Case Study: Why did Revolut succeed? | Fintech Fridays - 18
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2021 saw a significant amount of VC funding flow to digital banks, with the lions share going to mature challenger banks in Europe — with an $800 million raised by Revolut becoming the UK’s most valuable private company. They are internet-only or digital-only companies that avoid the cost and hassles of traditional bank branches. Why do neobanks like Revolut matter? They offer all the core functions you expect from a traditional bank, like checking and savings accounts, but with a twist; they create significantly better user experiences. In the end, neobanks like Revolut develop products that users love. Oh, and they also have a better business model.
Revolut’s go-to-market is a masterful lesson in what the late Clayton Christensen called “disruptive innovation”. When a new player enters the market, they often do it by offering a simpler, cheaper product to less demanding consumers and then moving up from there.
Tech Stack built ground-up
If you’re a traditional banker, you know the biggest obstacle to growth is the legacy banking systems on the inside. Revolut’s success comes with an unfair advantage here as they have built all their systems ground-up internally. So if they want to start a new segment of product or pivot an existing one they can do so quickly and affordably.
Financial Superapp Strategy
While many of digital ecosystems and super app startups end up failing, Revolut’s strategy of building a niche financial product superapp has proved to be successful. Simply put, they started as a travel card providing cheap exchange rates and slowly turning into a digital bank. In an interview at the Paris Fintech Forum in early 2020, Storonsky revealed his views on the shifting tides in financial services. His reason is simple: If you sell more things to more people — i.e. the “super app” or “platform” model — the cheaper pricing you can offer makes it hard for smaller or more niche players to compete because they have less access to funding and talent.
Growth inducing marketing strategy
The unique thing about Revolut’s marketing that generated over 10M users is that the effort did not rely on paid media. Instead, they created a snowball effect that would make most CMO’s jealous. They started with this ‘innovators’ segment. They are the ones who leap into novelty, keep an eye on trends, look for fresh and modern tools, new approaches, and are willing to take risks when trying a new thing. They are tolerant of mistakes and bugs. (A similar strategy can be observed by Jupiter bank in India)
Multi-revenue Stream
While we already discussed Revolut building their own suite of technology stack, this in-turn enables them to earn more per transaction fee for every revenue stream. Here are the main revenue streams that they focus on:
Subscription Revenue
Transaction Fee
International Money Transfers
Perks
Insurance
Trading
Loans & Overdrafts
Business Accounts
Reading Recommendation
What happened at Revolut India this week?
UK based Revolut invests Rs 340 crore in India ops
Revolut’s first acquisition in India - Arvog Forex to kick-start its product strategy in the country
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