Revolut: Managing Innovation

Introduction

Innovation has become almost obligatory for business success in recent decades (Meissner et al., 2017). It allows companies to utilise more effective manufacturing and marketing processes that increase sales and attractiveness of existing products and services. Such concepts as disruptive innovation or revolutionary innovation also imply the development of good ideas that boost productivity and performance manifold and contribute to the ‘blue ocean strategy’ (Madsen and Slatten, 2019). At the same time, one of the key associated problems in this dimension is the diffusion of innovations or the readiness of the market to accept new offerings (Distanont and Khongmalai, 2018). While original ideas may serve as the source of sustainable competitive advantage, marketing effectiveness may be seen as the second main component of organisational success. Therefore, this report aims to explore the historical development of Revolut banking products and their future development perspectives within the scope of the theory of diffusion of innovations.

The Revolut company is a modern organisation founded in 2015 that introduces diffusion of innovation in the business industry through a smartphone application replacing popular banking services (Robinson, 2018). This essential product was developed by the start-up founders based on their insight into the limitations of the financial industry. From the inception of the smartphone application, the company has acquired Specialised Bank licensing from the European Central Bank in order to expand the scope of its offerings in the future. As of 2019, it has already introduced its own  debit cards and insurance services that are highly popular in Europe and the US (Appendix B). The application allows users to make peer-to-peer payments, perform traditional payments or exchange currencies from the app with minimal or zero fees for most of these transactions (Russon, 2019). Additionally, it incorporates cryptocurrency

functionality giving the users access to their wallets containing Ethereum coins, Litecoins, Bitcoins, and other popular cryptocurrencies.

The Development of Revolut Offerings within the Scope of Diffusion of Innovations

Adoption Curve

The analysis of the bell-shaped innovation adoption curve suggests that the company has achieved the early majority phase (Appendix A). Within the first two years of steady growth, the company increased its consumer numbers to 1.2 million while demonstrating the five-fold increase in revenues, as well as the expansion of  the volume of monthly transactions from $200 million to $1.5 billion (Laurent, 2019). The following figure demonstrates this exponential tendency throughout 2017-2018. The rapid improvements suggest that the Revolut product has been increasing its popularity in terms of both transaction volumes and customer numbers, which suggests that the company managed to attract the early majority.

 

Figure 1: Monthly Payment Volumes of Revolut (USD Billion)

Source: Laurent (2019, n.p.)

At the same time, projected growth figures for 2020 do not demonstrate an abrupt decline in growth rates, which indicates that the late majority phase has not been reached yet (Statista, 2019). The global applicability of the Revolut smartphone application may be one of the reasons for this outcome since this innovation is not limited to a single local market, such as its native UK market. Moreover, it may be highly useful for internationalising enterprises or ‘born global’ users who have to send and receive money across national borders (Lima, 2018).

 

Figure 2: Revolut Projected Growth (Million Customers)

 

Source: Statista (2019, n.p.) 

 

 

Innovation Characteristics

 

Complexity

From the complexity standpoint, the Revolut application is similar to most Android or iOS solutions or online banking services. This means that the users of these traditional

 

products will have a short learning curve when switching over to this innovative product (Revolut, 2019a). The developers made it possible to start using the newly installed application within several minutes after downloading it. This is highly convenient for modern audiences who are tired of the cumbersome and poorly designed traditional banking solutions.

 

Compatibility

The application is compatible with most smartphones and other portable devices in the market (Salz, 2017). From a practical standpoint, it is highly compatible with the majority of users using banking services, currency exchange services or other traditional services involving the transfer of funds or financial operations.

 

Observability

The degree of observability directly depends on the frequency of using regular banking services. If a prospective consumer regularly has to pay currency exchange fees charged by traditional financial institutions, he or she can observe immediate positive effects of switching over to the Revolut application (Groenfeldt, 2019). However, customers who use debit or credit cards irregularly for receiving salaries, making purchases or hotel reservations may not fully realise the advantages offered by market- rate currency exchange fees and borderless money transfers.

 

Relative Advantage

The lower fees charged for similar operations mean that the Revolut application has a clear relative advantage over traditional banking services. However, another key benefit is the overall speed of transactions and the number of personnel necessary for controlling fraudulent operations and confirming the completion of financial procedures (Megaw and Bradshaw, 2019). The in-depth optimisation and the use of innovative technologies verifying transaction details allowed this start-up to substantially reduce  the waiting times enabling new users to register and start using the platform within 60 seconds after installing the application.

