Remove 0.5%/1% weekend markup for card purchases by delaying FX until Monday's WMR 4pm London fix

Since when is definition of “not free” equal to having “recurring fees”?! Is milk at your local supermarket free because it doesn’t include “recurring fees”? Of course Revolut isn’t free. Companies don’t work being free (surprise!). As is with many offerings on this planet, Revolut uses a mix of free and non-free stuff to get people on board. Here, free parts work as advertisement. For example, as already pointed out above, they provide 5 days of free transactions and two days of paid transactions a week. I’m not saying their product was bad or unfair; but claiming they’d give you free lunch is just so naive…

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The revenue generated from the transactions obviously isn’t enough such that they charge an additional markup on the weekend. Given the fact that transactions indeed only generate a minimal revenue for the issuer, I deem they’d hardly be sustainable without some additional source of income.

No, the only reason for the weekend FX markup is because there’s no market rate at weekends. It is common practice for a price maker to widen its price during illiquid market conditions. Even investment banks do this (although not at weekends when they shut up shop), whereby if they cannot ascertain an accurate market price, e.g. the market is moving too fast or the market price is too wide or the market price hasn’t moved for a long time (stale price), then they widen their price to customers to protect themselves; it’s not for additional profit but to protect against a loss. Curve likewise adds a markup at weekends. If you think Revolut’s original reason for this weekend markup is to generate additional profit, they you have a fundamental misunderstanding of the way the FX markets work.

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Well, just because others do this too does not mean it hasn’t been a welcome additional source of income for some all along. I guess if a practice is justifiable to some extent but not completely, but at the same time has positive financial side-effects, it is difficult to say what exactly is/was the reason for doing it.

Any price-maker that widens its spreads will lose business to other price-makers. That’s why price-makers keep their spreads as tight as possible, as Revolut does on weekdays. A price-maker has to strike a balance between a spread that protects it and a spread that attracts business. Revolut’s 2%-wide spread at weekends drives away business to other price-makers, i.e. to other card issuers. That is the problem that my idea above addresses.

You’re wrong; here are Revolut’s options:

  • Just use the last rate from Friday. This would perfectly work for normal transactions because on average Revolut would make neither loss nor profit when exchanging on Monday morning. However, it would allow people that know about Forex to speculate on market movements. These people could therefore steal Revolut’s money and this must be prevented.
  • Use Friday’s rate + markup: This defeats speculation. However, every normal buyer who just exchanges on an as-needed basis on averages looses 0.5% compared to option 1. This is profit for Revolut.
  • Allow people to exchange on Monday. This obviously also defeats speculation against Revolut, and offers no-loss transactions for the normal buyer. However note that Revolut does not make profit from the markup on non-speculative transactions anymore.

Thus, Revolut uses a very common marketing trick here. They use a valid argument (protection against speculative use) to charge everyone, even when the argument doesn’t apply. Anyone who doesn’t think it through to the end doesn’t notice the difference.

In case you’re still not convinced: Think about this post’s suggestion. Implementing this would help Revolut’s customers to save money. When they save money, someone else has to earn less (as money can only be with one entity at a time). Who could that possibly be?

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No, you are mistaken for the reasons that I’ve already given. Revolut has functionality to:

  • Add markup (e.g. 0.2% to 0.4% for most business customers)
  • To execute FX (where required) only at the time of a transaction

Therefore the easy option is for Revolut to add a 0.5% markup to protect against market movements between Friday’s close and Monday’s opening. Although any additional profit generated by the 0.5% might cause Revolut to be lazy to build a better solution for weekends, the additional profit is not the reason for Revolut having implemented it this way originally.

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Of course the profit was no reason to implement it this way. Revolut doesn’t even want the money. They are grateful for the tip on how to earn less money, they just didn’t get the idea themselves. I’m sure they’ve already ordered half their development team to implement the feature as requested…

You’ve missed the point. It was implemented originally as margin to protect against losses caused by market movements, not as additional profit. Please learn something about the FX markets before repeating this ill-proven argument.

