You’ve probably noticed that we’ve been creating a lot of educational content lately. From explaining how a credit score works to flagging common security risks, we want to arm you with as much knowledge and power as possible.
Now, as you already know, Revolut is not a bank, but an electronic money institution. You may not have heard of that term before, so we wanted to break this down for you and talk about how e-money institutions work and how they are rapidly evolving for your benefit.
Over the course of the last six months, we have witnessed a flurry of activity in the e-money sector. At an impressive rate, the industry has received approach documents, consultation papers and thematic review findings that cover a diverse range of topics, including operational and security risks, communication and marketing practices, anti-money laundering, terrorist financing and technical standards for customer due diligence.
But what does all this mean for you? In order to contribute in a meaningful way to the discussion about the future of e-money and the likely impact of these recent regulatory engagements, it’s important that we take a quick look back at our humble beginnings.
Coming of age 👴
September, 1997 - that’s the first time the European Central Bank started collected data on e-money. It would take three more years until the European Union would release a framework for the regulation of electronic money. Depending on whether you start counting from when the very first set of data was collected (1997) or when the very first regulatory framework was published (2000), e-money in Europe is either 21 or 18 years old this year - coincidence? I think not!
The transition from adolescence to adulthood is an exciting rite of passage in any community - and one that is not all that dissimilar for e-money firms. In the past, the transition from child to adult was governed by religious and cultural norms that determined our “age of responsibility”. These days we take this transition for granted as modern legal conventions have established arbitrary age limits that attract accountability to our actions and grant us certain privileges.
The development of e-money firms in the financial and banking sector can also be tracked in the same manner. In 2009, e-money entered the awkward teenager stage with the introduction of the second electronic money directive, that was implemented here in the UK through the Electronic Money Regulations 2011. Since then, largely due to the 2015 revision of the Payment Services Directive (PSD2) that went live in January this year, e-money has graduated and entered the big bad world of grown-ups.
Playing by the rules 👮
Peter Drucker, the father of management thinking, said that the ability to get the right things done involves aiming high, that is aiming for what will make a difference, rather than for something that is safe and easy to do. At Revolut, we’ve taken this advice and run with it. Our fast-paced innovation and evolution has seen us challenge more traditional players (such as banks and building societies) in financial services. Our 3 million customers want innovative products like pay-per-day travel insurance, bespoke security measures, unrestricted access to cryptocurrencies and the freedom to spend, send and hold money in up to 24 currencies all connected to one debit card.
⚠️ CLICHE WARNING - with innovation comes regulation - just like Airbnb who are in ongoing discussions with regulators in cities such as London, New York and Barcelona about limits on the number of lettings and profit sharing from short-term rentals - e-money institutions are also experiencing greater consultation on a number of very important matters.
The recent announcements and regulatory releases about e-money is underpinned by addressing the current conduct inconsistencies between e-money firms; improving confidence and trust generally in the market; and encouraging fair competition and greater choices that fit customer needs.
Ok, but what can I expect from Revolut? 🤔
At Revolut we are genuine when we say that the customer is at the centre of everything we do. We started on this journey back in July 2015 to fight unfair exchange fees and in 2018 we are continuing to put our customers’ interests first.
We are still going to aim high, really high. However, similar to the freedom experienced when you upgrade from your provisional drivers licence to, there are now more rules that we must all play by. These rules won’t stifle innovation, if anything they should make the playing fields a little more equal whilst improving confidence and trust in a rapidly growing market.
So, how are we growing up? 🎂
Transparency is at the centre of everything we do here - fair, clear and transparent communications are essential, you’ll soon be able to explore a new look website that will ensure you understand what the interbank exchange rate is and how our product compares to others.
Simplified and local terms and conditions - we’re overhauling our customer agreements, no one likes reading long and complicated agreements peppered with legalese and bad grammar.
Real-time analytics of our customer support data - this will be fed straight back to our product owners, to ensure that the root cause of any problems you’re experiencing are promptly resolved.
Further optimisation of our anti-money laundering and transaction monitoring systems and controls in addition to greater participation in industry events and mandatory face-to-face training on regular intervals.
Continued innovation with our security systems and processes - both in our product, to protect you and to tackle fraudsters head-on, and in our internal network, to protect your data and anonymity.
E-money institutions are doing incredible things for consumers all over Europe, and by working even closer with the regulator, there are endless opportunities for increased innovation and competition in the world of finance.
We really hope this article sheds a little light on the key differences between e-money institutions and banks, and how e-money companies are rapidly evolving and embracing new regulation to further improve and expand their services.
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