“You wonder what the hell is going on in our domestic banks that they are sitting back and letting this happen.”
So says serial entrepreneur Bobby Healy of the digital banking service Revolut’s rapid expansion in Ireland. Its latest step was the introduction this week of Irish IBANs, or international bank numbers. Its two million customers here previously had Lithuanian IBANs, which caused problems for some when trying to set up direct debits.
For Healy, who was the technical brains behind the CarTrawler rental platform and is the founder of Manna Drone Delivery, it signals a warning to legacy banks such as AIB and Bank of Ireland. Their technology is, in his words, a “shambles”.
“Revolut is easy to use. It’s designed for the sharing economy and for micro payments and it’s no surprise that it has taken off the way it has,” he says.
“Revolut is eating the lunch of the domestic duopoly [Bank of Ireland and AIB] because of bad management, bad vision, bad strategy, underinvestment. I mean, I’m a Bank of Ireland customer and their technology is comically poor and it hasn’t evolved. I can see this foreign company moving into Ireland and hoovering up every single current account. There are no Gen Z people [those born between the late 1990s and the early 2010s] who are going to stay on with existing banks.”
Healy already uses Revolut for much of his businesses and says like-minded entrepreneurs have moved from a reliance on traditional banks.
The Revolut revolution has happened remarkably quickly. The company was founded on July 1, 2015, in London by Russian-born Nikolay Storonsky and Ukrainian-born Vlad Yatsenko. Within three years, it was valued at $1.7bn.
In December 2018, it secured a “challenger bank” licence from the European Central Bank, facilitated by the Bank of Lithuania. This allowed it to accept deposits and offer consumer credits, but not to provide investment services.
By the end of that decade, it had made significant inroads in Ireland, proving popular with consumers under 30. The arrival of the pandemic in early 2020 proved a boon. With cash becoming increasingly consigned to history, Revolut’s user-friendly app for ‘tap’ payments, sharing small sums and splitting bills, was perfectly placed to capitalise.
A sense of how entrenched Revolut has become can be gleaned from the fact that its name is now used as a verb, as when someone says: “I’ll Revolut you the money.”
At the start of this year, it had over two million customers in the Republic, indicating that the majority of adults here use it. Remarkably, Ireland accounts for about 10pc of all Revolut customers worldwide. The arrival of Irish IBANs will ensure that the company’s growth is unlikely to stop any time soon. It also offers loans up to a €30,000 and, as the Irish Independent revealed in November, is considering introducing home loans.
While Revolut — along with the conventional banks — makes little money from its current account businesses, it’s the move to credit facilities, foreign exchange, loans and mortgages that could help it make a killing in Ireland.
With the exception of the German outfit N26, Revolut has comparatively few competitors as a digital-only bank. Its growth has been fuelled organically and some are likely to have been invited to use the service by friends. There has been a long-term financial inducement to get others on board. A standard email to customers from Revolut this week read: “Want to earn an easy €50? It’s easy! Just get your friends to sign up to Revolut and you’ll cash in.”
“One of the beauties of Revolut is that it took the stress and strain out of banking, particularly for younger people,” says Jess Kelly, Newstalk’s technology correspondent. “I tend to forget how stressful it used to be to transfer someone money. Emails would go around the office saying, ‘Does anyone have an AIB card reader because I need to pay my electricity bill’ or something like that. It was just bonkers.”
Kelly says the simplicity of Revolut’s service stood out when it first arrived. “It was like texting someone some money. There was no big headache. The set-up process was ideal. They really understood what was required from younger people. When that demographic went on to it, it made sense to get their parents on to it too.”
The broadcaster says Revolut has proved to be beneficial in unforeseen ways. “It helped me, as a person in their late 20s, early 30s, to get a better understanding of where I was spending my money. The app of my traditional bank was rubbish. It’s getting better, but it’s still not great. With Revolut, I could see every transaction as clear as day. I could see I was spending X amount of money on entertainment, Y amount of money on food, and so on.
“The features that came along — such as Vaults, which makes saving money easy — really spoke to a generation of people who probably don’t have the best financial literacy, but it did it in a non-stuffy, non-corporate, non-ram-it-down-your-throat kind of way. It was literally just, ‘Here’s a summary of what you were spending last week’ and it was presented like an Instagram story.”
