Is Revolut a Bank and What Does It Mean

Revolut is a digital banking service that offers a wide range of financial products, including current accounts, debit cards, and currency exchange.

Revolut is not a traditional bank in the classical sense, but it does offer banking-like services. According to Revolut's own website, they are a licensed e-money institution.

In the UK, Revolut operates as an Electronic Money Institution (EMI), which allows them to hold customer funds and provide payment services.

Revolut's EMI license means they are regulated by the Financial Conduct Authority (FCA), ensuring customer funds are protected up to £85,000.

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Revolut is a financial technology company, not a traditional bank, founded in 2015 by Nikolay Storonsky and Vlad Yatsenko.

It's headquartered in London, with operations in over 30 countries worldwide.

Revolut offers a range of financial services, including current accounts, debit cards, and currency exchange.

Their mobile app allows users to manage their finances, track spending, and receive real-time notifications.

Revolut's business model is based on interchange fees, rather than interest on deposits.

This approach has enabled them to keep fees low and offer competitive exchange rates.

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Revolut is now authorized as a UK bank, marking a significant milestone for the company. This means it can potentially rival the UK's largest banks by market value.

Revolut has been authorized with restrictions, pending the completion of a “mobilisation” period, a common regulatory stage for many new banks to set up their banking processes before starting to operate as a bank in the UK. This period is expected to be completed soon, allowing Revolut to offer a broader range of financial products.

Revolut has already started offering personal loans, credit cards, and instant-access savings accounts. It's interesting to see how the company will venture into mortgage products in the future.

In January 2023, Forbes estimated Revolut to be worth approximately $13.8 billion, which is way below the $33 billion valuation it achieved in a Series E funding round of $800 million from investors in July 2021. This valuation is still impressive, especially considering the company's ambitious plans to revolutionize the UK's banking sector.

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Revolut has over 45 million customers worldwide, and more than 9 million customers in the UK alone. This massive customer base will likely play a significant role in the company's future success.

Revolut's pre-tax profit in 2023 was £438 million ($545 million), up from a pre-tax loss of £25.4 million in 2022. This significant improvement in profitability is a testament to the company's growing success.

Revolut's Business Model is built around a mobile-only banking approach, with no physical branches. This allows them to keep costs low and pass the savings on to customers.

Revolut generates revenue through a variety of means, including transaction fees, interest on deposits, and exchange rate markups. The company also earns money from its premium services, such as Revolut Premium and Revolut Metal.

Their business model is designed to be scalable and efficient, with a focus on technology and automation to minimize costs and maximize customer benefits.

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Revolut offers a range of financial products, but its most popular is the Revolut Card, which allows customers to make purchases worldwide and get automatic currency conversion at close-to-baseline exchange rates.

The Revolut Card is a game-changer for travelers and international shoppers, making it easy to manage expenses abroad.

Revolut also provides personal and business accounts, offering a wide range of banking and money transfer services, including transfers abroad.

These accounts can be managed through the Revolut app, which also tracks your spending and allows you to set spending limits to help with budgeting.

Revolut is looking to expand its services with a UK banking licence, which will enable it to offer overdraft facilities and competitive personal loans.

This means users will no longer have to worry about negative balances, automatic top-ups, and insufficient funds notifications.

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Revolut has been able to secure significant funding to fuel its growth.

The company raised £6.5 million in a Series A funding round in 2016, followed by an additional £17 million on an equity crowdfunding site.

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This initial funding was a crucial step in establishing Revolut as a major player in the fintech industry.

In 2017, Revolut raised $66 million in a Series B funding round, with investors Index Ventures, Balderton Capital, and Ribbit Capital participating.

This influx of capital helped Revolut expand its operations and user base.

By 2018, Revolut had raised $250 million in Series C funding, valuing the company at $1.7 billion.

This valuation made Revolut a unicorn, a term used to describe startups that have reached a valuation of over $1 billion.

Revolut's value continued to soar, with a Series D funding round in 2020 raising $580 million and valuing the company at $4.2 billion.

This made Revolut the most valuable fintech startup in the UK at the time.

In 2021, Revolut's Series E funding round raised $800 million, valuing the company at $33 billion.

This valuation made Revolut the leading European startup in terms of valuation.

As of June 2023, Revolut has raised a total of $1.7 billion in funding.

This funding has been instrumental in helping Revolut achieve its ambitious goals and expand its user base.

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Revolut's Retail App offers a wide range of services to its users, including payments and cards, savings, credit, investment and trading, and cryptocurrency trading.

One of the standout features of the app is its multi-currency accounts, which allow users to hold and manage multiple currencies in one place.

Users can also access premium lifestyle features through the app, which provide exclusive benefits and discounts.

The app also includes a shared accounts feature, allowing users to manage joint finances with friends or family members.

Revolut's Retail App is designed to be a one-stop-shop for all of your financial needs, making it easy to manage your money on the go.

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Revolut's classification and structure can be a bit confusing, but let's break it down. Revolut has been granted an EU banking licence in Lithuania, which allows it to operate as a bank in several European countries, including France, Italy, and Portugal.

In these countries, Revolut customers can upgrade to Revolut Bank to receive additional services and deposit protection of up to €100,000.00. However, in the UK, Revolut is not technically a bank, but rather an electronic money institution, which means it's authorised to handle money and facilitate business transactions, but not offer certain financial services like protection under the UK government's Financial Services Compensation Scheme (FSCS).

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Revolut is authorised by the Financial Conduct Authority (FCA) and must safeguard customer funds as per FCA requirements. This means customer funds are stored in a segregated account with Barclays and Lloyds. Additionally, all card transactions are processed by the Mastercard or Visa network and are protected by Mastercard or Visa rules.

Here are the countries where Revolut customers can upgrade to Revolut Bank and receive additional services:

In 2021, Revolut applied for a banking licence in the UK, but it's still in the process of receiving full authorisation. Once it receives full authorisation, Revolut can begin to offer a broader range of financial products, potentially including mortgages.

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Revolut has faced criticism for its lack of transparency in its business model, particularly regarding its fees and revenue streams.

The company's decision to launch a banking service has been met with skepticism, with some questioning whether it truly offers a banking experience or just a digital wallet.

Revolut's CEO has stated that the company is not a bank, but rather a fintech company that offers banking services.

However, the company's use of the term "bank" in its marketing materials has led some to accuse it of being misleading.

Revolut has also faced criticism for its handling of customer complaints, with some customers reporting difficulty in getting issues resolved.

In 2020, Revolut was fined £1.7 million by the UK's Financial Conduct Authority for failing to properly disclose its fees to customers.