Why a fair usage policy on card purchases?


#1

I see in the new fair usage policy that “Cross-currency transactions (Send, Spend, Transfer, Exchange) are free up to £5,000 / €6,000 / $6,000 (or equivalent) per month. A 0.5% fee will apply to further cross-currency transactions performed during the same calendar month.

I can understand Revolut imposing a fair usage policy on transactions on which it makes no revenue, for example cash withdrawals and bank transfers (for example a friend of mine used bank transfers via Revolut to buy a house in Spain). However, Revolut primarily makes its money on the fees paid by merchants for accepting card purchases. Therefore what’s the rationale for a fair usage policy limiting card transactions (including those funded by exchanging between currencies)? For revenue-generating activity, it’s odd for Revolut to impose a volume surcharge; a volume discount would be more conventional.


#2

Hi @NFH,

We have implemented a fair usage policy in order for our business to be sustainable; and most importantly so we can continue to provide you with the best exchange rates available.

We felt that a small, simple 0.5% charge on all cross-currency transactions was the clearest and most transparent way to help reduce our costs.


#3

The point made by the OP (and not answered) is why are Revolut appyling a limit to SPEND transactions from which Revolut actually make money (help sustainability as you put it)?

I imagine most people would understand why transactions that simply exchange currencies might attract a charge.

Revolut appear to wish to encourage people to use its card less once transactions are chargeable i.e. the situation elsewhere.


#4

With any policy there’s always going to be alternatives; this is the option that we felt was the clearest and easiest to communicate to our users. We don’t expect it to discourage customers from using their RevolutCard’s to spend abroad because a) most users will not spend over £5,000 (or currency equivalent) per month and b) the main alternative is using a bank card abroad which typically charges 3% per transaction with a poor exchange rate.:blush:


#5

Besides this new monthly limit, there’s already a annual limit of 30k.
I do feel discouraged to use revolut if more and more charged and limits are added to the system, when the initial offer was for a fee free service


#6

As mentioned, the change wont effect most users. I use mine as a holiday card with the occasional GBP transfer as “pocket money”. Perhaps at a later date a business card with higher limits may be available, the Revolut Gold card??

Best exchange rates and free upto the limits set by Revolut and then still a percentage less than most high street banks.


#7

Revolut is slowly but gradually eroding with all the new fees and limits and hiding all that under a “fair use policy”. This is such a crock of s…t

First I get your card when you promised fee free service, then a few months later you introduce limit on free withdrawals, another few months later you introduce a yearly limit of 30k, another month later you introduce fees on “illiquid currencies” such as THB (now having the worst rate out there), and that is not enough,…now there is another limit on 6000 euro cross currency of 0,5%.

When exactly will you come clean to your existing customers and stop using the phrasing “fee free solution”.
While we are at it. Would it be better, that you would just take a yearly fee of 10 or 20 EUR from every member, and just keep the services free of all the fees and “fair use policies”.


#8

Nobody has explained Revolut’s rationale for imposing a fair usage policy on revenue-generating card payments. The fact that few people will be impacted by it is not a rationale.


#9

Again, this won’t affect most customers, it’s not a replacement for a bank or whatever. Stop complaining about your high usage, wait for the business card to come out…


#10

Well, to be fair, Revolut communicated early that it is free for now and that they have to an will evaluate their business after the first year. They never advertised that they keep offering all services for free.

Also, “fair use” seems fair to me, because most of the basic things still stay free.

Another thought: traditional banks are way cheeper for rich people. The more you spent, the more you hold in their accounts, the less you pay in fees. I like that Revolut does not go this way. It’s still a fantastic, mostly free product for the Average Joe. That seems pretty fair to me.


#11

I never said my own usage is high. I’m just puzzled why Revolut is discouraging revenue-generating activity.

Neither of you has explained Revolut’s rationale for imposing a fair usage policy on revenue-generating card payments. The fact that few people will be impacted by it is not a rationale.


#12

I’m not saying that I know what are the reasons behind Resolut’s decision. But what about this: First: it’s not just about spending. It is also about exchanging. Revolut might not want to become a currency exchange trader platform. Second: the income generated by merchant fees might not be enough to establish a sustainable business. Revolut needs some sources of income. Every exchange is attached with a small expense Revolt has to cover. Holding and exchanging funds on accounts does not come for free for the service provider.

So, the first rational behind the policy was explained by Revolut staff here: They don’t want to make it too complicated, so they don’t want to make a difference between just exchanging and spending in currencies that need to be exchanged while spent with the card. Therefore one limit and fee to cover it all.

Furthermore, they might want to keep the product attractive and free for most of their customers that might not be big spenders. Instead of asking for monthly / yearly fees like banks or coming up with other hidden – or not so hidden – fees, they came up with something where people that spend or exchange more than 5000 GBP a month end up paying fees that are still pretty competitive.

