Revolut offers better exchange rates than high street peers but customers find it frustrating when accounts are frozen without explanation, writes Robert O’Brien

Ireland’s pillar banks are still the first port of call for most business owners looking to set up accounts. Digital players Revolut and N26 have core appeal to millennials and younger people but the loss-making upstarts want more business custom too.

Dispensing with physical branches, digital banks operate via smartphone apps and, if you want one, a MasterCard debit card. They major on ease of use and money transfer that bypasses regular banks. Last May Revolut announced that it had signed up one million users in Ireland, while N26 currently has c.160,000 Irish accounts and launched a new business account service in June 2020.

Headquartered in London and launched in 2015, Revolut is the brainchild of Nikolay Storonsky and Vlad Yatsenko. Revolut has raised venture funding of c.£700m, including £450m raised in 2020 in a round led by TCV, a Silicon Valley VC firm. Now claiming 12 million personal customers and some 500,000 business customers, Revolut had revenue of c.£160m in 2019, more than double its 2018 turnover. However, its 2019 deficit of £106m was triple the loss posted the year before.

Revolut is licensed as a bank in Lithuania and operates in Ireland through an e-money licence issued in the UK by the Financial Conduct Authority. With the end of the Brexit transition period looming, Irish accounts have been transferred to Lithuania. This will result in new customer IBAN and BIC numbers, and from next year customers who want to make a complaint about Revolut’s service will have to take it up with the Bank of Lithuania.

The Revolut Business account enables users to hold, exchange, send and receive funds in 28 currencies, using the interbank FX rate, which is cheaper than the high street bank rate. Other features include free international and local payments within a plan allowance. Revolut Business also facilitates physical and virtual cards, with real-time spending tracking. The account integrates with some accounting software platforms such as Xero, as well as other business tools such as Slack.

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Business account options begin with a basic free version, while the Grow account costs €25 per month and comes with a metal MasterCard. Users can make fee-free payments to other Revolut accounts and 10 free local payments per month (after that 20c is charged on each local payment).

The Grow account offers 10 free international payments per month (€3 after that) and allows for €10,000 of currency exchange using the cheaper interbank exchange rate (a 0.4% mark-up applies thereafter). Grow allows up to ten people to access the account and hold company cards, with additional members charged €5 for the privilege.

The Revolut Scale business account costs €100 per month and provides two metal Mastercards. Up to 1,000 free local payments and 50 international payments are free per month, with a €50,000 allowance for currency exchange at interbank rates. Thirty employees can also be given access to the account and hold company cards for no extra cost.

Revolut also has a business account option aimed at freelancers and sole traders, costing €7 per month. This provides for 20 free local payments per month, five international payments, a €5,000 allowance for cheaper FX transactions and the ability to provide account access to four other team members.

N26 is also pitching for business clients. Established in Berlin in 2015, N26 is licensed by the German Central Bank and its customers are covered by the German Deposit Guarantee Scheme up to €100,000. The venture has VC backing of c.£600m, and while revenue quadrupled to c.€44m in 2018, losses doubled to €73m. N26 pulled out of the UK this year, ostensibly due to Brexit but likely also due to a lack of traction in the market.

N26’s business account is aimed at freelancers and the self-employed. The account offers 0.1% cashback on all purchases, fee-free payments in multiple currencies, and a travel, lifestyle and mobility insurance package. The N26 Business You premium account costs c.€10 per month and includes several insurance benefits. The Business You account lets users set up 10 sub-accounts to organise finances, which can be shared with other N26 users.

N26’s Business Metal account costs €17 per month and comes with a stainless steel Mastercard. The account offers 0.5% cashback on purchases, free currency payments, and free ATM withdrawals worldwide. It also offers seven-day phone support for account users.

Revolut’s mass market penetration is largely due to enabling six students to split a restaurant meal by pinging each other cash. However, two-thirds of its revenue is fees from purchases effected with Revolut’s prepaid debit cards. Road warriors signed up for Revolut for the cheap foreign exchange, but if they’re not travelling and buying goods and services then the company’s revenue is impacted.

Any perception that Revolut is a better alternative than a high street bank for hiding money from the taxman is wide of the mark. An IPO is high on Revolut’s agenda, and for that to happen the compliance function has to be up to scratch. Through 2019, Revolut more than tripled headcount to c.2,200 people, and many of the extra hires and engaged in anti-money laundering functions.

While Revolut is great for pinging a few euros here and there, problems can arise if an incoming funds transfer is out of the ordinary. The problem arises when Revolut decides it doesn’t like what it sees and freezes the account. Though the company has a 77% ‘excellent’ rating on Trustpilot, customer frustrations at Revolut lockdowns are posted daily on the review site. Customer annoyance is heightened when nobody in Revolut will explain to them what the problem is.

On its site, the company explains that its computer system scans transactions and top-ups and flags suspicious activity. “Occasionally our models can highlight genuine activity as suspicious. That's when skilled reviewers may ask you for more information so that we can get to the bottom of the issue as soon as we can,” says Revolut.

“If the system raises too many flags, it will temporarily lock an account and place it in a queue until a compliance agent can review the case. To unlock an account, the compliance agent must review each red flag. The review mostly happens in minutes, but sometimes this process can take longer.

“Under current regulations, we are not allowed to give out any details about an account that's under investigation. This means that our customer agents cannot share information on why your account has been locked, or how long it will be until the review is over.”