 

Trialability

On the one hand, the Revolut application can be easily installed on most devices allowing their users to start transferring money or performing currency exchange operations several minutes after its installation. On the other hand, remote banking products require access to personal information, such as credit and debit card CVC codes (Kopp et al., 2017). This means

Revolut: Managing Innovation

Introduction

Innovation has become almost obligatory for business success in recent decades (Meissner et al., 2017). It allows companies to utilise more effective manufacturing and marketing processes that increase sales and attractiveness of existing products and services. Such concepts as disruptive innovation or revolutionary innovation also imply the development of good ideas that boost productivity and performance manifold and contribute to the ‘blue ocean strategy’ (Madsen and Slatten, 2019). At the same time, one of the key associated problems in this dimension is the diffusion of innovations or the readiness of the market to accept new offerings (Distanont and Khongmalai, 2018). While original ideas may serve as the source of sustainable competitive advantage, marketing effectiveness may be seen as the second main component of organisational success. Therefore, this report aims to explore the historical development of Revolut banking products and their future development perspectives within the scope of the theory of diffusion of innovations.

The Revolut company is a modern organisation founded in 2015 that introduces diffusion of innovation in the business industry through a smartphone application replacing popular banking services (Robinson, 2018). This essential product was developed by the start-up founders based on their insight into the limitations of the financial industry. From the inception of the smartphone application, the company has acquired Specialised Bank licensing from the European Central Bank in order to expand the scope of its offerings in the future. As of 2019, it has already introduced its own  debit cards and insurance services that are highly popular in Europe and the US (Appendix B). The application allows users to make peer-to-peer payments, perform traditional payments or exchange currencies from the app with minimal or zero fees for most of these transactions (Russon, 2019). Additionally, it incorporates cryptocurrency

functionality giving the users access to their wallets containing Ethereum coins, Litecoins, Bitcoins, and other popular cryptocurrencies.

The Development of Revolut Offerings within the Scope of Diffusion of Innovations

Adoption Curve

The analysis of the bell-shaped innovation adoption curve suggests that the company has achieved the early majority phase (Appendix A). Within the first two years of steady growth, the company increased its consumer numbers to 1.2 million while demonstrating the five-fold increase in revenues, as well as the expansion of  the volume of monthly transactions from $200 million to $1.5 billion (Laurent, 2019). The following figure demonstrates this exponential tendency throughout 2017-2018. The rapid improvements suggest that the Revolut product has been increasing its popularity in terms of both transaction volumes and customer numbers, which suggests that the company managed to attract the early majority.

 

Figure 1: Monthly Payment Volumes of Revolut (USD Billion)

Source: Laurent (2019, n.p.)

Source: Laurent (2019, n.p.)

At the same time, projected growth figures for 2020 do not demonstrate an abrupt decline in growth rates, which indicates that the late majority phase has not been reached yet (Statista, 2019). The global applicability of the Revolut smartphone application may be one of the reasons for this outcome since this innovation is not limited to a single local market, such as its native UK market. Moreover, it may be highly useful for internationalising enterprises or ‘born global’ users who have to send and receive money across national borders (Lima, 2018).

 

Figure 2: Revolut Projected Growth (Million Customers)

 

 

Source: Statista (2019, n.p.) 

Source: Statista (2019, n.p.)
 

 

 

 

 

Innovation Characteristics

 

 

Complexity

From the complexity standpoint, the Revolut application is similar to most Android or iOS solutions or online banking services. This means that the users of these traditional

 

products will have a short learning curve when switching over to this innovative product (Revolut, 2019a). The developers made it possible to start using the newly installed application within several minutes after downloading it. This is highly convenient for modern audiences who are tired of the cumbersome and poorly designed traditional banking solutions.

 

Compatibility

The application is compatible with most smartphones and other portable devices in the market (Salz, 2017). From a practical standpoint, it is highly compatible with the majority of users using banking services, currency exchange services or other traditional services involving the transfer of funds or financial operations.

 

Observability

The degree of observability directly depends on the frequency of using regular banking services. If a prospective consumer regularly has to pay currency exchange fees charged by traditional financial institutions, he or she can observe immediate positive effects of switching over to the Revolut application (Groenfeldt, 2019). However, customers who use debit or credit cards irregularly for receiving salaries, making purchases or hotel reservations may not fully realise the advantages offered by market- rate currency exchange fees and borderless money transfers.

 

Relative Advantage

The lower fees charged for similar operations mean that the Revolut application has a clear relative advantage over traditional banking services. However, another key benefit is the overall speed of transactions and the number of personnel necessary for controlling fraudulent operations and confirming the completion of financial procedures (Megaw and Bradshaw, 2019). The in-depth optimisation and the use of innovative technologies verifying transaction details allowed this start-up to substantially reduce  the waiting times enabling new users to register and start using the platform within 60 seconds after installing the application.

 

Trialability

On the one hand, the Revolut application can be easily installed on most devices allowing their users to start transferring money or performing currency exchange operations several minutes after its installation. On the other hand, remote banking products require access to personal information, such as credit and debit card CVC codes (Kopp et al., 2017). This means