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How to Build a Revolut-like Digital Bank?

Revolut, one of the most highly valued neobanks at the moment, has recently launched in the US. The bank, valued at $5.5bn, has attracted millions of customers by doing what most traditional banks do. 

Many people wonder why everyone likes it and how to build Revolut alternative?

The London-based Revolut has been providing superior digital banking services to a rapidly growing customer base. The bank has made it incredibly easy to join – anyone can open an account in less than 60 seconds. All you need is to download their app, input your information, and confirm your identity. 

Compared to lengthy queues and never-ending bureaucracy at traditional banks, opening an account at Revolut is a breeze. And it’s not just a simple account – you can add secondary accounts to hold money in 30 currencies with just a few taps at no cost. 

You can then use a card that conveniently arrives in your mail to spend any of your currencies, making it a whole lot easier to travel and spend abroad. Let’s say you are in Prague, and you had some Czech korunas in your secondary account but not enough to buy another cup of coffee. Revolut will automatically convert your primary currency to make up the difference when you tap your card. 

But that’s not the cool part. Unlike traditional banks, Revolut won’t charge you exorbitant foreign currency fees and exchange your money at a horrible rate set once a day. Instead, you get a continuously updated interbank FX rate without fees, so you save money on every transaction. Revolut estimates that customers save an average of 46 GBP when traveling abroad. 

The same logic applies to international bank transfers. Besides the interbank exchange rate, Revolut does not charge fees to transfer money or for exchanging it, making it extremely popular not only with frequent travelers and expats but for those with family overseas.

Why do customers love Revolut? How does Revolut work?

Revolut functionality makes managing your money incredibly simple. The term user-friendly is thrown around too often, in this case, it perfectly summarizes the Revolut app experience that customers love. Simple daily use examples will demonstrate why Revolut is much better than a traditional bank.

Revolut has solved the usually complicated problem of losing your card. Instead of calling your bank’s hotline to spend an unnecessary amount of time on hold, in the Revolut app, you can change your pin code or freeze your card in just a few taps. There, you can adjust your spending limits and quickly toggle magstripe, NFC, and ATM transactions for extra security. 

 

Image source Revolut official website

Now, if you’ve canceled your card and are waiting for a new one to arrive, with traditional banks, you can’t spend your money, but with Revolut, you can create a virtual card that is ready for online transactions straight away. You can even create single-use virtual cards, which change details with every purchase for an extra security layer.

Once you make a purchase, you will automatically receive an instant payment notification from your app that will also display the amount you spent that day to help you monitor your expenses. Every purchase is then categorized, stored, and used to project your monthly expenditure. 

Image source Revolut official website

You can always come back to fantastic spending analytics to see how much money you spent by merchant, category, or country. With Revolut, you can also set up “vaults” that round up your purchases and deposit the difference into a special savings account. You can even set up an accelerator that multiples your spare change to help you reach your savings goal faster. 

Image source Revolut official website

These features make managing your bank account incredibly simple. The neobank’s diverse functionality, low costs, and adaptability stem from one place – its core banking system. 

Revolut in numbers

10 million – number of current Revolut users

12 thousand – average daily user signups

2 thousand – people working for Revolut

169% – total number of users growth in 2019

380% – daily active customers growth in 2019

Why is there a demand for banks like Revolut? 

Revolut, Fidor, Simple, N26, and Monzo are some of the better-known neobanks out there today, and even established banks are trying to develop their alternatives. Neobanks are threatening the largely undisrupted retail banking industry that has enjoyed excess profits and left many customers unsatisfied and unserved. Goldman Sachs rolled out Marcus, and RBS has launched its standalone version called Bó to compete with the newcomers. 

The incumbent banking system relies on physical branches to open accounts, make transfers, and service customer requests, which is highly prohibitive for some customer groups. Those in rural areas or those working long hours have to make special arrangements to travel to a physical branch only during office hours just to open an account. Even then, traditional banks cover their high overhead by passing the costs onto the consumers in the form of high and unexpected fees. 

Neobanks, in comparison, offer unparalleled convenience and transparency. With just a smartphone, customers can open an account whenever and wherever they want. Low and transparent fees are easy to understand and enable customers to reap the benefits of financial services.

The neobank market, fueled by underserved market segments such as the unbanked, SMEs, freelancers, startups, and new-to-credit customers, is expected to grow up to $394bn in value by 2026, with a CAGR of 46.5% in the coming years. 

