U.K.-based fintech Revolut has entered the Russian payments market through a partnership with Russian payments firm Qiwi, and announced plans to apply for a U.S. banking license. Revolut is hoping its low-cost P2P transfers services will attract Russian consumers away from what it says are often high-priced payment services offered by local financial institutions.
In Russia, Revolut plans to offer its mobile app, foreign transfers and a multi-currency Visa card through its partnership with Qiwi. The Russian firm operates POS and virtual payments networks across Russia and the Commonwealth of Independent States, and will give Revolut access to its subsidiary Qiwi Bank’s open APIs to provide payments services to Russian consumers.
Its U.S. entry hinges in part on Revolut's ability to get a banking license, which it plans to apply for this year. By the summer, Revolut plans to launch banking services in the U.S. with a banking partner.
“We plan to offer our full suite of services when we launch in the U.S., Canada, Australia, New Zealand, Singapore and Hong Kong within the next few months,” said Kiran Wylie, Revolut’s U.K. and Ireland PR and communications manager.
Founded in 2015, Revolut has benefited from the EU and the U.K.’s open approach to banking and payments competition, and has over 2 million customers in the U.K. and the EU, up 300 percent in the past year. Revolut says that around 900,000 of its customers are U.K.-based, with France and Poland emerging as its second and third largest markets respectively. Revolut has monthly transaction volumes of $2 billion, with its customers having performed over 100 million transactions as of June 2018.
Currently, Revolut has an Electronic Money Institution license from the U.K.’s Financial Conduct Authority (FCA), which it can “passport” across the EU.
“We’re applying for two banking licenses, an EU banking licence in Lithuania which we’ll be able to passport throughout the EU; and a U.K. license via the FCA to prepare for any passporting issues due to Brexit,” Wylie said. “This will enable us to offer fully functional current (checking) accounts, initially in Lithuania, before rolling out these accounts to Estonia and Latvia and, as soon as possible, the U.K. Next in line are France, Germany, Italy and eventually the rest of the EU.”
Revolut provides a mobile banking app in which customers can hold 25 currencies, fee-free Visa and Mastercard prepaid multi-currency debit cards, and free domestic and cross-border transfer services at the interbank exchange rate. Customers can trade in cryptocurrencies including Bitcoin, Ethereum, XRP and Ripple using their Revolut app.
Revolut also offers instant loans, and will be looking into providing overdrafts and further credit services once its banking licenses are approved. “A credit card isn’t something we’re working on at the moment, but we may explore the idea further down the line,” Wylie said.
In April 2018, Revolut raised $250 million from its investors to fund its international expansion, giving it a valuation of $1.7 billion.
Revolut competes with U.K. challenger banks such Starling Bank, which launched a cross-border transfer service last month; and Monzo. It also competes with Germany’s N26, which has around 1 million customers in Europe but hasn’t launched in the U.K. yet. Both Monzo and N26 have expressed interest in expanding into the U.S.
In January 2018, the EU and the U.K. introduced the revised Payment Services Directive, PSD2, which promotes the development of innovative online and mobile payments services through open banking. PSD2's, whose goal was to increase pan-European payments industry competition and participation from non-banks, and to create a level playing field for all participants.
“PSD2 allows customers to own their own financial data and switch from bank to bank or to a Fintech that offers more advantageous terms,” said Ed Price, director of compliance at Chicago-based custom software developer Devbridge Group.
Wylie says Revolut has benefited from the growth of competition in banking and the advent of open banking and PSD2 in the U.K. and Europe.
“Recent banking legislation is helping to connect different financial services and allow them to work together to provide improved functionality, offer a more streamlined user experience and help tackle fees,” Wylie said.
Revolut has developed its own open API platform for its business banking users, which allows them to combine their Revolut for Business account with their own software and business processes. It is exploring opening its platform to other financial services companies as well, Wylie said.
One of the first companies to integrate with Revolut’s open API platform is French ride-hailing service SnapCar. Revolut will provide SnapCar’s drivers with instant automated payouts for rides into their accounts, instead of the traditional payment services which SnapCar used previously.
“Revolut’s success can be attributed to its focus on international payments, said Ron van Wezel, senior analyst at Aite Group. “While many challenger banks such as Monzo or Starling were setting up a domestic shop to compete with incumbent banks, Revolut rolled out its prepaid card that allows customers to make payments and take out cash in foreign currency at a much lower price than banks offer. The offer seems really attractive, and proof of this is that consumer organizations are strongly recommending Revolut.”
Revolut has been on record claiming that it is profitable, which is rare among challenger banks, said van Wezel.
“It makes money from interchange, user fees, premium accounts, business accounts, and additional services such as insurance,” he said. “Obtaining a banking license will allow Revolut to venture into lending and other banking services. But I think Revolut’s cryptocurrency offer is just a gimmick to appeal to young people.”