Financial technology or Fintech is a white hot area these days and lots of folks are after a piece of the action. The payments business is one huge area of opportunity even before counting cryptocurrencies. When the global economy generates more than $90 trillion in GDP, that means lots of money constantly on the move. Trouble is, these days, it moves slowly and at a high cost.
With that much at stake, there is no shortage of entrepreneurs with the next disruptive idea. As an analyst and investor, it is hard to choose who knows their stuff. Revulut got my attention and here is how it happened.
Venture Capitalists are wrong on about 95% of their investments but to put a valuation of this magnitude was quite unusual, maybe even a little crazy. The crypto buzz had a lot to do with Revolut’s capital raising success.
Last summer, Revolut founders Nikolay Storonsky and Vlad Yatsenko raised over $66 million in VC funding and another $23 million from Crowdfunding. That is serious money considering the company was scarcely a year old at the time with hardly any revenues. This placed the implied value of the company between $200-$400 million.
It would be easy to declare insanity in the ranks of venture capital. An equally plausible conclusion is that a major source of risk capital has done their homework on crypto and has given their seal of authenticity. Just something to keep in mind as the price of crypto is soaring and the word bubble comes up.
The Revolut app allows customers to open a current account in under 3 minutes, and includes a prepaid contactless MasterCard debit card. So far there is nothing unusual about Revolut. Sounds like about any other branchless bank.
The company marketing offers freebees like free international money transfers that could save users 3% so that is good. Also there is free access to global ATM machines although no mention is made of what networks are included or their location.
And there is one other caveat; the free ATM access ends when you withdrawn $250 in any month. That is chump change for most people. If you average closer to $500 per month at the ATM, you will want to select the Premium service. That will cost $6.99 per month.
OK so not everything is really free but still $6.99 per month beats the $25-$35 charged by conventional banks.
Offering freebees can be a great way to attract customers but read the fine print before making any commitments. In Revolut’s case you really have to dig into the details such as the limit of free ATM withdraw before little charges start to creep in. And if you are an American here is the most puzzling detail taken directly from the company website.
“You can transfer money to banks in the United States using Revolut. However, if you are currently living in the United States, you cannot make a bank transfer from Revolut to your local bank account due to licensing restrictions.” Something must have been lost in translation: what does this mean?
The firm launched personal international bank account numbers (IBANs) across Europe last summer. So if you live in the United Kingdom or one a a dozen or so Eastern European countries, Revolut offers real value added services. For the rest of the planet, not quite yet.
Since then they have begun integrating currencies like Bitcoin, Ethereum and Litecoin. Here is the sizzle to bring in new customers. “Revolute will now be able to buy, hold and exchange Bitcoin, Litecoin and Ethereum in just 30 seconds at the best possible rates.” There is a 1.5% fee for this service which is competitive with exchanges like Coinbase and others.
Revolut is adding other new services beyond cryptocurrency to lending and pay-as-you-go travel insurance at the tap of a button. Altogether, not a bad business plan but it is the crypto connection that moves the needle.
VCs Depending On Experienced Management
Storonsky is more than a slick operator with a pretty pitch deck. He and his partner have deep experience in the global payments business. Nikolay spent years as a currency trader with Credit Suisse so he understands the level of fees charged by the current system.
The technical wizardry, however, rests with his partner Yatsenko. Vlad spent over 10 years building financial systems for major Wall Street investment banks. He serves as the company’s CTO.
Conclusion: Why Is Revolut Unique?
The global payments business has long been a gigantic oligopoly controlled by a series of networks, governments, banks and a group of oversized corporations such as Visa, MasterCard, Fiserv and others.
Taken together it is like a mafia of financial behemoths interested in nothing more than keeping the status quo. Perpetuating the system enables them to maximize the amount of fees for the mindless service of money transfer. Revolut could be one of many disruptive forces but will it take $90 million to get them there. Evidence shows the answer is most definitely no. The cache of cryptocurrencies in the Revolut business mix has attracted Venture Capitalist and others to pay outsized prices for access. Bravo for crypto investors everywhere.
Featured image courtesy of Shutterstock.
from Crypto Currency Online https://cryptocurrencyonline.co/moneyonmobile-aiming-big-in-south-asia/