Last week, London based fintech startup, Revolut, which allows travelers to make purchases abroad with no FX fees through their Revolut card, announced a change to their fee structure. Previously, Revolut users could withdrawal up to £500 a month before being charged fees. Revolut has restructured this plan, charging customers that withdraw over £200 monthly a 2% fee. Additionally, there is now a £5 charge for new cards, and a £6 charge to replace lost or stolen cards.
Revolut users receive a prepaid foreign exchange card, which they link to an app. The app allows users to upload money directly to the card, to be spent globally via Mastercard, without the high exchange rates generally charged by traditional credit cards, banks, debit cards and ATMs. For frequent travelers, Revolut provides an attractive option, even with their restructuring of fees, but will Revolut be able to retain customers with their higher fees
What Lies Ahead for Fintech?
Revolut’s announcement reflects an ongoing conundrum within the fintech world, and one that FXcompared Intelligence’s division studied in depth in 2016’s Money Transfer Report. Fintech companies draw in customers with low fees and offset their costs with venture capital, but what happens when business models must be restructured for profitability? How can startups retain customers? Will customers have developed loyalty to a relatively new brand, and will they be enticed to stay with a company that offers only a slightly better deal than their current bank? Most fintech companies counter these questions with a simple answer - they are focused on growth, for the time being. But what happens when the growth is met?
As we near 2017, many fintech companies are taking a closer look at their business model. Venture capital is beginning to slow down, with many economists saying the Fintech bubble has already burst. Apart from the challenge of building a profitable business model that attracts new customers, startups within the remittance industry are competing with very established companies, such as Western Union, with large marketing budgets and an advantage of decades of brand awareness. Though these older companies have taken a while to develop competing technology, they are beginning to catch up, as we saw this week with Western Union’s further expansion of money transfer via Viber in the UK.
To learn more about the future of the money transfer industry, check out FXcompared Intelligence’s Money Transfer Report 2016. You can also subscribe to FXcompared Intelligence’s Newsletter for regular updates on the remittance industry.
