A tech VC explains why Revolut is such as hot ticket as the fintech app hits 1 million users

The Revolut app.Revolut

• Revolut now has over 1 million users just over two years after launch.
• Index Ventures’ Jan Hammer says thekey to its success is a great product and low-fee model.

LONDON — Fast-growing fintech app Revolut has passed 1 million customers just over two years after launch.

Revolut announced the milestone on Friday, saying that customers have now completed 42 million transactions on its app worth a combined $6 billion (£4.5 billion). The company began as a foreign exchange app linked to a pre-paid card but has since branched out into broader financial services, such as current accounts, insurance, and investments.

The customer milestone puts Revolut ahead of other European rivals such as UK-based Monzo, which has 400,000 customers, and German-headquartered N26, which has over 500,000 users across Europe. All are in a race to build a global, app-only bank that hopes to win over a new generation of millennial customers.

Revolut, which is applying for a full European banking license, said that 42% of its customers are aged 25-35, “a clear indication that traditional banks are no longer meeting the needs of younger, tech-savvy generations.”

Index Ventures partner Jan Hammer.Index Ventures

Jan Hammer, a partner at venture capital firm Index Ventures, which has backed Revolut, told Business Insider that Revolut’s “product elegance” has helped to fuel its rapid growth.

“First and foremost, Revolut has built a great product, a great product that has a phenomenal product-market fit, that clearly satisfies the needs of hundreds of thousands of users in a really frictionless way,” he said.

Launched in July 2015, Revolut has quickly become one of the hottest fintech startups in the world thanks to its rapid growth. The company has raised over $85 million (£64.1 million) from investors to date and claims to be signing up 3,000 to 3,5000 new customers across Europe per day. It plans to launch in North America next year.

One of the appeals for customers is Revolut’s lower money changing costs compared to traditional foreign exchange brokers. The company was founded by Nikolay Storonsky, a former FX trader with Credit Suisse who felt he was being overcharged when travelling abroad.

Hammer said: “The user loves the no-frills, no fees model for both the banking part and the foreign exchange model, a market that’s historically been burdened by huge fees to the tune of up to 5%.

“Revolut has been at the forefront of eliminating these fees. I would draw the similarity with Robinhood — the upfront fee to transact has been eliminated.”

Robinhood, another Index Ventures investment, is a US-based stock trading app that charges no brokerage fees and makes money through margin trading loans instead.

“In both cases, it’s been zero [customer] acquisition costs,” Hammer said. “Referrals, wait lists, peer-to-peer recommendations, social sharing — the list goes on and on, but non-traditional, non-paid user acquisition channels that are resulting in, in both cases, huge user and transaction growth.”

Revolut emailed customers last week asking for help getting to 1 million customers by advertising the service to their friends on Facebook, just one example of how it has relied on viral marketing for growth.

Nikolay Storonsky, cofounder and CEO of Revolut.Revolut

CEO Nikolay Storonsky told BI recently that many staff “work at least 12, 13 hours a day. All the key people, all the core team. A lot of people also work on weekends.”

Asked if he was worried about the sustainability of this culture, Hammer told BI: “In general, passion and intensity and commitment and hard work are synonymous with ambition and disruption and building a startup. Culture being described as intense, hard-working is not something that’s foreign to many other ambitious, venture-backed companies.”

Many fintech market watchers see a rivalry between Revolut and TransferWise, an international money transfer business that is also backed by Index Ventures. TransferWise announced plans for an international currency card earlier this year, a move that was seen by many as a direct response to Revolut’s popularity.

“Both of those companies satisfy a slightly different use case,” Hammer said. “They are obviously aware of each other. They are pursuing somewhat different use cases.”

Read BI’s full recent interview with Revolut founder Storonsky on the company’s rapid growth.