Unlike traditional banks, neobanks provide their customers with full control over their banking experience. Users are free to set up their security settings, like whether they want NFC or magstripe payments enabled or not. Customers can also use features incumbents simply don’t offer, from buying cryptocurrencies and gold to investing in the NYSE. 

The reason why traditional banks cannot implement new functionality lies in their technology infrastructure. Closed legacy systems require a lot of time and resources to upgrade, and some banks are struggling to integrate even the most basic functions like currency exchange. Neobanks, on the other hand, rely on a much more flexible and stable API first architecture to roll out new features in a fraction of the time.

These factors make neobanks attractive not only to previously underserved customers but to those with accounts at traditional banks. When you can open a free bank account in the time it takes to download a new app, trying a neobank is easy as can be.

How to develop a Revolut alternative? 

Revolut, like Rome, wasn’t built in a day. Although building a digital bank is a complicated process, here we highlight its most vital components which are mandatory to build similar to Revolut app. 

Core 

The most crucial part of every digital bank is the core banking platform. The platform is the engine behind the creation and management of accounts, balances, transactions, journal entries along with the storage of client data, receipts, and other reporting tools.

A good core banking platform relies on composable architecture connected by APIs that allows to decouple distribution channels, products, and client data. This particularly agile architecture enables to make quick changes while providing a continuous digital customer experience.

Onboarding, payments processing, card issuing, and KYC services have to be then integrated into the platform. Developing a core banking platform in-house is a complicated and time-consuming process that can overwhelm teams and delay product launch. As such, very few banks have their own platforms. 

N26, Tandem, O2 Banking, and other Revolut alternatives have outsourced their core banking platforms from FinTech providers. New cloud-based platforms with pre-integrated key features help to assemble best in class products and launch them at a much faster pace and lower capital expenditure. 

100% dedicated team

It is hard to overstate the importance of finding the right team for developing a digital bank like Revolut. A team should consist of people who are genuinely invested in seeing your vision through to the end. Some have compared Revolut’s development teams to a special forces squad on a mission. Their success stems from shared responsibility, trust in each other, and a lack of doubts about their purpose and goals. 

A small team that can be like that:

Vision & growth hacking

Developing and sharing your vision with your team will help them understand what they are working to achieve and encourage them to work with passion. Revolut’s goal, for example, was to see how much their consumers could save with a no-hidden-commission product. 

Using a growth hacking strategy, you can then deliver your unique vision to consumers. This scientific approach consists of choosing and testing a single hypothesis at a time to see whether it works or not. Pick a new idea or a feature, launch it, then document and analyze the results before proceeding to the next iteration. 

Growth hacking is especially appealing to startup founders because it focuses on rapid growth. Although some results may turn out to be complete failures, other experiments can bring out the winning strategy for exponential growth. 

Quick features delivery

For a startup with limited resources to succeed in a new market, it needs to innovate much faster to outperform the competition. Rolling out new releases is vital to providing customers with a superior product, precisely what Revolut has been doing. 

Example

Compared to a traditional bank’s app that had few updates in one year, Revolut released a new version a few times a week (!). Check your local bank and you will see a similar story. Revolut’s constant iterations and fixes allow it to continuously please its growing customer base and stay ahead of the curve. 

The problem in traditional banking is that the journey from an idea to a rolled out feature is about months or even years.

A process that takes incumbent banks years can be implemented by neobanks in weeks. The difference in the whole business processes and product development lifecycle. The bank as a product is based on core banking and in most cases, this component is the main barrier for the implementation of the new WOW-features that customers love.

What core banking software is available on the market today to build Revolut Alternative?

There are many more worthy next-generation FinTechs competing in the banking services market. SDK.finance and their core banking platform has been particularly successful at leveraging modern tools to help companies launch their neobanks quickly and easily. 

SDK.finance offers a highly secure and mobile-ready solution to delight banking customers and take the lead in the open banking world. 

The core banking software with a strong API layer for banks and FinTechs consists of 5 main components: a back-end wrapped in 400+ API endpoints, 3 front-end frameworks, and a web for system management with iOS and Android capabilities for our clients. 

Advantages of software built on API-first architecture:

  • Much faster release of new features and functionality 
  • More economical cost of ownership 
  • Fewer bugs and more stable products 

 

Visit Digital Retail Bank Software product description page or contact SDK.finance directly if you are looking for a solution to develop a FinTech app like Revolut to be a branch-free bank.