Revolut Trading šŸ¦…

@dan this sums up Revolutā€™s model to a T. Low hanging fruit, white label products provided by others, who will take their cut a long the way.

But reading between the lines, it feels like speed to market is more important than doing things ā€˜the right wayā€™ cf. Monzo, who came under heavy, sustained criticism for not ā€˜innovatingā€™ hard or fast enough. Whilst Revolut was charging a lead and offering a racy basket of products, Monzo was building a bank (in the regulatory sense) from the ground up, to provide an agile yet robust core product. To me thatā€™s the real innovation, as opposed to sticking your UI on top of Mambu (looking at you N26!)

As @freetrade_cal pointed out

and ( incoming :bomb: ), offshoring their banking authorisation to a potentially less robust regulatory environment. Revolut certainly arenā€™t alone in this m.o. but again, a picture of shortcuts emerges.

Does this even matter to customers? The honest answer is probably not to most people. But for me getting the essentials right is important, and is certainly not incompatible with building innovative, paradigm shifting businesses that are in it for the long haul - as customer and investor thatā€™s where I see value.

Totally, and they are seemingly doing astoundingly well from valuation, transaction volume, and customer acquisition perspectives, and this should be recognised and congratulated. But customers, investors, markets, people essentially, can be fickle things. Clearly, Yuri Milner knows something I donā€™t :sunglasses:

Also, I canā€™t speak for anyone else, but I donā€™t necessarily consider the comments and criticism as taking shots per se. Itā€™s really all part of a robust conversation around an incredibly exciting, fast moving industry. A point I make quite often is that as customers of, and investors in these businesses, itā€™s important we have visibility and understanding of how they operate and the potential ramifications of their choices they make. Itā€™s not a game, itā€™s ultimately peopleā€™s money and their futures.

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No need to wait for Revolut, this oneā€™s for you @freetrade_cal !

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They operate a freemium model with many customers willing to pay for the premium product. Are these also ā€œlow hanging fruitā€? I would say no.

The jury is out on what they ā€œright wayā€ will be or even if there even is one way of disrupting an industry. I just have a strong dislike for those who praise Monzo and simultaneously discount what Revolut are managing to do.

Is Lithuania a less robust regulatory environment? Theyā€™re a member of the EU which is more than can be said for the U.K. next year.

And they can even be more sticky. The Big 4 oligopoly in professional services, the Big 6 energy suppliers, The Big 4+ legacy banks, the Magic Circle law firms, etc all benefit from customers not being ā€˜fickleā€™ enough.

There are definitely thinly veiled & often quite explicit shots imho (more so in the Monzo Community where tribalism is noticeable). The debate here is somewhat robust so far and Iā€™m hopeful this wonā€™t turn into an echo chamber of groupthink as it grows larger.

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Yes, it is. Itā€™s described as a ā€œfavourable regulatory environmentā€ if youā€™d research it.

Itā€™s exactly because the debate is robust that we donā€™t think weā€™re going to be anything like an echo chamber. Itā€™s not an echo chamber when a majority of people seem to agree on a view for well-argued reasons but also willingly engage with the counter-argument.

Revolut has some awesome things going for them (round 1 investor here :raised_hand: although I sold my shares since). I like their velocity. But we think very differently about

  • focus
  • building fundamentals
  • aligning with our customers

, and a host of other things. Which is fine. And if you prefer their approach, thatā€™s fine too - Iā€™m a Monzo fan, and the above comes across a bit like:

giphy

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And this doesnā€™t come across as (insert your exact same dog gif here)?

Pot calling the kettle black.

@CTE apologies if my response was interpreted as a rebuttal. This wasnā€™t my intention at all; please donā€™t take it that way or anybody else. Iā€™m all for civil debate which I thought my response was. Apparently Iā€™ve appeared to have crossed a line. Will take it on board.

Btw Iā€™m also a Monzo fan, but my point was I donā€™t let this obscure my judgment like some others do (my observation of strong selection biases, not an attack). There is a subtle difference between brand loyalty and rose-tinted glasses that some super fans in the Monzo community wear. I was speaking generally and wasnā€™t referring to CTE as one of those people just to clarify. But hey, this is just my opinion.

