European digital banking app Revolut to launch into NZ

UK online bank Revolut is entering the NZ market. Photo / Supplied

Revolut, a European digital financial services provider with more than 26 million users worldwide is to soft launch into New Zealand next month with around 20,000 Kiwis on its waitlist the first to get access to the service aimed at providing a cheap money transfer and currency exchange service.

The company, which started in the UK in 2015, will not be a licensed bank in New Zealand but will have a relationship with a local bank enabling it to use local payment rails to do domestic and international transfers to non-Revolut users. Transfers between its own users are done via its app and digital wallet.

The app based service launched in Australia in 2020 and became registered on the New Zealand finance services providers register in February 2021 but it won’t be fully available to the public until April.

Matt Baxby, APAC chief executive of Revolut, said the closed borders due to Covid pandemic restrictions meant it had to push out its launch date.

“The thing that probably got in the way of an earlier launch was Covid - the principle use case for the product being travel and borders shutting - that meant we resequenced things a little bit. I think with borders lifting, restrictions coming off...it does feel like the time is right.”

Unlike a traditional banking service it won’t offer mortgages or term deposits but instead, its focus is on allowing people to seamlessly transfer money between its New Zealand users, to other Revolut members internationally and to have accounts with five different currencies - NZ, Australia, UK, Euro, US and spend in over 150 currencies around the world.

Under its license in New Zealand any money transferred to Revolut has to be held in a trust account so if the company collapsed the money would still be held on trust. Revolut said it maintained separate trust accounts for each currency offered to users.

Baxby said its 20,000-strong waitlist in New Zealand showed there was pent-up demand for its products and services.

“It’s probably one of the benefits of Revolut being quite famous in other markets. I think particularly for Australians and New Zealanders who tend to be prolific travellers they get some exposure to the Revolut product or have heard about it from friends and family in other markets and bring those ideas back.

“It gives us a lot of confidence there is this underlying demand.”

New Zealand will be the 36th market it will operate in. The company isn’t designed to replace a traditional bank but hopes to pull customers from other banks and to use its cheaper money transfer services.

Baxby said its research on the New Zealand market was an unmet need that the local banks were not fulfilling.

“Being able to transfer money between peers and colleagues instantly, splitting bills - it does feel like there is this unmet need and the local banks aren’t really filling it.”

Banks charge high fees for transferring money overseas and most have already exited the foreign exchange market - meaning you can’t walk into a bank branch and get Aussie or US dollars anymore.

In reality, Revolut’s biggest competitor for international money transfers is likely to be Transferwise - a UK company which launched in New Zealand in 2016.

There are also some Kiwi start-ups that are already offering bill splitting and person-to-person transfer here, including Dosh which was launched by Shane Marsh and James McEniery in 2022, and Buck, an app launched by a fintech owned by Westpac New Zealand.

But the start-ups are small and have yet to gain critical mass in New Zealand.

Baxby brushed off local fintechs, saying its difference was an offering that had multiple features rather than just one service.

As well as the foreign exchange side of the business it will also have budgeting functions allowing people to track their spending. In Australia Revolut also has a cryptocurrency exchange and allows US share trading.

That won’t be available in New Zealand to start, with Baxby indicating it would look to expand its services over time. In Europe, where it does have a banking licence, it also offers “lifestyle” features such as hotel booking as part of the app.

Baxby said the company would have people in New Zealand running the business here. “We understand the importance of having people on the ground that deeply understand the competitive dynamic, what consumers want, the way the regulation works.”

At the moment it was recruiting for a New Zealand country manager. It had a remote first strategy so the person could be located anywhere in New Zealand.

In Australia it now had nearly 300,000 people using its app. While it didn’t have a target for how many customers it hoped to grow to in New Zealand, Baxby said they saw similar parallels between New Zealand and Ireland, where it had around two out of three adults using its service there.

It has a European banking licence and is also targeting a licence in Australia.

Baxby didn’t rule out getting a licence in New Zealand as well.

“I would never say never in New Zealand. Our strategy is to get a great beachhead with the offering we are coming to market with around payments and cross-border and safe and seamless place to use. It is the start not the end. Revolut is really local market focused in how it thinks about how it comes to market - deeply understands what is going on, what the options might be in terms of licensing and tend to build out from there.”

As a registered financial service provider in New Zealand it must also belong to an independent dispute resolution scheme - this service is free - and should customers strike a problem, they have an independent party they can turn to.

Baxby said in terms of fraud protecting its customers was a priority.

“Revolut offers no less protection or support to customers who have been a victim of fraud when compared to a legacy bank.”

He said the company had an industry-leading fraud detection system which included customers using a pin or biometrics to identify themselves as well as two-factor identification and there were additional checks whenever money was sent to a person not in a user’s contact list.