General insults like “you don’t know enough about FX markets” are not really helping to make your point. Your knowledge about FX trading does not apply here, sorry. Brokers target people who want to make money on market movements. We are talking about people who make random transactions when they buy stuff. For this kind of people the best approach is to exchange at the next possible rate without any artificial markups. The funny thing is that you yourself noticed that and wrote this post. But your believe in Revolut as Robin Hood is so strong that you completely disregard the obvious option that you loosing money is exactly the goal here because it’s their revenue.

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Brokers do no such thing. Brokers match buyers with sellers, for which they charge brokerage. The buyer settles directly with the seller and vice-versa. Brokers do not market-make, manage risk or play any part in the cashflows.

How does my using another card at weekends (because of the 1% markup) turn into revenue for Revolut?

By “you” he obviously meant “the customer”, not you specifically. But even if we were talking about you, if you read carefully, he was talking about their goal, not about what you actually do. You cannot argue with your specific workaround against what he believes is their goal.

Yes, I know, but I’m not the only customer who avoids using Revolut for FX at weekends because of its weekend markup.

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Yes, but is this actually part of the discussion? I feel we’ve come full circle with the arguments and then added another tangent here, no?

BTW: I think he does have a point above: if money exchange on weekends were more or less natural (read: people would just travel and exchange money when they use it), then fluctuating exchange rates would not affect Revolut in one way or the other as over time wins neutralize losses. However, speculative exchange is indeed a problem when some events take place on weekends (e.g. Brexit parliament voting) and everyone can predict what will happen when markets open. So, I would say that there is a 4th option: they could limit markup-free exchanges to actual spendings with a Revolut card in the target currency. And keep the markup for exchanges in the app.

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You’re right. This is exactly the kind of event that the markup is designed to protect Revolut against. Although a much better example is elections, which happen in most countries on Sundays.

You are right. I was thinking of Oct. 19 (Saturday). Interestingly enough, it didn’t have a big effect on exchange rates. I do think, however, that if large-scale speculation could be prevented, the effect for Revolut would be quite minimal.

In any case, I think we all agree that delaying execution would solve the issue entirely. Where the two of you don’t agree is that you assume that Revolut has reasons other than earning money to not change their implementation, whereas @jucs assumes that the loss of revenue alone keeps them from doing it (indefinitely). I guess time will tell, and especially it will be interesting to see if workarounds as the ones you mentioned will put enough pressure on them that jucs’ assumption – even if true now – could no longer be upheld because they would lose too much business to the competition.

There’s no workaround. I was previously using Tandem, Santander Zero and Halifax Clarity UK-issued credit cards for purchases and cash withdrawals in currencies in which I don’t have an account. The only problem is that these cards don’t give any points etc (although Tandem gives 0.5% cashback). Then I realised that I could top up Revolut using a UK-issued points-earning credit card and get fantastic FX rates when spending Monday to Friday in non-balance currencies and all week in balance currencies.

So there’s no “workaround”. Revolut has simply failed to win my business for purchases at the weekend in non-balance currencies - all because of this 1% markup.

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Ok, maybe the term “workaround” was wrong. I just meant some sort of alternative payment method. Because next time you are in Norway (replace with a non-balance country), maybe you don’t want to stay hungry for two days :wink:. I guess you’d use Halifax then. As for me, I haven’t found an acceptable alternative yet, but the race among the new card issuers has just begun, so I’m sure more people will come across alternatives without markup and then Revolut loses more and more transactions. Additionally, they risk people switching entirely, which I think is the even bigger issue.

I have not done the math yet, and avoid using Revolut during weekends for this particular reason, and use my main bank card instead.

Maybe the posters above have a better picture: is that markup cheaper or more expensive than any other bank charges specifically during weekends?

Regardless whether or how much business does Revolut do because of the markup, it might still be cheaper for us customers to use their card (and I could save a little because of it, as I also avoid travelling during weekends).

Several UK card issuers, e.g. Tandem, Santander Zero and Halifax Clarity charge zero all days of the week. They use MasterCard’s FX rate on the next business day. A lot of UK cards charge 3%, but these are not suitable for travelling.