raised a $2.3 million seed round backed by Balderton Capital and Seedcamp. 

It was accomplished on the strength of more than 1.5 million recorded transactions and weekly increases of up to 30%.

Revolut was granted a specialized banking license by the European Central Bank in 2018. (facilitated by the Bank of Lithuania). It enables the organization to collect deposits and extend credit to consumers.

Nonetheless, Revolut’s expansion has been fraught with controversy. Wired Magazine published an article in 2019 detailing the horrific working conditions and maltreatment of employees at Uber.

Weeks later, the company’s chief financial officer, Peter O’Higgins, resigned amid charges that the company disabled an anti-money laundering mechanism that protects consumers against fraudulent transactions.

All of these hurdles, however, have not hindered expansion. Today, the service operates in nearly 30 countries and employs over 2,000 people.

Key Takeaways From Revolut Business Model

Revolut is a fintech business based in the United Kingdom that provides banking and financial services. 

It was founded after co-founder Nikolay Storonsky was appalled by the excessive foreign currency and transaction costs he encountered when traveling abroad.

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Revolut offers three premium options that supplement their free bank account with additional functionality. Additionally, the corporation makes a percentage from its cashback and rewards program.

Revolut has also positioned itself as an insurance and a personal loan provider. The platform includes fractional investing in commodities, equities, and cryptocurrencies.

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