Kelly believes the legacy banks have a fight on their hands. “Obviously, banks have to be careful when it comes to security and authorisation, but I’m a Bank of Ireland customer and I sometimes feel like they put the old ways of doing things ahead of ‘Let’s give this a go’. If it went wrong, customers would be up in arms, so I recognise the predicament they’re in. KBC [which is winding down its Irish operations] had the best digital offering of all the traditional banks. AIB have gotten significantly better. But it’s baffling how the legacy banks here didn’t lead the way in the fintech revolution.”
She says Revolut’s offering will be ramped up quickly. “At Web Summit [in November], they were talking about their vision, potentially providing mortgages and so on. Young people know and trust Revolut now and they probably have more interactions with Revolut than they’ve ever been inside a physical branch of Bank of Ireland or AIB. Anyone who doesn’t take them seriously is doing so at their peril.”
Daragh Cassidy, head of communications at price comparison site Bonkers.ie, believes the introduction of Irish IBANs is significant. “It makes Revolut a viable alternative to the main banks for the first time,” he says. Some businesses had refused to facilitate customers with Lithuanian account numbers.
“IBAN discrimination is supposed to be illegal,” Cassidy says, “but like so many things around consumer law, what the law says and what it’s doing can be quite different.”
Most users will have deposited money in Revolut account from a legacy bank account, but the IBAN move would make it easier for them to get their salary paid directly to the digital service.
Cassidy believes that while many will be happy to continue to use Revolut in conjunction with their traditional bank here, others will shift all of their banking to it. “More people will be happy to close their Bank of Ireland or AIB accounts and move to Revolut and a whole generation of kids growing up — the 17-, 18- and 19-year-olds — who are taking out current accounts for the first time would be happy to use Revolut exclusively,” he says.
But he adds that Revolut is not without its problems. “There absolutely are pros and cons to Revolut. It’s not great if you want to take out a lot of cash, at least if you have the basic account. There’s no overdraft facility. And there are still issues around customer service as well. Of course, there are no branches. But some of those negatives — such as no branches — won’t be big barriers for younger generations.”
Despite this, Cassidy believes it is too early to write an obituary for legacy banks. “We’re very quick to write off older companies that have been around for decades or even centuries. People talked about the death of traditional banking as far back as the 1990s, but in the medium term, I don’t think they’re under threat. But they will have to work out how to remain relevant and appeal to younger customers and there may be a case where they may have to close branches and use those savings to invest in technology instead.”
Jess Kelly agrees there is room for improvement. “With the basic consumer app, they’re doing crypto and stocks and I’d love to know how much the average consumer wants to be doing that stuff within their banking app. Sometimes, it feels like it’s a little bit cluttered and I think there should be the option to personalise the app a bit more.”
Deposits with Revolut are protected under the EU’s “safeguarding of funds” rules, which means it must hold its customers’ deposits in a special account with a European bank, separate from its operational funds. If it goes bust, its clients must be paid before other creditors. Unlike legacy banks, it is not covered by the deposit guarantee scheme, which protects up to €100,000 of an account holder’s money. Other consumer protections are the same.
One source in the Irish banking sector says that while “Revolut has caught us napping”, it lags behind on customer service. “It works exceptionally well for the simple stuff — like making payments to your friends, and I use it all the time — but what happens when you want to do more serious banking? Do they have the customer service support that my bank does, where you can speak to someone either in branch or over the phone and where any issues you have can be escalated? That sort of stuff isn’t very sexy, but it is important.”
“Mark Zuckerberg always said that he wanted Facebook to be synonymous with the internet,” says Kelly. “I think Revolut could become synonymous with shopping and everything that you need to do with your money if they play their cards right and, obviously, tick all those regulatory boxes.”
Revolut was valued at $33bn in 2021, the same year that co-founder Storonsky said it became profitable, although figures have yet to be published. The 38-year-old British citizen made the Forbes’ billionaires list last year and is worth an estimated $7.1bn. He has been a critic of Russia’s war on Ukraine and renounced his Russian citizenship in October.
Review put several questions to Revolut, but there was no response. Its head of public affairs was on annual leave, and a detailed query to the press office by email — the method Revolut asks journalists to use — did not elicit a response.
AIB declined to comment when contacted by Review. Bank of Ireland says 1.4m customers use its app, its “busiest channel”, and said that in 2022 it had 36pc year-on-year growth in mobile traffic. “70pc of our current account applications are via digital-only channels and completed in circa six minutes,” a spokesperson said. “More than 90pc of all applications for everyday banking products are received digitally and we continue to invest in and enhance our digital services. We’ve seen an improvement in the mobile app ratings since we launched additional functionality last year.”
