By tailoring its proposition towards the needs of the local consumer in countries suited to the bank’s core product range, Revolut is showing time again how to take root into seemingly challenging banking markets.
With much of the world slowly coming out of the Covid-19 pandemic, challenger banks everywhere are now considering new ways to grow and create value for the future. Of these has been Revolut, which has recently signalled its intention, for the second time, to enter the Indian banking market.
Revolut plans to offer its flagship currency exchange product as a remittance service for Indian users working abroad. The service, initially at no cost, will enable Indian consumers working abroad to instantly send money from the US, Australia, the UK, and Europe and vice versa, as well as bank with Revolut in those countries through a borderless account.
And while Covid-19 halted Revolut’s expansion into India last year, the bank’s strategy is likely to be successful this time round. Research from GlobalData’s Beyond the Hype: Insight into Digital Challenger Banks report has revealed that Revolut’s successful geographic expansions rest on several key, strategic features.
The first has been to identify how Revolut’s core products, in this case currency exchange, can be tailored to fulfil unmet demands for consumers in India.
In this case, Revolut’s flagship product adds significant value to Indian workers abroad, making it much easier to solve problems when setting up life in a foreign country. This includes renting or buying a house, buying a mobile phone contract, or simply getting a bank account, all of which typically require a bank account and/or a permanent address, both situated in that country.
Revolut’s borderless banking product also helps Indian workers by bringing their Revolut-based credit history with them, a lack of which can be a further barrier to working abroad.
Engaging with stakeholders
Just as important, however, is how Revolut engages with stakeholders in the market. In many cases, the challenger bank operates local headquarters in the country, allowing it to talk to both partners and regulators and thus ensuring seamless entry into the market. This helps explain how Revolut has done well in markets that are thought to be difficult to enter, such as Ireland – where 25% of adults have a Revolut account.
Additionally, though, has been the long-term consideration for how revenue will be generated. In this case, Revolut is likely to move towards a freemium plan similar to its wealth services, with a basic account allowing some free remittance while heavy users receive the feature as part of Revolut Premium/Metal. This also includes the chance to cross-sell other features, including insurance, which will further increase revenue.
This strategy is in stark contrast to other challenger banks, particularly N26, whose history of using an undifferentiated approach to each market has led to lower growth in all but its German market, and in the case of the UK, outright failure. It also explains why, among challenger banks globally, Revolut has done particularly well in expanding geographically while others either try and fail or don’t even bother to try at all.
As challenger banks increasingly focus on creating sustainable growth, the temptation for some to expand beyond their current borders will prove irresistible. But for banks of all sorts to be a success in a market, they must focus on identifying the key problems faced by local consumers and how to solve them.