Revolut Business Model – How Does Revolut Work and Make Money?

Revolut Business Model

Revolut is a financial technology company based in the UK. The company offers banking services as a primary income source. These services include currency exchange, virtual and debit cards, Apply Pay, interest-bearing “vaults”, crypto, commodities, commission-free stock trading and other services. Similarly, Revolut holds a banking license in the UK, which makes its services more trustworthy.

What is Revolut?

Revolut started its operations in 2015 under Nikolay Storonsky and Vladyslav Yatsenko. Currently, the former is Revolut’s CEO, while the latter works as its CTO. Before starting Revolut, Nikolay spent seven years as a financial trader at Lehman Brothers. In 2013, he got a lucrative offer for a trading job. However, he left since he was not a fan of the regulations and changes in behaviour after a financial crisis.

While Vladyslav did not have the same financial experience, he worked in the sector before. However, his experience came from offering and building software products for that sector. At the time, he had over ten years of experience in the field. Moreover, he worked as a software engineer for various companies. These include some big names, including Deutsche Bank, UBS and Lab49.

The founders came together and based their company in Level39, a fintech incubator in London, UK. Initially, they started it as a money exchange service. The idea then was to support travellers in saving money from exchange rate commissions and transaction fees. Consequently, it garnered significant attention and attracted users. It also helped the company raise funds through seed funding.

One of the reasons behind Revolut’s success also included its development. At the time, the company processed over 1.5 million transactions. On top of that, it was experiencing a weekly growth of almost 30%. These factors played a significant role in allowing the company to attract investors. On top of that, Revolut also obtained a specialized banking license issued by the European Central Bank. This license came for the company in 2018.

After obtaining a license, Revolut could accept deposits and offer consumer credits. This feature allowed the company to enhance the range of its services significantly. On top of that, the company also enjoyed further growth due to these factors. However, it also faced some challenges during its rise. Some of these also came from the controversies where the company was under the spotlight. For example, it got reported for its gruesome working conditions in 2019.

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How does Revolut work?

Revolut offers various accounts that come with different features. However, these features are only available to users in specific countries. Globally, users can use it anywhere in the world. On top of that, they can withdraw cash in over 150 currencies. The company also offers prepaid debit cards. However, they come with specific use cases. These cards do not work like other payment cards.

Personal account

Revolut allows users to open a personal account. This process is straightforward. Usually, users can get started through the Revolut app and their phone number. Once they provide their number, they can set a password. Later, they will receive a 6-digit code to verify their account. After that process, the app will require them to provide basic information, such as name, address, email, etc.

Once users get their account, they can make an initial deposit by entering their bank details. They can initiate the transfer through the app. On top of that, the Revolut app will ask them for other verification evidence, such as a selfie and passport scan. Within the personal account, users can choose between various packages. These include standard, premium or metal accounts. These subaccounts come with more features.

Business account

Revolut also offers users a business account. However, the process for this account differs from that used for Personal accounts. Business accounts require users to fill out an application. This process applies to businesses rather than individuals. On top of that, users must also provide other details about their companies, incorporation, business sector, location, etc. This information is a part of the application they submit to the company.

Business users must also prove that they have the authority to open a business account for their company. On top of that, they must provide information to verify their identity, like personal users. Later, Revolut will process the application and confirm their business. However, the platform may require further data if they can’t verify the account through typical channels. Users must wait for this process to complete, which may occur between hours to a week.

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What is the Revolut business model?

Revolut uses a fintech business model where it offers financial services using technology. This model has been successful for many companies offering similar services. However, Revolut has customized it to include various other business models within this model. Consequently, the company has increased its income sources while attracting more users.

Revolut also uses a subscription business model. The company offers different types of accounts, which come with various plans. Usually, the company provides a basic version of its services for free. However, the premium plans come with additional features. In exchange, Revolut charges a subscription fee from its users. This fee falls under a subscription-based business model.

On top of that, Revolut uses a commission-based business model. The company charges its customers for every successful transaction through its physical cards. However, Revolut does not take all of those commissions itself. Similarly, Revolut also charges commissions on international money transfers. These commissions differ based on the details of the underlying transaction.

Lastly, Revolut also uses its fintech business model in other models. The company handles substantial user funds. Revolut uses a similar strategy for these funds by investing them in other ventures. In exchange, it earns interest and returns on those investments. Revolut uses this business model similar to banks and other financial institutions.

How does Revolut make money?

Revolut makes money from various sources. An explanation of each of these sources is as follows.

Subscriptions

Revolut offers its consumers a free package that comes with standard features. However, it also has two other plans, which require $9.99 and $19.99. These are called Premium and Metal plans. Each of these plans comes with various perks and benefits. Essentially, they provide features that do not come with the standard plan.

Interchange fees

Revolut makes money every time a user uses its physical card to make transactions. While interchange fees primarily go to the card provider, Revolut also takes a cut. Usually, the company shares the money received with MasterCard. This money comes from every transaction. However, Revolut does not disclose how much it makes from each transaction.

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International money transfers

Revolut allows customers to transfer up to £5,000 to other countries every month. These transfers are free for the app’s users. For premium users, this limit may be higher. However, any transfers above this amount come with an international money transfer fee. This fee is 0.5% of the transaction amount.

Perks

Revolut offers its users a discount when using their Revolut card with selected partners. However, this discount does not apply to every transaction. Instead, Revolut applies it for every ten successful uses on a single card. Revolut makes money from those partners, not from the customers.

Insurance

Revolut also provides insurance services. These come under two packages, including device and overseas medical insurance. However, these services do not come from the company itself. Instead, Revolut Travel Limited, one of its subsidiaries, provides insurance. Revolut makes money from each insurance transaction facilitated through its subsidiary.

Trading

Revolut Trading Ltd, a Revolut subsidiary, also makes money from trading. It allows the possibility to buy and sell stocks from various companies. Within these services, Revolut offers two packages, including Standard and Premium. On top of that, the company makes a specific number of trades per user. The company applies a flat fee for each additional transaction.

Loans and overdraft

Being a fintech company, Revolut handles large sums of money for its clients. The company uses its reserves to offer loans to customers. On these loans, Revolut charges interest, which makes money. These loans can range between £500 and £25,000. Similarly, they last between 12 to 60 months. The company also offers overdraft facilities that earn money.

Business accounts

Revolut offers business accounts similar to customer subscriptions. These accounts allow users access to premium features. In exchange, Revolut charges a subscription fee, similar to other accounts. Business accounts are helpful for merchants and freelancers.

Conclusion

Revolut is a fintech company based in the UK. The company offers many products through its mobile apps. Initially, Revolut provided limited features and services. However, the company has grown over time to cover more areas. Revolut’s business model is similar to other fintech companies. The company makes money from various sources, as listed above.

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