Posted on Tuesday, Aug 14th 2018
According to a 2017 Allied Market Research report, the global neobanking market is expected to grow 51% annually through to the year 2020. Neobanks are the new kinds of banking organizations that use technology to provide complete online banking solutions to its customers. They do not have physical offices and branches and allow customers to complete all transactions online without expecting them to visit a bank. UK-based Billion Dollar Unicorn Revolut is one such neobank that recently acquired the Unicorn status.
Revolut was founded in July 2015 by finance industry veterans Nikolay Storonsky and Vlad Yatsenko. Prior to setting up Revolut, Nikolay was a trader with Credit Suisse where he witnessed the extremely high fees charged by traditional banks for cross currency transactions. Vlad, was a tech guru who had been building financial systems for a tier-1 investment company. Together, they decided to set up a financial organization that was geared towards today’s global economy, offering customers the ability to transact for free across currencies and geographies.
Today, Revolut offers four key products. Its Money Transfer service allows its customers to transfer money abroad for free, using the Interbank Exchange Rate that is used by banks to trade between themselves. The service is available for money transfer in up to 26 countries. To help its users achieve savings goals, Revolut offers a service called Vault. Users can digitally transfer money to the Vault as their savings fund and even use the account to buy Cryptocurrencies. Recently, the company added a digital budgeting tool that tracks spending and savings targets in real-time to help its users achieve their financial goals. Finally, its Cryptocurrency product allows users to buy, hold, and exchange Bitcoin, Ether, Litecoin, Bitcoin Cash, and Ripple at the best available exchange rate. Revolut does not charge any deposit or subscription fee, but charges a 1.5% markup on the exchange price as part of this offering.
Revolut’s products have been received well by the market. The company claims it adds more than 8,000 customers every day and already has 250,000 daily users out of a user base of over 2 million customers. Revolut plans on growing to a user base of 100 million customers in the next five years.
While Revolut offers several of its services for free, it also offers a premium paid for service. Customers can choose to subscribe to a monthly service that provides them with access to services like unlimited FX volume transfers, overseas medical and travel insurance, exclusive priority 24/7 customer support, and free virtual cards for secure online payments. Revolut is privately held and does not disclose the earnings it receives from its business. But, it has revealed that it recently broke even when its monthly transaction volume grew to $1.5 billion.
Revolut has been venture funded so far with $336 million raised from investors including Lakestar, Index Ventures, DST Global, Greyhound Capital, Global Founders Capital, Sprints Capital, Draper Esprit, Ribbit Capital, and RML CAPITAL. It has also raised funds through crowdfunding rounds. Its latest funding round was held in April this year when it raised $250 million at a valuation of $1.7 billion. A 2016 crowdfunding round had valued the company at $58 million.
Revolut is not the only neobanking player in Europe. There are others like Monzo, Starling Bank, and Tandem, all of which have British banking licenses. But Revolut has managed to sustain its losses by offering premium services and businesses as well. Additionally, the company has managed to secure licenses for operations in other parts of Europe as well including countries like France, Germany, Switzerland, and the Nordic region. Many believe that it is now looking to obtain licenses in the US as well.
More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns.
This segment is a part in the series : Billion Dollar Unicorns
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