Why global digital banks like Revolut are doing more than we think

Digital banks are now a global phenomenon and can appear in many countries. Countries where the digital banking scene is booming are the United States, Canada, United Kingdom, Vietnam, and Nigeria.

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These digital banks aren’t just rambling startups born in their respective markets, they also include big international brands like Revolut and N26.

International fintechs aren’t new, but these global digital banks are doing something that has never been done before in finance, and it’s much more important than we think.

One model, many countries

Global digital banking brands are not only digitizing banking services, but more often than not, they bring a whole new way of doing banking in the countries where they do business.

Take Ireland, for example. Bank customers in Ireland are used to paying quite a few fees on their current accounts with traditional banks, including fees for contactless payments, quarterly fees, ATM withdrawal fees and also transaction fees. by debit card.

While a new bank launched in Ireland may lower some of these fees for signing up new customers, global digital banking brands such as Revolut offer accounts with the same fee structure you would see in other countries at lower fees. This meant Ireland had access to a no-fee account option, no ATM fees up to a certain limit, no fees for contactless payments, and no currency conversion fees up to a certain limit from Revolut. .

This unique approach to the product allows digital banks to offer many more benefits and much lower fees than traditional banks, as they do in Ireland.

Making subscription banking the norm

Digital banks that operate in multiple countries also all tend to offer free and paid account subscription options (as is the case with Revolut and N26). The idea of ​​subscribing to a bank account is completely new in some markets.

Australia is a market that did not see subscription bank accounts until Revolut launched. Traditional Australian banks are actually quite digital already, offering accounts with feature-rich apps and low fees. However, none are as feature rich as Revolut’s paid accounts.

While Australians are not used to paying their bank accounts, 30,000 were on the waiting list for a Revolut account before its official launch. It is now targeting 1 million Australian subscribers in the medium term.

This shows that digital banks can gain traction even though nothing like this has happened before.

Why it matters

While it may seem like it’s just a digital bank expanding into new markets with the same or similar product offerings, it’s actually more important than that; it is perhaps the beginning of a more uniform financial system.

Before global digital banks started to grow in this way, every country had unique banking products. But now a person in Japan can get essentially the same digital bank account – including fees and benefits – as a person in Australia.

This can have a number of ripple effects. First, it increases the portability of bank accounts. You no longer need to create a new bank account if you change country; you can simply register with a global digital bank and use it in the country you are in.

A good example of this type of account is Wise (formerly Transferwise). The Wise multi-currency account allows cardholders to “bank like a local” as they receive local bank details in nine different markets. This means that they will have a UK sort code, account number and IBAN as well as a US routing number and account number, as well as details for other countries included.

Second, the globalization of banking will make banking accessible to a large number of unbanked people.

In Mexico, up to half of the population is unbanked. The Spanish neobank Bnext developed there in 2019 and offered its mobile first bank account, much more accessible than what was already available. The neobank Nubank also offers smartphone bank accounts in Mexico as well as in Brazil and Colombia.

Obstacles to expansion

The road to becoming a global digital bank is not always easy. Often these companies face regulatory and licensing issues.

In February 2020, N26 announced that it would be leaving the UK market because it would no longer be able to use its European banking license there after Brexit. Revolut has also been delayed in its deployment in Australia due to licensing delays.

Writing for Tearsheet, Zack Miller discussed the various other issues digital banks may face as they expand. This includes cultural issues with the mindset of a high-growth business, the need to obtain local banking or payment licenses, and issues that can arise from focusing solely on new account registrations.

Stay local or go global?

Despite the challenges digital banks may face as a result of global expansion, the benefits for both the bank and potential customers are likely to outweigh them. For the digital bank, it opens up to a much larger market than if it had remained in only one country. This is particularly useful for global digital players such as Revolut and Wise who identify with being ‘borderless’. For customers, they can access competitive offers available in other countries, access portable bank accounts, and have more options outside of traditional banks and their local neobanks.

Currently, only a few digital banks pursue international expansion (Revolut and N26 are notable examples), but that may change as the space matures.

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About the Author

Elizabeth Barry is Finder’s global fintech writer. She has been writing about finance for over six years and has featured in numerous publications and media including Seven News, ABC, Mamamia, Dynamic Business and Financy. Elizabeth holds a BA in Communication and an MA in Creative Writing from the University of Technology Sydney. In 2017, she received the Highly Commended Award for Best New Journalist at the IT Journalism Awards.