Fireside Chat with Nikolay Storonsky (Revolut) | Disrupt SF (Day 2)
3:05AM Sep 7, 2018
Hello, hello. Hello. Welcome, everybody. Thanks very much for joining us again, Mike butcher and TechCrunch. And big round of applause, please for Nikolay Storonsky from Revolut. Fantastic. Thanks very much.
Now those of you who aren't familiar with Revolut, I'll just bring you up to speed. And what's going on in Europe at the moment is a fascinating new era of banking challenging banks, startups challenging the and the old system of banking the the high street the main streets doors that you know, very well. And it's really very app based. It's very aimed at the new generation of the smartphone generation, isn't it?
And that's been going on in Europe for the last couple of years. And Revolut is now pushing out here to North America.
Yeah, just to give you a idea about us. So we rolled in the business three years ago and it's effective alternative to your bank account. So we do everything what banks do what we do it 10 times better and 10 times cheaper. And it's app based so within 10 minutes you can open yourself bank account. You can send money , you can borrow money, exchange money and buy cryptocurrency, invest money as well.
So we are growing growing extremely fast with the with zero marketing. So opening 7, 8000 accounts every day we have about 3 million users. We also entered into business accounts world as well. So opening of all the hundred to 200 business accounts every day again that with a zero marketing.
You're doing it you're you're you're you're doing the whole interview on your own which is marvelous. I don't have to do any work but um like, like what I want to know is a little bit more about you and the company.
You know that you were saying earlier that just now that you've managed to achieve this without any marketing. What do you think is the special sauce behind Revolut that's made it as successful as it has?
I mean the special sauce is not the secret sauce is the usual thing 10 x right so if you want a product to be sold in a huge quantities start with zero marketing has to be 10 times cheaper and 10 times better as simple as that. So that's what we do.
And it's it obviously you don't have to run any physical stores of course so you know of shopfronts. Doesn't that mean that the the barriers to entry are pretty low?
Do you have plenty of competition in in Europe where you have Monzo, you have N26, you have Starling bank as well, yapping at your heels. What how do you think that you're going to be able to compete with these guys?
Just providing people with a better products as usual. So if you look at all the competitors, they're always behind us. Like you know two to three years behind threads. So we're faster in the releasing new features, we are faster in expanding outside of Europe as well so they're always trying to catch up but never can.
You raised something like 300 and almost 340 million dollars so you have an enormous war chest and you've expanded it to about what 28 countries in Europe?
Already and lot faster than some of your competitors. Well what's interesting as well as not just doing banking is it you're also doing other products aren't you? I noticed that you you've lot you had a premium version it's kind of weird to have a bank that have a premium version. Surely a bank to just you know treat people equally no maybe that's not true, is it?
But this premium version it's got a sort of a metal card you will launch that recently didn't you? Why would you launch I mean isn't that a gimmick? Come on. It's a gimmick isn't it?
Well metal metal metal card is a quite a special product right? So show me a bank who gives you a premium premium product which has metal card, which has a dedicated concierge, which has cashback in the cryptocurrency thread.
Dedicated concierge? Sort of like sort of butler?
Well it's it's for for booking tickets, you know, restaurants, and so on. But the main thing for me personally, I think it's cashback which you can set up, also in cryptocurrency. Imagine yourself you pay right everywhere with a metal card.
So when you pay something, you you lots of lots of cards, have cashback schemes don't they? To encourage you to spend. And so I think it's something like is it up to 1% you can get cash back from all of your spending. You can get that in cryptocurrency yeah in that cash back now what do I get to choose what sort of cryptocurrency? You don't give me doge coin, are you?
No, you know I mean you you can choose a Bitcoin and Litecoin the Sarah mall I can
Cash back in Bitcoin
Yeah you can, yes. If you want.
who hands up who likes the sound of that? Few people? Seems like quite popular.
What I mean Wait, wait a second now. Hold on. Let's just slow down a second. So I get cash back in cryptocurrency and it's in my Revolut wallet. Where what about the security of that wallet? Can it be hacked?
I mean this has been great right obviously because we provide banking products and figure we have banking level level going on stress so we need to go through all this innovation testing Kotler
Have machine guns. Where is the where is the cryptocurrency held?
So yeah, cryptocurrencies held in the cold wallets so we don't disclose who it is and the service not
Cold wallet somewhere somewhere in London
Where is it Swiss bank account?
I really I don't know myself right? I'm not allowed to know this information.
So you've got loads of cryptocurrency just in on hard drives sitting in you know, surrounded by barbed wire somewhere.
City. So we're in a secure place you have this?
Well, there you go. Well, I'm I don't think I'm going to get much further with that line of questioning but but that that's really fascinating. It's really innovative. And do you think that's what what's kind of really attracted your audience you know, that kind of gimmick can't not gimmick perhaps, but
I don't think it's number nine. Number one thing that the. I think the main thing is it's really beautiful, are called the way it's done, right. And for
sheet metal card.
