- Investment sought:
- Equity offered:
Consumers and businesses worldwide are being underserved by expensive banks with dated technology. A survey of 9,000 bank customers in nine countries revealed that 77% of customers globally are unsatisfied with their bank.
We're creating a world where money moves freely at your pace, wherever you are. Revolut is a digital banking alternative designed for a global lifestyle. You can set up a current account in 60 seconds, hold and exchange 16 currencies at the interbank exchange rate, make free international money transfers to any bank in the world and spend fee-free globally with a contactless MasterCard. In just two years, Revolut has acquired more than 750,000 customers who have transacted over $4.2 billion.
The fast-moving Fintech has also launched a business platform that enables companies to hold, exchange and transfer 25 currencies at interbank rates and issue corporate cards for global fee-free spending. 12,000 global companies and scaling start-ups.
This crowdfunding raise is part of a much larger fundraising round involving institutional investors. The round price for this fundraising was set at US$11.2526. For the purposes of this crowdfunding raise, an exchange rate of US-GBP 0.7613 (being the end of day rate on 28 July 2017 provided by financial exchanges) has been applied to the round price, resulting in a share price of £8.57 per share.
Investors in this round will receive shares, which have a 1x non-participating preference on a return of assets, liquidation or sale, alongside earlier issued classes of preference shares. All preference shares also enjoy anti-dilution protection on a down round.
Revolut was launched in July 2015 by ex-finance professionals who have a distinctive ambition to build the future of money beyond banking. The idea came from a common frustration with exchange rate mark-ups, foreign transaction fees and a lack of technological innovation from the big banks.
Banks charge insane fees to spend or transfer your money in a foreign currency. A typical UK bank customer is charged up to £25 to transfer $500 to a bank in the United States with an exchange rate mark-up of 3-5%. For international card payments, banks charge as much as 6% on every transaction.
Today’s hyper-connected world deserves a financial partner just as progressive. One that adapts to your needs, gives you control and constantly pushes you into new exciting spaces. Revolut is a new Global Banking Alternative that enables free international money transfers, fee-free global spending - always at the interbank exchange rate.
Substantial accomplishments to date
In just two years, Revolut has grown to over 750,000 active users who have transacted over $4.2 billion to date. An average of 1,700 new customers sign up every day.
As a testament to the product, Revolut’s user acquisition is primarily driven by recommendations from friends and family. For an early growth comparison, TransferWise - a well-known Fintech unicorn launched in 2011 - only processed €10 million in client funds in their first year.
This crowdfunding is part of a $66m investment round from some of Europe's most well-known Venture Capital firms including Index Ventures, Balderton Capital and Ribbit Capital. The hot Fintech startup has also regularly attracted the attention of international media, with regular coverage in the Telegraph, Times, Financial Times and CityAM.
In July 2015, Revolut’s £1m crowdfunding campaign was oversubscribed by over 10,000 would-be-investors who pledged to invest £17m, all of whom were Revolut users.
Revolut was also notably:
- Nominated alongside Pokémon Go and WeChat for ‘The Best Overall Mobile App’ award at the largest Mobile Conference in the world.
- Selected from over 1,500 European FinTech’s to be named on the ‘Fintech50 2017’ list of the hottest European startups.
- Awarded the ‘Hottest FinTech Startup’ award at the Europas 2017.
Revolut has 3 main revenue streams: (1) MasterCard© interchange (2) consumer add-ons and (3) business accounts.
Revolut gains a cut of the revenue from the fee (interchange) paid to MasterCard© by merchants in order to process their payments.
In April 2017, Revolut launched an annual, paid Premium service which costs £6.99 per month or £72 per year. Over 10,000 customers signed up within the first two months, with droves of new customers joining every week. Other revenue streams include Revolut credit which can be accessed from the app. Revolut also promotes new game-changing start-ups in the app and gains a fee for every Revolut customer who signs up.
Revolut for Business is a subscription-based web service that enables companies to manage international payments and corporate travel. Over 12,000 FTSE 100 companies and scaling start-ups are currently being on-boarded.
Use of proceeds
The funds raised will be used in two ways: (1) International expansion and (2) product development.
Starting in 2017, the fast-growing startup will be expanding internationally, with the aim of establishing itself as the number one platform for consumers and businesses for managing their finances. Revolut intends to initially expand its services across North America and Asia.
The equity raised will be used to hire a world-class team of International Expansion Managers, paying for the infrastructure and relevant licensing required to operate across new territories and to accelerate customer acquisition globally.
