Revolut – a portable financial manager

Managing personal finance takes time and practice. But there are certain paths to make it easier. Lowering fees, especially for currency transactions, automating saving and easy access to capital market investing from the palm of one’s hand is the Revolut’s domain. An app in which you can follow your spendings, easily send money to friends, and buy cryptocurrencies. Everything a personal finance manager would do for you.

Who could benefit from Revolut

I believe that Revolut was primarily aimed at ex-pats. I got my first personal recommendation to use it after discussing vacation spending in Switzerland/Germany. The next one in Ireland was almost exclusively paid with a Revolut card.

What was so enticing? One word: fees. Specifically currency conversion and fees for ATM withdrawal, from which the conversion was "the killer app". The fundamental problem with traveling to countries where different currencies are used is in the conversion – you can go to exchange with cash, but that would turn into fees after fees, not mentioning the exchange rate. Or you can pay with your card, which is more convenient (no cash needed) and even more expensive.

But the app is more than a fancy currency converter. It’s also more than an app: You can use their card, you get your IBAN, you can operate your account through a browser.

What can it do?

There are more than few things you can do with Revolut – zou can pay with their cards (and there is more than one card), there are money transfers (fast between Revolut users, slowish using SEPA), there are savings options (and more planned) and there is investing.

Revolut cards

Revolut offers few plans for users: Revolut, Revolut Premium, and Revolut Metal. Each with different debit card options.

• Standard debit card
  With each and every plan comes an option to get a sleek, carefully designed plastic card – or, to quote someone looking through my wallet, "That’s weird. Really nice card without a picture." With Revolut Plus, which offers only a few more things than the free plan, you can get to customize the design. With higher plans, you also don’t have to pay for the card delivery, which will otherwise cost you about 4 €.

• Virtual
  With plans Premium and Metal you get "Safer online shopping". What it really stands for is a Virtual card, that you can use for paying online. As in Mission Impossible, the card destroys itself after use (hey, it’s still virtual, no fire involved). That way your main card and whole account are protected and no one can access your money even after a database leak.

• Metal
  Metal card is something I haven’t had the courage to get yet. It’s paired with the highest plan (Metal) that’ll set you back ~14€/month but gives you access to more perks like cashback (0.1% in Europe, 1% overseas). There is also travel insurance, purchase insurance, and mobile device insurance. The promise of higher interest rates when savings accounts are introduced to the market is just a small plus.

Revolut vaults

Vaults are generally places to store your valuables. They serve the purpose of digital piggybank (and sometimes spare change jar), where you put money every month or after every Revolut card transaction (I do both in small amounts). You can set up targets and name your vaults according to different goals you want to achieve and save up to – one can be for your vacation, the other for your new car, and the third one just for bad weather, furloughs, or not enough paying customers in a month.

There are three ways to put money into a vault: You set up a monthly transaction (say 10 € on the 5th of every month), you save the rounding difference of every card transaction you save a one-off amount when you have spare change.

Currently, the vaults do not offer any interest rate. There is more than one reason for it but it is fair to say that for the last couple of years the rates were lousy enough on savings accounts to be negligible. No loss there, probably. In 2021 Revolut plans to introduce saving vaults with rates of up to 0.65 % for most of Europe, other regions might already have this feature (UK) or get it later.

Sending money

Banks are supposed to help you send money to someone else. And although Revolut is not technically a bank (it’s an electronic money provider with a banking license they are trying to implement), they did understand this crucial truth. They provide account holders with IBAN numbered accounts so customers can use conservative ways of dealing with money or they let you send money to your phone contacts (m-PESA in Africa might have been an inspiration). Also a direct competition to Venmo and others.

Investing

Ease of investing is definitely a plus, which could sell someone to the idea of using Revolut as their primary financial platform, but it’s fair to say they are not an expert tool for investments. For one thing, there are only three asset classes to invest in: stocks, cryptocurrencies, and commodities.

This universe is also severely limited. There are about 850 stocks and while this list is expanded on occasions, it’s not exactly all that one could wish for. Try finding nice European companies like Nestle, Luxottica, or Vivendi, you’ll have no luck.

Almost the same could be said about cryptocurrencies. While you could buy Bitcoin, Litecoin, Bitcoin Cash, or Ethereum (and a couple of others), some of the smaller ones are missing. You also can’t send cryptocurrencies to any other account, they are meant only as an investment.

Lastly, there is new support for certain commodities. Again, as with cryptocurrencies, nothing else to do with them than buy and sell silver and gold. It might be noted, though, that’s all most people do on more sophisticated investment platforms anyway.

So, is it a bank?

Revolut is not really a bank, they currently act as a payment processor (or specifically e-money provider). I’ll quote from banks.eu here:

Electronic money (e-money) is a payment instrument which can be considered as a digital form of cash. Electronic money means a monetary value stored electronically, issued on receipt of funds for the purpose of making payment transactions, and accepted by a natural or legal person other than the electronic money issuer. Strictly speaking, an electronic money institution (EMI) is an undertaking that has been authorised to issue e-money. Compared to traditional and even direct banks EMIs have a lot of advantages: EMIs do not have to comply with capital requirements, do not have to participate in deposit guarantee schemes and do not have to implement strict KYC/AML requirements applied to banks.<

Or as Revolut themselves say:

As an electronic money institution, we are required to "safeguard" clients’ funds. Safeguarding" means separating clients’ funds from our own funds and holding them in a separate account with a credit institution. The funds in this segregated account are held by us on your behalf. As an authorized institution, Revolut safeguards your funds as per regulatory requirements.

This means that they do not participate in any deposit guarantee scheme, but are legally required not to touch your money, so to speak – bank or credit union would be able to lend it to other customers. Revolut also holds a European banking license and is in process of implementing all requirements to actually become functional bank. That is currently true in only a few countries.

Why switch from your bank to Revolut

I would not recommend to anyone switching from their bank to Revolut. That being said, I wouldn’t hesitate and use them as a primary payment card provider and specifically when traveling abroad one could rely on reasonable currency exchange. I use them for almost all transactions in foreign currency if the payment receiver does support them. (My stockbroker Degiro – for some reason – does not, crowd financing Twino is OK with the payment)

Their app is also pleasant to use as an analytics tool. If a relevant portion of your spending is occurring through a Revolut card, their insight is automatic enough to help you make better plans regarding your spending. And maybe cut it in some relevant places.

Bonus: Revolut Business

We discussed the consumer perspective on Revolut, but they do offer a Business account for the entrepreneurial amongst us. Their offers are aimed at companies and businesses registered in the EU, Switzerland, UK, or USA. They include metal cards (at some plans at least), virtual cards, no-fee currency exchange up to a limit (and after that moderately low fee), the ability to hold up to 28 currencies in an account, and cryptocurrency trading. They developed Business API for integration with your software and also provide Marketplace, where you can find connectors to different apps (accounting software Xero, communication platform Slack or Zapier, the ultimate integrator for many apps).

I have not tested their business offering yet and include it more for completeness than for any other reason. But it looks promising and even if it might not be the best solution for someone now, they do seem to concentrate on adding more features and more value to their business partners. So maybe in the future, you’ll catch me using the Freelance plan.