Although it has found success with a wide range of personal finance products, UK-based fintech Revolut faces an uphill battle as it eyes entry into the rewards-based credit card market. In Europe, this segment is not only limited due to structural factors but has also long been dominated by American Express.
Revolut tested the waters last July with the launch of a debit card that introduced its proprietary rewards system, RevPoints, which allows users to redeem points for gift cards or airline miles. From its early days as a prepaid debit card provider, the company has expanded into digital banking, crypto services, and an investment platform. With over 50 million customers globally, Revolut has built a reputation for its mobile banking services and multicurrency accounts.
Taking on American Express
Credit cards appear to be a logical next step. Sifted reports that Revolut plans to launch a set of points-based credit cards aligned with its various subscription tiers. But American Express has long been recognized as the dominant provider of points-based purchases in Europe.
“Amex is a legacy brand with international appeal and a strong presence,” said Ben Danner, Senior Analyst of Credit and Commercial at Javelin Strategy & Research. “It’s going to be tough to launch a premium card product that must justify its cost with good rewards drivers in the European market.”
In North America, the rewards credit card market is thriving amid fierce competition. In contrast, European consumers have relatively few opportunities to earn rewards points through credit card spending.
One reason is that alternative payment methods have become much more popular across Europe, leaving credit cards somewhat sidelined. Revolut is already a leader in pay-by-bank, which ranks among the top three payment methods in the UK, Netherlands, Finland, Spain, and Germany.
Capped Fees
Even in the credit card market, the options for a rewards card are constrained by regulation. The EU’s Interchange Fee Regulation caps interchange fees on consumer debit and credit card transactions. For transactions conducted entirely within the UK, for instance, interchange fees are limited to 0.2% of the transaction value for consumer debit cards and 0.3% for consumer credit cards.
“Card companies use interchange fees to fund the rewards programs on the cards,” Danner said. “Compared to the U.S., the weaker interchange earnings means less rewards funding and a weaker overall value proposition to the consumer.”
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