Revolut will also use the funds raised to accelerate product development for its consumer and business products. Currently some of Revolut’s services are made available in the Revolut app via partnerships with licensed third-parties. The funds raised will enable Revolut to apply for licences to provide these products in-house, which should in-turn increase profit.
Revolut is targeting consumers and businesses that are dissatisfied with their banks and other financial services for three main reasons: (i) lack of product innovation (ii) the expense of spending money abroad and (iii) fees to transfer money overseas.
The technology available for consumer and business banking is archaic. Transactions are monotonous lists without any insight into where your money's going, it takes days for your balance to update and you still have to call your bank to replace your card should it be lost or stolen.
Revolut appeals to consumers that are looking for a more convenient way to manage their finances. The Revolut app is packed with innovative features to make managing your everyday life easier. Customers can analyse their spending by categories and shops; split-bills with their phone contacts in a single swipe; apply for and receive instant peer-to-peer credit at a market leading APR; and block or unblock their Revolut card at any time.
Revolut also targets consumers and businesses that regularly spend or transfer money abroad. Banks make a huge profit on foreign exchange spreads and fees charged to their banking customers every year. Santander's reports show that 10% of their annual profits derive from international transfers.
Revolut resolves this problem, enabling users to make fee-free purchases and cash withdrawals in 120 currencies at the real exchange rate and send free money transfers of up to £5,000 per month. Whether you’re a consumer living between countries, traveling, paying a mortgage in a foreign country or a business sending money overseas – Revolut can help cut out the banking fees entirely.
Characteristics of target market
Banking is one of the world's largest industries, accounting for 15% of the world's largest companies in 2016. However, traditional banks are losing market share because of their tendency to be expensive and slow with out-dated technology.
A survey of 9,000 bank customers in nine countries revealed that 77% of customers globally are unsatisfied with their bank (Source: CNBC 2015). The banks scored badly on ‘basic banking’, ‘transparency on fees and pricing’ and 'personalised banking'.
Another study carried out by Accenture in July 2016 showed that almost 15% of those surveyed had switched from a major national UK retail bank to ‘online-virtual banks’ or ‘payment providers’ in the past 12 months. Revolut’s acquisition of 750,000 customers, in just two years, clearly demonstrates an appetite for a Global Banking Alternative.
Revolut will focus on further customer acquisition across Europe in the next 6 months and aims to become the top platform used by British and Europeans for global payments and transfers. Starting in 2017, Revolut will look to go global and expand to North America and Asia.
Revolut’s user acquisition is primarily driven by recommendations from friends and family. The team has worked hard to keep marketing costs close to zero and incorporate features with a natural ‘network effect’. For example, customers can send and receive money from their phone contacts in seconds via the Revolut app – seamlessly bringing them into the Revolut network.
Revolut is also hiring a world-class team of International Expansion Managers for over 20 countries including Germany, France, Portugal and the United States. They will be responsible for driving customer acquisition primarily through viral marketing tactics, press coverage and affiliates partnerships with local companies.
Revolut’s competitors tend to fall into one of three brackets: (1) banks (2) currency specialists & prepaid card providers and (3) web-based money transfer services.
Unlike many other providers, Revolut combines aspects from all of these services into one app, but with exceptional value and a seamless user experience. Revolut customers can open a current account in minutes and instantly send free money transfers in 26 currencies to banks around the globe, spend fee-free in 120 currencies with a contactless MasterCard© and hold and exchange currencies at the interbank rate. Customers can also access banking products at significantly better value than traditional banks, for example P2P credit with an APR of 9.9% compared to 21% for a typical UK credit card.
Revolut distinguishes itself from competition, including challenger banks, by being the only financial product tailored to a global lifestyle. Unlike competitors, Revolut allows customers to load and hold 16 currencies in-app and exchange between them at interbank rates. It's essentially like opening a local bank account in every currency.
Other services with some comparable features, including Atom, Starling and N26 are only available locally or to a very limited number of European countries. Revolut is the only challenger to our knowledge that is available to all residents of the European Economic Area (EEA) and to offer a business banking platform for SME’s across Europe.
Revolut is an early-mover in the digital banking space and has delivered a huge number of new features and products over the last 9 months. This includes, but is not limited to, business accounts, P2P credit, turbo transfers, UK current accounts, a customer support chat bot and a bill-splitting feature. Revolut has been amongst the first UK banking challenger to deliver many of these features time and time again.