Revolut’s Bold Move in the Crypto Market
A prominent player in the fintech payments sector, with significant aspirations in the cryptocurrency arena across Europe, is willing to forego immediate profits in favor of increasing transaction volume and user engagement.
Comparative Crypto Trading Fees
For those looking to purchase Bitcoin, trading fees can vary significantly. Major platforms like PayPal and Cash App impose fees of up to 1.5% (150 basis points) for buying $1,000 worth of Bitcoin, while Coinbase, the leading cryptocurrency exchange by assets, averages a fee of 143 basis points, generating a substantial $1.35 billion in retail trading revenue for the fourth quarter of 2024. In contrast, traditional trading platform Robinhood offers commission-free trading. London-headquartered Revolut, valued at $45 billion and catering to 9 million cryptocurrency users, is taking a different approach compared to its high-fee counterparts. Until recently, Revolut’s global crypto users faced fees ranging from 49 to 149 basis points, alongside an additional spread of around 100 basis points. However, starting from March 25, the company introduced a specialized crypto app, Revolut X, for users in the UK and Europe, which features zero spread and a minimal fee of just 9 basis points for those taking prices. Unlike traditional financial services that may offer a limited selection of tokens, Revolut presents over 220 tokens, providing more than 400 trading pairs across three major fiat currencies: the US dollar, euros, and British pounds. According to recent calculations by Forbes, the average cost of purchasing Bitcoin in the industry is currently around 80 basis points. On the lower end, firms like Robinhood charge no fees but do not disclose their average spreads, while exchanges like OKX and Binance operate with a basic fee of 10 basis points plus an additional 20 basis points in spreads.
Shifting Strategies and Future Aspirations
Revolut’s previous high-fee approach is being phased out as the company focuses on enhancing its overarching financial services platform, known as a super app, which allows users to manage spending, sending, and investing in one place. Surprisingly, despite the significance of consolidating various financial services within a single app, Revolut recognizes the necessity of launching a dedicated app for cryptocurrency trading, which contradicts its established high-fee structure. The firm reported impressive profits of $545 million, derived from a gross income of $2.2 billion in commissions for 2023.
Strategic Focus on Crypto Liquidity
Securing liquidity in the crypto market is now a vital goal for Revolut’s broader ecosystem, which hinges on attracting a substantial base of active crypto traders. The company stated that customers using the Revolut X app trade ten times more than those utilizing its standard retail services. This new pricing model is intended to capture market share across the board, with Binance, a significant European competitor, facing the most considerable threat. Other notable players like Coinbase, Kraken, and Bitstamp (which is now part of Robinhood) will also encounter increased competition, albeit to a lesser extent. Binance, which has little presence in the lucrative US market, claims to boast over 250 million users globally. In capital markets and crypto circles, it is widely accepted that roughly 8% to 9% of registered users typically engage as active clients. If this statistic holds true for Binance, it would suggest around 20 million active users, many of whom are based in regions such as Brazil, India, and Argentina, where average account values are significantly lower than in Europe. From a wealth perspective, Europe represents the most critical market for Binance, yet it poses considerable regulatory challenges. Currently, Revolut’s pricing strategy is more competitive than Binance’s in Europe, and while both companies face similar regulatory requirements, Revolut enjoys a stronger reputation among regulators. As it seeks to expand beyond Europe, Revolut is actively targeting Gen Z and Gen Y consumers in the United States with offerings in payments, currency exchange, zero-fee investing, and savings. Its banking services in the US are facilitated through partnerships with Sutton Bank, based in Ohio, and Cross River Bank from New Jersey.
