Fintech Revolut targets a million local customers in Asia-Pacific push

London-based fintech Revolut foresees a spate of growth opportunities across the Asia-Pacific region, including Australia.

Revolut founder and chief executive officer Nik Storonsky.

London-based fintech Revolut foresees a spate of growth opportunities across the Asia-Pacific region, including Australia, where it believes consumers are underserved and paying “exorbitant foreign exchange fees”.

Revolut co-founder and chief Nik Storonsky said the group was targeting a million Australian customers over the medium term, and expanding into New Zealand, The Philippines, India, Indonesia, and South Korea.

“Our ambition is to become a market leader in Australia and claim a larger share of wallet … Speaking generally, we hope to acquire a million customers in Australia as we’ve successfully done in other markets such as Ireland,” he said.

“We intend to do this by delivering more best-in-market features, and by being one of the leaders in doing so.”

The Revolut financial platform and app includes payments, foreign exchange and overseas funds transfers, accounts, budgeting tools, and cryptocurrency and precious metals exchange ­services.

But the domestic market for fintech players and digital banks has become increasingly crowded, and challenged by official interest rates at 0.1 per cent. That led to local player Xinja handing back its banking licence last month, while other fintechs pushing into Australia have been impacted by the onset of COVID-19.

“With most countries going into complete lockdown, we saw a decline in domestic payments and international travel. However, we saw a rapid increase in online shopping, stock trading and cryptocurrency trading,” Mr Storonsky said of Revolut’s ability to navigate 2020.

“Due to the diversity of our product offering, we were considerably less impacted than many of our peers.”

But growth in Australia will be a tough slog. The beta launch phase for Revolut in Australia saw the company acquire 30,000 customers, and by its public start date in August last year it had an additional 30,000 people on its local waitlist. Mr Storonsky admitted it had been difficult to launch publicly in Australia in 2020, although he noted Revolut was seeing “an encouraging rate of consistent growth” in customer numbers.

“One of the biggest challenges for us has been launching in a time where international travel has not been possible. Our initial strategy was to land a strong beachhead in payments and FX, particularly for Australians who are statistically big international travellers.”

World Bank analysis has labelled Australia the third most expensive market among the Group of 20 economies for customers to transfer money.

Almost a year ago, Revolut tapped former Bank of Queensland finance boss Matt Baxby to lead its Australian push. He is also currently the interim global banking chief while a search is conducted for a permanent replacement, following several Revolut executive departures last year.

Matt Baxby, Revolut Australia CEO.

At the time of an early-stage launch, Revolut was relying on its British e-money licence, but it was granted an Australian financial services licence in April last year.

Revolut has more than 12 million customers around the world as it pushes into new products and markets, including the US in 2020.

Research house WhiteSight ranked Revolut fourth globally by valuation in a 2020 comparison of independent digital banks. Revolut — which has a European banking licence but is not a bank in Australia — was valued at $US5.5bn ($7.1bn) and sat behind US player Chime, Brazil’s Nubank and Russia’s Tinkoff.

Judo was the only Australian digital bank to make WhiteSight’s top 10 and top 20 list.

Revolut’s latest accounts showed revenue almost tripled in 2019, but operating losses widened to £107.4m ($190m).

On the regulatory front, the company has had to bolster its anti-money laundering defences after suspected activity on its platform three years ago, while in 2020 it was the victim of a fraudulent copycat website.

Mr Storonsky highlighted that since 2018 Revolut had made “substantial investments” across financial crime capabilities, governance and resourcing, including quadrupling the risk function’s size during 2020.

“This included local appointments of senior money-laundering reporting officers in each jurisdiction — including Australia — ongoing monitoring and optimisation of all financial control settings in response to portfolio performance and financial crime threats, and improved governance and oversight,” he said.

Revolut is seeking to expand in Australia against the backdrop of sweeping reviews of the payments system by Treasury and the Reserve Bank.

While Revolut didn’t make a submission to the Treasury review, Mr Storonsky said he believed the regulatory framework needed to be “fit for purpose”, keep pace with change in the fintech sector and drive better consumer outcomes.

“We support any regulatory change that seeks to increase competition and promote innovation while maintaining consumer protection,” he added. “Understanding that regulators are examining the fintech sector across the board, we hope any regulatory changes encourage competition, rather than stifle it.”

On the prospect that interchange fees — which are paid by a merchant’s bank to a card issuer — may be cut further either offshore or in Australia, Mr Storonsky stressed any reform needed to be “balanced and workable”.

“Reducing interchange fees will create a revenue hole for card issuers which they will need to fill — either through higher fees or higher commissions,” he said. “Reducing interchange will, in effect, have a negative impact on new entrants and will give incumbents a disproportionate advantage by reducing competition in the market and keeping fees high for consumers. We believe the current settings for interchange and merchant surcharge caps provide an adequate balance between allowing issuers some profit from the business of card issuing but not gouging customers.”

Originally published as Fintech Revolut targets a million local customers in Asia-Pacific push