It is not just that big spenders can afford these fees more easily than a backpacking student, Revolut also charges the people that profit most from their product, because, obviously, if you spend 5000 GBP or more in foreign currencies, you save a lot more money with Revlout than the backpacking student.

It’s impossible to say for me which scenario would generate more income in the long term: merchant fees from people that spend high sums (like you assume) or applying some fees on certain services for people that use the product more extensively. I assume that Revolut has thought this through thoroughly.


#13

My guess is that it’s actually quite difficult to separate a cross-currency exchange transaction and a spend transaction on Revolut. Let’s take the example of a UK customer visiting Spain: they are most likely to upload their funds in GBP using a debit card. Then they probably just keep their funds in GBP until they make a purchase with the card in Euros, at which point Revolut will undertake a cross-currency transfer of the precise amount of the purchase in Euros. Under the hood, what’s happened here is that the card provider notifies Revolut of a debit in Euros. Revolut debits its own Euro trade account by this sum and credits its own GBP trade account with the equivalent amount in GBP taken from the customer’s GBP balance. It will batch together all such transactions from all customers over a day, probably, and transfer a gross balance via the money markets to ensure enough liquidity in EUR and GBP in its trading current accounts. So what you have here is a spend on the card AND a cross-currency transaction (eventually).

Now let’s take the customer who prefers to know exactly how many Euros s/he has for the holiday and to lock in an exchange rate that is favourable. S/he is likely to exchange any GBP to EUR on a weekday prior to the holiday, especially if rates are looking good. This person makes the cross-currency transaction a few days (or weeks) prior to spending on the card in Euros. But you still have a) a cross-currency transaction, and b) a card purchase in Euros. Why should this person be treated in a different way from person a) above?

Under this fair usage policy, person a) and person b) face the same charge. They have effectively used the same Revolut services, only person a) uses them simultaneously, and person b) separates them in time. Therefore it seems fair that any charge attached to the cross-currency part of the transaction should be applied in both instances. If Revolut were to exempt spending from the policy, person a) would not be charged, but person b) would be, even though there is no real difference between the two in terms of services used.


#14

It is clear that Revolut is not batching trades for pricing purposes, although it obviously batches trades for settlement purposes. Your explanation is regarding pricing. Given that Revolut prices trades using real-time wholesale rates, there appears to be no daily batching for pricing purposes (unlike Visa’s and MasterCard’s FX rates).


#15

Hmm, I guess only Revolut can answer this. But if I were running the business, I wouldn’t be making multiple costly little trades on the money markets. My job would be maintaining liquidity in large currency-denominated trading accounts and batching together cross-currency transactions. Just because Revolut is showing the current market price when you make an exchange doesn’t mean it has to go to the markets for your €3.50 cappuccino at that very instant. Your purchase is just an accounting entry on the computer which it settles with its card provider from its Euro trading account. If not, it wouldn’t make sense for Revolut to be operating its own currency exchange, and it should just use the MasterCard wholesale rate (which would also allow it to offer a competitive rate for Thai Bhat and Russian Roubles). They must be getting cheap services precisely by undertaking all the currency hedging and settlement themselves.


#16

Additionally, remember that they can balance your €3.50 cappuccino in Madrid against a Spanish Revolut user’s £4.50 afternoon tea in Oxford, and they only need to transact the difference at set points during the trading day. [Edit: meant to use two sums that balance, but got it the wrong way round!!]


#17

That principle works only if they give everyone the same daily FX rate (like Visa and MasterCard do). Aggregation between customers doesn’t work with Revolut’s live market rates, particularly when there’s no markup to absorb intraday movements.


#18

Not sure why there’s a fair usage policy in place for transaction, I’m probably not your average user. Every year I need to spend between 30-40k in Euros from GBP. Next year that figure is likely to tripple. I was looking at ways to use Revolut’s services to get best value. However with these limits being put in place I doubt this will be a viable option moving forward. Hopefully you’ll offer something worthy as a business package to replace the current service. I think many people using your services when travelling would exceed your limits to be honest. The other limiting factor I have found with your cards is that most of the time the card is required to be present during a transaction, and cannot be provided over the telephone. This has resulted in me having to use other methods of payments for hotels across Europe and when you’re often spending 2-3k a day in just hotels, that’s a lot of money you’re not handling.


#19

I’ve used my Revolut card with a US business before and they processed the payment without having my physical card after I told them the details but I guess this falls outside your ‘some of the time the card is required to be present during a transaction’ statement, not sure what factors are needed for this to fail.


#20

I think the US is far more relaxed on card security to be honest. When I try to use my Revolut card over the phone it often just gets declined if they’re using a terminal, goes through if they process it online which some hotels do using their web interface.