Revolut boss convinced Malta ready to ditch cash

The digital payment platform Revolut announced its arrival in Malta last week with a warning to the country’s financial institutions.

“The big banks in Malta have been taking advantage of their customers for years with endless customer fees and crappy technology…Revolut is here to end the party,” the company said in a press release announcing it was now on the ground in Malta.

Revolut has grown rapidly since it was founded in 2015. Today, it boasts some 2.5 million users worldwide, and is one of the most recognisable electronic payment platforms around. The start-up is estimated to be worth $1.7 billion.

Prior to the start of its local marketing campaign, Revolut already had some 25,000 users – this number has gone up by 5,000 users in the last week alone.

While Revolut isn’t the first fintech company to announce a presence in Malta over the last year, it is the first to issue such a bold warning to local players.

Asked whether antagonising the banks was the best way for the company to announce itself to Malta,  Revolut’s regional manager Dimitris Litsikakis told MaltaToday he was not “concerned at all as the financial system has very specific rules and regulations that must be respected”.

He said irrespective of the traditional banks’ position, European laws ensured Revolut would be able to operate in Malta. “This is the beauty of the single market we call EU – it’s designed to serve the people by allowing more competition rather than protecting monopolies that allow high fees and unreasonable charges.”

Rather than concerning themselves with Revolut, Litsikakis insists that banks would be better off investing more in modernising their “outdated technology” rather than “wasting time trying to find new ways of introducing hidden fees to their clients”.

Despite the government’s obvious vested interest in the local banking system – it is a major shareholder in Bank of Valletta, Malta’s main bank – Revolut’s threat appears to have been endorsed by the Prime Minister, who tweeted his welcome to the company shortly after the press release was issued.

“Revolut is a fintech bank and fintech is the future so yes, I welcome anything that disrupts the market and the traditional players,” he told journalists who asked about his endorsement this week.

“While I understand the concerns of traditional banks, if the people aren’t satisfied with their services, then we should welcome competition.”

Malta ready for digital payments

According to a recent study conducted by the European Central Bank, Malta’s share of cash transactions is the highest in all of the EU – 92% of all transactions are affected in cash.

Despite efforts to encourage cashless transactions, hard cash remains the Maltese’s payment method choice. Myney, a Maltese platform similar to Revolut which was launched in 2016, failed to live up to expectations, but this doesn’t discourage Litsikakis.

He says he’s “super confident” that Revolut can attract many more Maltese users than the 30,000 it currently has, pointing out that since the company launched its marketing campaign, it has been at the top of the local app charts.

He added that Revolut only launched in countries with “great potential”.

“We have done our homework and we believe that the Maltese are ready for an innovative, technology-first banking alternative,” he says.

Referring to Muscat’s tweet, Litsikakis stressed it confirmed “the will of the nation to move into digital payments that add safety and transparency”.

‘Early days’ to talk about Malta relocation

Malta has seen its fair share of companies relocating to its shores over the last year, mainly driven by its commitment to embracing disruptive technologies like blockchain. However, Litsikakis is cautious when discussing a possible relocation to Malta.

Revolut is currently based in London and like other banks, could be tempted to move to a different European state once Britain leaves the European Union.

Asked whether such a move was on the cards, Litsikakis says it is “still very early days”.

Revolut’s main focus at the moment, he says, is building partnerships with companies and merchants in Malta.

“Judging by the insane growth of Malta, I’ll be spending more and more time in the ‘blockchain island’ to support operations and help expand our reach by talking at high-profile events like the Delta Summit and the Malta Blockchain Summit.”

Profitability possible though ‘fee-free spending’

Sceptics often question how a digital bank promising to do away with fees and charges can be profitable, but Litsikakis insists that being profitable doesn’t necessarily have to mean “squeezing every penny from people’s pocket”.

“We just decided to have a different business model, one that is built on fee-free spending when you are abroad,” he says.

The company, he explained, has added a number of “optional ad-hoc services like travel or device insurance, subscription services and services to corporate clients with the company’s Revolut Business product”, all of which he says are a revenue source.

As for security of people’s funds, Litsikakis insists that Revolut is obliged by law to segregate its clients’ funds, and that currently it funds are held in a “segregated account at Lloyd’s or Barclays” banks, depending on the type of Revolut account held.

“In the event of insolvency of Lloyd’s or Barclays, you will be able to claim your funds from this segregated account and your claim will be paid above all other creditors.”

He also notes that Revolut is certified by the UK’s Financial Conduct Authority – a financial services regulatory body – and completely adheres to its requirements, including compliance with the Electronic Money Regulations and the Payment and Services Regulations Act.

Compliance by self-learning machines

Another type of criticism often levelled at the company concerns its ability to combat financial crime.

Revolut has in the past been criticised for not having strong enough defences against money laundering, and of being overly dependent on banks’ transaction monitoring systems to catch suspicious activity but Litsikakis says this is not the case.

“On the contrary, Revolut took a different approach to compliance  by building machines that are self-learning and self-improving,” he explains.

“Instead of applying a one-size-fits-all approach, we separated our compliance team into two special forces, compliance technology – the machine – and compliance services, the people.”

He says that thanks to the latest emerging technology, the financial sector is moving at “lightning speed” which “leaves little room for old-school processes and unchallenged thinking” – one of the main reasons banks are lagging behind, he says.

“We’re passionate about learning and improving as a company and compliance is no exception.”

Whether or not the company succeeds in reaching its target of 60,000 users by the end of the year remains to be seen, but with Revolut aiming to have a European banking licence by the end of the year its growth shows no sign of letting up.