It is yes. So if you look at it
Can you show it to me
we left your wallet band. Okay. Somebody will have it. You're taking this the whole strategy that Revolut is you're doing this. So you've got these premium products using banking, which is, you know, hard enough as it is and you're doing crypto certain wallet I by the way now can you explain to me can I trade cryptocurrency to other exchanges from your wallet
so you can trade cryptocurrencies within the wallet but you can't well transfer you can transfer could trade inside your environment okay
so you're sort of taking this very large kind of Amazon approach Aren't you it was like you know you're you know banking cryptocurrency wallet concierge services I mean where else can you go
I mean for now where we were constructed on financial services and information source for example one of the services that we were launching his commission free trading send us you have the service in the European you don't have it yet so there's this little working on wealth management as well when you can affect layer allocate certain amount of your money and then to professionals to invest for you
so this is this is going to take on the Robinhood in particular over here with this commission free trading approach. So they're coming it from the sort of commission free trading approach. And apparently they're now going trying to go into banking and you're already a bank, you're coming out into commission free trading, who's going to win
theater to build a bank as much more difficult than Russia. So for us to move to commission free trading is much easier in terms of interface licenses infrastructure, learn from commission free trading to to become a bank and issued cards loans. So our our, the submitted like, you know, 10% versus 90% of for complexity.
And so you said that you're going to launch into North America what's the launch date
so expect to have it here by by end of the year so we already have for both 60,000 people are in the US on a waiting list
to have 60,000 people. waiting to get a revolut card right now.
Without even you haven't done any marketing. No. Just announced. What. So when? When? When can we expect October?
I will say closer to December
Close to December? Excuse me. My phone's going off. That's embarrassing. Apologize. So October, November on October
December. I think that but your your PR man is having a heart attack on the front row here. I think someone. you know you're an interesting fellow on you. You were the state swimming champion in Moscow.
Yeah, we're squarely at the swimming yeah when I when I was a school and I've done a few spots competitor.
He doesn't. Do you still swim or?
occasionally. do you think is kind of interesting that a Russian launching a bank in America in 2018.
Well the reality I left Russia one almost 13 years ago right so when I was 20 years old so I mean yes you can clear my head you know my origin Russia but but reality I'm like a world citizen right because I lived like you know in the UK spent a lot of time in in us as well so I'm in the right I don't really have any kind of specialized motion I need to know
your citizen of the world. There was an article I read about you recently said that you you uh. Can you encourage a long hours working culture in Revolut Is that true
I don't want our day I just observe a threat so when I come and live is that I like a lot of people there when they leave the earth as the relative people there and I wrote myself personally very long, right. So I just observe it and I think that the reason why we're having a long hours to just you know people are passionate about you know what they do and they they really want to change The way banking is done.
So it's you it's more about the fact that everyone's passionate about working.
Yeah. So that patient as the result of their work long hours, and that's what I observe, right? It's not like pushing on our side, I just tell you what I see.
And do they get paid more if they work longer?
Well, there is a bonus system or year so every half half a year would be stock option bonuses based on their performance. But it's not it's not related at all with a number of hours you put in because, I mean, for us, we, we we want to have like an awful lot.
Does all did all the staff get Revolut cards?
Yeah, exactly. The middle class for free metal cards for free.
Um, you had a bit of controversy recently, didn't you? Because there was you had to institute a whole bunch of new features and checks on customers a whole lot of people couldn't access there and Revolut banking account there was a bit of a bit of a Twitter storm about it wasn't there people were on vacation and couldn't access the bank account and it was a little bit problematic what went down there
So we we introduced a new or compliance system which which does you know, professional monitoring both against fraud and you know, I guess my money laundering and because we're innovators we are trying new things all the time and then we introduce additional model on top of old models which performed by the way quite quite well but it also increased center show for a number of accounts right and then there is a process how people can unlock accounts and then the reality was less than 0.1% of our customers but people don't like one the one that counts of being locked as a result we had the quite quite a few customers who complain the tutor
and but I guess you you know you over that hump. Now and that was a that was something you just sort of had to get over with the KYC but it's interesting also you're trying to do a lot of anti fraud systems I noticed that you're doing something called an anti fraud disposable card how does that sort of operate?
Yes it's a very cool products are within the app you can generate the disposable virtual card so every time when you pay with this card account number changes so the result that can never be hacked. so sexual abroad,
like a like a burner phone, yeah, transactions.
So it actually brought the fraud on e commerce down I don't remember. Enormous but it's, it's quite significant by 20, 30%.