This is invetiable in my opinion as itā€™s the Freetrade community. Iā€™m sure you wouldnā€™t claim not to be biased in Revolutā€™s favour in this point either. But if we accept the fact that some users here have a personal preference & stick to discussing the merits of different ideas / facts - both positive & negaive - about the different offerings then I donā€™t see why that should be a problem :slight_smile:

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This is your favourite line :joy: Glad youā€™re back ahem but as you know we donā€™t see eye to eye (previous in the Monzo community) so Iā€™m not going to go off topic anymore than we have discussing this.

Iā€™ve said my peace. I believe this community is great; I was just talking about being mindful of groupthink in the future as it grows. Anyhow this is something for you as forum leaders to figure out and Iā€™m sure youā€™ll get the balance right :slightly_smiling_face:

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The answer to all your problems. Invest in all three. Monzo, Freetrade and Revolut. There will always be more than one player in the market, and as of today, in the disruption play, all three are on my watch list.

Just hanging out to get on to the Freetrade platform and start investingā€¦

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This is official.

A quote to answer some questions in this topic:

ā€¦In the meantime, it plans to launch the share trading service in the next four to six months in partnership with an established brokerage, shouldering the cost of commissions it pays on behalf of its usersā€¦

Can we create a closed channel on the forum to discuss sensitive questions (like this one) for the investorsā€™ eyes only? I have some thoughts on this but am hesitant to share since there is no privacy. What do you think?

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@szb We are big fans of transparency, so as a first step, maybe just DM me what youā€™d like to discuss.

Most probably itā€™s something we can publicly debate.

Iā€™m actually excited for this to launch, and itā€™s a big testament that, after what comes across as a relative (compared to the space) lull in crypto, this seems to be considered as a growth engine.

Now, ā€œpartnership with an established brokerageā€ is not how we think about building a product that really solves a problem on a deep enough level. No need for more middlemen in my view.

Also, as you are an investor, please DM us your email you registered with on Crowdcube, so we can give you a badge.

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Partnership with an established broker?! And shouldering the cost of commissions?

Thatā€™s surely an unsustainable business model? Watch CAC go up once againā€¦

I love Revolut, but Freetradeā€™s model is far more profitable and sustainable.

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That adds weight to my theory that this will be a Premium subscription only service (as they have to cover that cost), which would limit the number of users that use it.

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That would still be a lot of expensive services (including the FX and free insurance from a partner) rolled into a Ā£6.99/month account. Not sure but think it would just marginally cut the cost to them, not cover it

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So Revolutā€™s just said that they plan to make their money via interest from clientā€™s funds (presumably lending deposits once they have a banking license?) + extra incentives for Premium customers :thinking:

So perhaps a portion of the service will be available to all users but theyā€™ll keep the best bits for Premium subscribers.

Robinhood claimed this is how theyā€™d make money when they first launched. Historically, stockbrokers made a lot of money earning interest on client cash (ā€œinterest turnā€). But with interest rates where they are, itā€™s simply not true anymore. Robinhood really makes money off their margin/leverage product (ie high-interest loans that magnify your investment gains or losses).
Also worth noting, you canā€™t lend client money in a brokerage account like a bank. Thereā€™s a reason bank regulation is much stricter with very different regulatory capital requirements (even if the stockbroker is part of a group that has a banking license).

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Revolut promises that you wonā€™t pay any commission when you buy or sell shares. The company plans to make money on margin trading, securities lending and interest on cash.

Unless Iā€™m missing something, both models are freemium models. Also, whereas Freetrade donā€™t plan on offering margin trading, Revolut will which is an additional revenue stream. Correct me if Iā€™m wrong?

Somebody just posted this article in the Monzo community:

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We can only speculate to a certain extent until we see their full pricing schedule (who knows what the zero commission covers) but from our perspective the biggest difference between us and Revolut is that we are an actual broker ourselves.

By becoming a member of the LSE, CREST etc and trading directly with the market, we can slash the cost of executing a trade.

Revolutā€™s plan is to act as a front end for another broker, who will charge them fees on each trade. By introducing a middle man you lose the ability to cut the cost per trade, and therefore it is hard to see how they can offer zero commission in a sustainable way - whichever broker they use will need to make a return themselves!

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Interesting. The article mentions parallels with the Amazon Prime approach of a predictable revenue stream. In a similar vain to you where you want to make Alpha so good that it makes sense to pay for it, it appears that this is part of Revolutā€™s plan for their premium subscription. Would premium revenues cross-subsidise non-premium users not be sustainable from the info we currently know?

Possibly, but itā€™s hard to see at the current price how that can work when you consider everything else it includes.

But like I say, weā€™ll wait and see when their pricing model comes out.

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