Is bitcoin Revolut's path to profitability?

Neobanks and digital wallet providers like Revolut, Paypal, Robinhood, and Square are already offering cryptocurrencies on their platforms. Millions of potential bitcoin buyers get access to crypto markets via PayPal, Robinhood, Square's Cash App, and Revolut. Bitcoin's meteoric rise has spiked its cryptocurrency trading volumes and the number of new customers on its platforms.

To illustrate this, Square’s CashApp traded $1.8 billion worth of cryptocurrencies in the fourth quarter of 2020 alone. Robinhood cryptocurrency service has added 6 million funded accounts in the first two months of 2021 only when its total customer count was 13 million users a year ago.

Revolut has never been profitable, at least not on an annual basis, but it’s always seen positive months when bitcoin’s price skyrocketed. Since November 2020, it’s been profitable every month. In December and January, Revolut opened 300,000 new crypto wallets per month. When Revolut launched its crypto offering back in 2017, customers could buy and sell crypto on their platform for 1.5% per trade, but they didn’t control the bitcoin they purchased.

Customers could not send their crypto to anyone outside of Revolut. To withdraw their digital assets, Revolut’s customers had to convert them to fiat. Earlier this month, Revolut announced that customers will be able to send their bitcoin to any other bitcoin wallet, outside of Revolut’s platform, up to 500 pounds per day and 1000 pounds per month. Also in April, Revolut made available another 11 crypto coins (Cardano, Uniswap, Synthetix, Yearn Finance, Uma, Bancor, Filecoin, Numeraire, Loopring, Orchid, and The Graph). It looks like Revolut is changing its Bitcoin strategy, and it’s not alone.

Venmo has added the ability to buy, hold, and sell cryptocurrencies within its app, supporting four cryptocurrencies: Bitcoin, Bitcoin Cash, Ethereum, and Litecoin. Venmo is positioning crypto trading to be a social activity, users can share transaction updates with friends via the Venmo feed. They will be able to trade by using funds stored with Venmo or by using their linked bank accounts. However, users cannot withdraw from Venmo’s mobile app. As the crypto market heats up, even more, we'll be seeing a slew of players competing with each other and traditional banks. 

Several crypto metrics are now measured in the trillions, including annual on-chain transaction volumes of stablecoins and annual spot volumes at major crypto exchanges. The latest figures put the value of the cryptocurrency market at almost $2.43 trillion in 2021, more than 10x the 2019 figure of $237 billion. Nearly 900,000 unique addresses now hold at least 1 bitcoin, with roughly 150,000 addresses holding at least 10 bitcoins.

As the industry has grown to new highs in terms of users, volumes, and overall market valuations, many large financial institutions, neobanks, banks, and payment companies have recognized this opportunity and are accelerating their strategic efforts to expand capabilities to provide financial services and product offerings built specifically for the digital asset ecosystem.

As the industry has grown to new highs in terms of users, volumes, and overall market valuations, many large financial institutions, neobanks, banks, and payment companies have recognized this opportunity and are accelerating their strategic efforts to expand capabilities to provide financial services and product offerings built specifically for the digital asset ecosystem.

Revolut aspires to provide a suite of services beyond basic checking and savings accounts to its clients to make it the center of their financial lives. Cryptocurrencies are on the top of Revolut's list and a key element in its strategy for profitability and to grow its ecosystem.

In 2017, Revolut sought to gain a competitive edge using crypto and letting its customers initially buy bitcoin, and later assets including Ethereum, Litecoin, Bitcoin Cash, XRP, and others. The lack of not being able to store their holdings anywhere apart from Revolut has been a huge sticking point for users.

In 2021, Revolut decided to double down on crypto, adding bitcoin withdrawals with more features planned. This makes Revolut one of the leading cryptocurrency mobile apps offering Bitcoin withdrawals. Neither PayPal nor Robinhood currently allows the withdrawal of digital assets.

Recently, Revolut partnered with Fireblocks, and with crypto analytics startup Elliptic to filter customer withdrawals. It is also looking ahead to adding more tokens and allowing crypto customers to earn income on their funds.

Some might argue that cryptocurrencies are the opposite of banking, but as more and more people are exposed to cryptocurrencies, the demand for easy and user-friendly digital wallets will grow too. Digital wallets are overtaking their traditional counterparts.

According to research by ARK Invest, digital wallets represent a $4.6 trillion opportunity and could replace physical banks. In China, mobile payments have multiplied more than 18x in just five years, from roughly $2 trillion in 2015 to an estimated $36 trillion. Meanwhile, in the US, digital wallet users are surpassing the number of deposit account holders at the largest financial institutions. At the end of 2020, the number of JPMorgan Chase deposit account holders totaled approximately 60 million, while Cash App’s and Venmo’s active users were 59 million and 69 million respectively.

Today, consumers are looking to use wallets that allow them to spend crypto just as easily as they spend fiat. It appears that digital wallets could entirely replace their traditional counterparts. Digital-native institutions like Revolt, PayPal, and Square are aiming to become the digital banks of the future and win the trillion-dollar pie.