That must be incredibly useful. I don't think I haven't actually heard of another bank doing that. Is that is that a unique thing
we were first right.
you're kind of your unicorn actually basically now from your How's it feel to be unicorn
soon as before
times before nine different
different stages similar team is bigger, the result more intentional about where we're just continuing to work in every single day
you're the D Do you think that with this sort of cryptocurrency aspect that you're doing Do you think that might be have sec implications. Do you think Have you been talking to the regulators about that there is any less
of course so in the US cryptocurrency is actually regulated the Europe it is not so every time when we approached the CA with a different proposals essays UK regulator so everything will approach of say with different proposals of all the products they like I meant was that they are not regulating cryptocurrency content wise So what it means is that affected any company can watch cryptocurrency and there are no regulations to follow i think is being changed. Now what are the special task force created by FCA, which looks at implementing some kind of you know, regulations around cryptocurrency in the UK and Europe but the snow Well it's not in production
even you know you came from that you were in from the financial sector before you did Revolut what what was the kind of the moment the Eureka moment when you decided to do Revolut
well I will always wanted to to run my own business right when you went you went a trader right yeah i was i was a director straighter yeah in liberal sexually or was 10 years ago
at Lehman Brothers
well one of the bus yes it was last week so yeah i was i was there with straighter and then after after being in the shift for I think seven years I decided to to create my own company and completely different sphere
in a way it's interesting isn't it because you have similar idea to transfer wise they also didn't like all the all the foreign the cut the cost of moving money around the world and you sort of thought well, why can I can address this as well.
Exactly. Initial frustration with banks was because I was traveling abroad a lot I was sending money abroad as well a lot right on the every time your your waist and or 3456 7% just adds up all the time of the letter was frustration and I was always questioning how how to avoid it and the initial problem that relaunch was just a simple account classical which allows you to avoid the conversion fees effects fees and then with direction expanded it to the full ratio for banking service but the initial idea was to to where the fixed fees
And you took a kind of an unusual approached you when you launched Revolut you started with a a UK platform which is a crowdfunding platform to launch it Why do you Why did you choose to launch and launch it using crowdfunding
it's actually a great marketing idea to crowdfund the your startup even though we didn't really needed because there were like a lot of institutional investors who wanted to invest we allocate a certain amount of capital for crowdfunding platform so we can have extra four 510 thousand retail investors so what happens if someone invest in you evenly in $100 right? That become your advocate right? So they sell your product to the family or their friends it's like a powerful marketing machine right like imagine yourself 10,000 people speaking about your company where they are that's what couples will you know crowdfunding and then we've done it twice and I was quite favorable result
you actually have quite most of the time as far as I can tell, actually, you you managed to leverage the sort of crowd aspect of of not crowdfunding but I mean they're sort of the marketing the viral sort of uptick of Revolut you know you get a lot of people like calling out some going on in a good way on Twitter and things like that
yeah so during crowd funding campaigns within a few few few kind of tricks, well tricks but like in in a good way to to increase promotion of our product. For example, it can only invest if you have a this you know I think hiring people using Revolut so we forced people to actually invite all the friends first crowdfunding was you can only invest if you buy premium product from us. So we should wish actually a spike the premium user acquisition. So all these things they actually quite powerful.
I mean, part of the reason you're you're successful in a way is that the big traditional banks have actually started to move away from retail banking, haven't they, there's less money to be made. There's more regulation about consumer protection it's just not as good a business for the big traditional banks anymore.
Well, I disagree to to the point it's not a good business, some of the world we see in terms of numbers, this is a very good business and it can be even more lucrative right now on I think that the main problem that banks for faces are legacy systems, legacy culture and legacy people as All right, I mean relative you felt like you know, senior management and
have never done take before they they they simply can't show direction way where to go right so they I mean I know a lot of banks they're hiring at McKinsey the Lord or whatever to create a strategy how to digitize their operations like in a year time McKinsey Professor report what to do right alumnus it just don't process right instead of hiring consultants you always need to hire tech people to to build great products that just to slide generally I'm going to slow on the approach is wrong and people people who are leading their for their their own people
And I imagine that you know with amount of funding you got the amount of traction you're launching in North America later this year I mean there's obviously a little bit of a pathway to to exit or to IPO I mean what sort of preferred path would you take if you had the choice
I mean I don't really think about it or a thing IPO Chris all the friction actual business because then you need to have quite often bureaucracy, governance and Our own so it's probably slow. You don't. Right. So we should try to stay in a private as as long as possible.
You want to stay as private as long as possible. I should imagine there'll be some few very large banks looking at you rather jealously about some of your your such high growth in the last couple of years.
Yeah, it's true. I mean, we've got like a lot of baking CEOs, you know, coming to office,
he had a lot calls. Yeah, yeah, like to them
whether they wanted to find out how to do things probably keep silent or whether we're telling you know, we're the same as you guys
say. Goodbye. Fantastic. Thank you so much for coming to TechCrunch, disrupt Nikolay Storonsky from Revolut.
Thanks. Thanks very much, everybody. See you later.