At the intersection of fintech and cryptocurrency

British fintech startup Revolut has received a new portion of investments and is now valued at $ 33 billion, making it of the most expensive neobanks in the world. One of the factors of its success is timely offering of cryptocurrency services to the clients.

British fintech startup Revolut drew $ 800 million in the latest round of investments, – its valuation is now $ 33 billion. That makes Revolut the most expensive fintech startup in the UK and one of the most expensive in the world. Among the investors of that last round were such structures as Vision Fund 2 (a venture fund of Japanese SoftBank) and the Tiger Global Management hedge fund. Compared to last year, Revolut’s valuation grew sixfold, which, according to Bloomberg, reflects strong investor demand in the fintech sector.

Today Revolut has approximately 16 million individual customers and more than 500 thousand business clients, with more than 150 million transactions carried out monthly.

The company positions itself as a “neobank” – a popular modern concept, which usually means an IT company specializing in financial services, similar to those of a traditional bank, but without its own banking license. The services Revolut offers include opening and maintaining an account, international money transfers, cryptocurrency transactions, cashback, trading, selling insurance, personal and business loans, etc. All operations are carried out in the smartphone application of the same name.

One of the main market advantages of Revolut is that the company does not charge a commission for currency exchanges: each person using its services receives a multi-currency debit card (currencies are exchanged at the interbank rate). However, a free service option comes with only a limited range of options. For example, there is a limit on cash withdrawals, and a client will be charged for exceeding it. Paid plans are available for customers who need more options.

In addition, the company provides services for business clients, who also pay a monthly subscription fee. And after the trading starts, the company takes a commission from the brokerage account.

You can get a Revolut card almost anywhere in the world – provided that the client has citizenship or at least a work visa of one of the states where Revolut officially operates. The list of such countries is now rapidly expanding.

As was mentioned, the main market advantage of Revolut is the ability to convert money from one currency to another at close to the exchange rate (more than 140 currencies are available) and make cross-border transfers with minimum commission. It has a specialized bank license issued by the European Central Bank (ECB) and a license to issue electronic money in Lithuania. As a European neobank, Revolut is much younger and more flexible than the old ossified conventional banks, so its services really wowed Europe at first – which contributed to its rapid growth.

In 2020, however, Revolut’s operating losses doubled, amounting to $ 278 million. The company cites the pandemic and the difficulty of hiring new employees as the reasons. Which seems odd: other fintech companies with a similar service model, such as Robinhood, on the contrary, have grown a lot thanks to the pandemic and the following quarantines. On the other hand, the company made a lot of money thanks to multicurrency cards for travelers, and the pandemic suddenly made travel much less prevalent.

To a large extent, the neobank’s standings were improved by the fact that its clients were actively conducting cryptocurrency transactions.

Back in 2018, Revolut became one of the market’s pioneers in issuing a debit card with cryptocurrency cashback. The ability to trade digital assets became available for all clients of the platform in the spring of 2020 (it was previously exclusive to owners of premium accounts).

At that point, a year ago, the company stated that the reason for this decision was the economic crisis caused by the coronavirus pandemic. Clients should be able to diversify their investments amid “unprecedented economic turbulence” and the risk of currency devaluation, Revolut explained.

Shortly thereafter the number of the company’s customers investing in digital coins increased by 68%. The total volume of purchases went up by 57%, and the average size of a single transaction grew 63%.

The users of Revolut mostly preferred Bitcoin, it was used in 51% of transactions. In 20% of cases, customers bought the Ripple XRP token. Ethereum took the third place with 14% of the total number of cryptocurrency transactions. The fourth and fifth places were taken by Litecoin and Bitcoin Cash.

What’s really surprising is that the most active cryptocurrency investors were users aged 55 to 64. On average, they spent $ 423 on each digital coin purchase. Young users from 18 to 24 invested in digital assets the least – an average of $ 134 per operation.

In March of this year, users of the Revolut app also gained access to the purchase and sale of Cardano, Uniswap, Synthetix, Yearn Finance, Uma, Bancor, Filecoin, Numeraire, Loopring, Orchid and The Graph. There is now a total of 21 digital assets available to Revolut customers.

In the comments on the startup’s Twitter post, users wandered whether the team was planning to add new cryptocurrencies. Revolut responded that they are working to expand in this direction. And in its blog, the startup team called 2021 the “year of cryptocurrency”, adding that users should not forget about the risks of working with a new financial tool. In particular, Revolut representatives emphasized the high volatility of digital assets.

Of course, this is not some fairy tale about how the timely start of working with cryptocurrencies helped a promising fintech company withstand hardship. Revolut and its customers have a lot of issues. Many users accuse the startup of illegally freezing digital assets. They complain that calls to the support service don’t actually help. According to customers, Revolut representatives limit themselves to scripted basic phrases that can’t resolve their problems.

Many also report that their support calls take a long while to get processed. In response to complaints, Revolut asks users to be patient.

In general, though, this is just an important case study, which shows that today it is no longer enough for fintech companies to simply “take a cut” of traditional banks’ business to succeed. Integration with the blockchain world is becoming imperative.