Revolut breaks from standard neobank strategy by making a premium feature free

Revolut breaks from standard neobank strategy by making a premium feature free

February 9, 2021
  • Revolut has extended access of its virtual card feature from paid accounts to all users in Ireland.
  • This could drive spending and help it stand out in the growing neobank market.
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The UK-based neobank has extended its virtual card feature—which was previously only available to paid Metal and Premium accountholders—to all of its customers in Ireland, AltFi reports.

The feature generates one-time-use digital cards in the Revolut app, which makes for a more secure way to pay online. The neobank is extending the feature to all customers in recognition of “changing spending habits and the need to protect consumers when they purchase online,” according to Michael Russell, communications manager at Revolut. And the feature has seen high demand: Throughout November and December 2020, Revolut customers in Ireland generated nearly 200,000 virtual cards.

Making a paid feature free is a departure from the strategy of other neobanks that have added more premium products to boost revenues amid the pandemic. Here are two ways the distinctive approach could benefit Revolut:

  • Offering a virtual card can enable immediate spending—which is more important to neobanks than ever. Virtual cards can allow new customers to start spending as soon as they sign up, rather than waiting for a physical card to arrive in the mail. That speed is much-needed right now, as neobanks generate a large chunk of revenues through debit card swipe fees, which have fallen during the pandemic: Revolut found that consumer spending in Ireland dropped 14% annually last month. The extra layer of security offered by single-use virtual cards could also encourage consumers to spend early and often with Revolut for online purchases. For the neobank, boosting spending among its full Irish customer base may outweigh the benefits of using the virtual card perk as an incentive to drive paid account sign-ups.
  • The virtual card feature could be an effective tool for Revolut to maintain customer engagement and growth in the burgeoning Irish neobank market. Revolut reached 1 million users in Ireland in May 2020—or 1 in 4 Irish adults—doubling its total from just three months prior. It has since grown to 1.2 million users. And its Revolut Junior product reached 40,000 users within three months of launching. Meanwhile, Germany-based neobank N26 is targeting 1 million users in Ireland as well, after seeing its user base grow 50% annually last year. Their success will likely spotlight the opportunities for growth in the Irish market and spur competition from more incoming neobanks: Starling, for one, plans to launch in Ireland. Moves like making virtual cards free for all users could help Revolut signal to consumers that it is addressing relevant, timely needs that are specific to Irish consumers—both cementing loyalty and attracting new customers, even as competition heats up.

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