The Customer Effect

Revolut is coming to the US this summer

  • U.K. challenger bank Revolut, bolstered by a $250 million fund raise, is on the cusp of global expansion beyond Europe
  • The digital-only bank plans to focus on a millennial mobile workforce that would benefit from cross-border currency, multi-currency operability and peer-to-peer payments services
Revolut is coming to the US this summer

Revolut is about to be the first U.K. challenger bank to come to the U.S.

The five-year-old company plans to launch checking accounts for U.S. customers in August, adding to the pool of digital-only banks competing for market share among digital-savvy millennials like Chime, Varo and Aspiration, the bank confirmed Thursday.

Revolut’s U.S. offering will include the same add-on features available to European customers, including the ability to hold funds in 25 currencies, real-time spending alerts and interbank foreign exchange rates. Its premium offering that includes overseas travel insurance, free unlimited foreign-exchange volumes and disposable virtual cards.

“We’re going to America to replace your bank — it’s not a payments app with cool features,” said Chad West, head of global brand and communications. “There are a lot of these neobanks doing niche small things, but no one’s offering the scale of what we’re offering — you can hold cryptocurrencies too” — including bitcoin, litecoin, ethereum, and soon, Ripple.

Like all digital-only banking startups, Revolut is up against the challenge that large swaths of customers rarely drop their their financial institution for a new one, though they may add additional banking relationships. Recent research shows just seven percent of customers in the past two years expressed their dissatisfaction with their bank by moving to another; another 17 percent indicated they thought about switching but ultimately decided not to for fear of potential costs, including “when things go wrong, the hassle involved and fear of a negative effect on credit rating.”

Revolut is the latest European digital banking startup to announce forthcoming moves to the U.S., following N26, Monzo and Starling. While they make plans, U.S. neobanks like Chime, Varo, and other fintech companies like SoFi, Stash and MoneyLion are creating a crowded market.

Revolut said its differentiator is its breadth of service offerings for a 25 to 35-year old customer who travels and is attracted to the multi-currency operability and features like location-based travel medical and dental insurance and peer-to-peer payments that are both domestic and international in scope. Despite the competition for market share, challenger banks still see the U.S. millennial group as a growth opportunity due to their doing business with multiple providers and lack of loyalty to specific companies.

“There must be enough white space [in the U.S. millennial market] for these companies to make a run for it,” said Aite senior analyst David Albertazzi. “U.S. consumers tend to hold more financial relationships than other countries with an average of five to seven banking relationships [per consumer] … and younger U.S. consumers don’t have the same brand affinity that their elders have.”

The digital-only bank, which has two million customers across Europe, has set an ambitious five-year customer acquisition target of 100 million. West said growing the customer base in North America will be a “crucial” path to that goal; however, it remains to be seen whether its emphasis on cross-border banking will produce similar results in the U.S., said Celent analyst Stephen Greer.

To build brand loyalty among U.S. customers, the company said it’s going to employ a community-based approach that it’s used in Europe by organizing “Rev Rallies,” meetups where participants can discuss the company’s plans and engage in frank discussions — a strategy that’s also used by rival Monzo and U.S.-based SoFi.

“We hire out cool spaces with beer, pizza and wine with presentations on what we’ve been working on and what’s coming next, and [participants] can ask the good, the bad and the ugly,” said West.

In March, Revolut revealed that it had reached break-even status — while competitors Monzo, Tandem and Starling Bank had yet to see a month without losses. The London-based company, which has applied for a European banking license, operates in 32 countries across Europe. It plans to launch in Canada alongside the U.S. expansion in August, and other targets for this year include Singapore, Hong Kong and Australia; it will also grow its 350-member team to 800 by year end. On Thursday, the company confirmed it raised $250 million in Series C funding led by Hong Kong-based DST Global, pushing its valuation five-fold to $1.7 billion.

 

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