Issue link: https://maltatoday.uberflip.com/i/1028264
12 maltatoday | SUNDAY • 16 SEPTEMBER 2018 NEWS LAST week the digital bank Revolut announced its arrival in Malta with a warning to the country's financial institutions. "The big banks in Malta have been taking advantage of their customers for years with endless customer fees and crappy tech- nology…Revolut is here to end the party," the company said in a press release announcing it was now on the ground in Malta. Revolut has grown rapidly since it was founded in 2015. Today, it boasts some 2.5 million users worldwide, and is one of the most recognisable electronic payment platforms around. The start-up is estimated to be worth $1.7 billion. Prior to the start of its local marketing campaign, Revolut already had some 25,000 us- ers – this number has gone up by 5,000 users in the last week alone. While Revolut isn't the first fintech company to announce a presence in Malta over the last year, it is the first to issue such a bold warning to local players. Asked whether antagonising the banks was the best way for the company to announce it- self to Malta, Revolut's regional manager Dimitris Litsikakis told MaltaToday he was not "con- cerned at all as the financial system has very specific rules and regulations that must be re- spected". He said irrespective of the traditional banks' position, European laws ensured Revo- lut would be able to operate in Malta. "This is the beauty of the single market we call EU – it's designed to serve the people by allowing more competition rather than protecting monopo- lies that allow high fees and un- reasonable charges." Rather than concerning them- selves with Revolut, Litsikakis insists that banks would be bet- ter off investing more in mod- ernising their "outdated tech- nology" rather than "wasting time trying to find new ways of introducing hidden fees to their clients". Despite the government's ob- vious vested interest in the local banking system – it is a major shareholder in Bank of Valletta, Malta's main bank – Revolut's threat appears to have been en- dorsed by the Prime Minister, who tweeted his welcome to the company shortly after the press release was issued. "Revolut is a fintech bank and fintech is the future so yes, I welcome anything that disrupts the market and the traditional players," he told journalists who asked about his endorsement this week. "While I understand the con- cerns of traditional banks, if the people aren't satisfied with their services, then we should wel- come competition." Malta ready for digital payments According to a recent study conducted by the European Central Bank, Malta's share of cash transactions is the high- est in all of the EU – 92% of all transactions are affected in cash. Despite efforts to encourage cashless transactions, hard cash remains the Maltese's payment method choice. Myney, a Mal- tese platform similar to Revolut which was launched in 2016, failed to live up to expectations, but this doesn't discourage Lit- sikakis. He says he's "super confident" that Revolut can attract many more Maltese users than the 30,000 it currently has, point- ing out that since the company launched its marketing cam- paign, it has been at the top of the local app charts. He added that Revolut only launched in countries with "great potential". "We have done our homework and we believe that the Mal- tese are ready for an innovative, technology-first banking alter- native," he says. Referring to Muscat's tweet, Litsikakis stressed it confirmed "the will of the nation to move into digital payments that add safety and transparency". 'Early days' to talk about Malta relocation Malta has seen its fair share of companies relocating to its shores over the last year, mainly driven by its commitment to embracing disruptive technolo- gies like blockchain. However, Litsikakis is cautious when dis- cussing a possible relocation to Malta. Revolut is currently based in London and like other banks, could be tempted to move to a different European state once Britain leaves the European Un- ion. Asked whether such a move was on the cards, Litsikakis says it is "still very early days". Revolut's main focus at the moment, he says, is building partnerships with companies and merchants in Malta. "Judging by the insane growth of Malta, I'll be spending more and more time in the 'block- chain island' to support opera- tions and help expand our reach by talking at high-profile events like the Delta Summit and the Malta Blockchain Summit." Profitability possible though 'fee-free spending' Sceptics often question how a digital bank promising to do away with fees and charges can be profitable, but Litsika- kis insists that being profit- able doesn't necessarily have to mean "squeezing every penny from people's pocket". "We just decided to have a dif- ferent business model, one that is built on fee-free spending when you are abroad," he says. The company, he explained, has added a number of "option- al ad-hoc services like travel or device insurance, subscription services and services to corpo- rate clients with the company's Revolut Business product", all of which he says are a revenue source. As for security of people's funds, Litsikakis insists that Revolut is obliged by law to seg- regate its clients' funds, and that currently it funds are held in a "segregated account at Lloyd's or Barclays" banks, depending on the type of Revolut account held. "In the event of insolvency of Lloyd's or Barclays, you will be able to claim your funds from this segregated account and your claim will be paid above all other creditors." He also notes that Revolut is certified by the UK's Financial Conduct Authority – a financial services regulatory body – and completely adheres to its re- quirements, including compli- ance with the Electronic Money Regulations and the Payment and Services Regulations Act. Compliance by self-learning machines Another type of criticism often levelled at the company con- cerns its ability to combat finan- cial crime. Revolut has in the past been criticised for not having strong enough defences against money laundering, and of being overly dependent on banks' transac- tion monitoring systems to catch suspicious activity but Lit- sikakis says this is not the case. "On the contrary, Revolut took a different approach to compli- ance by building machines that are self-learning and self-im- proving," he explains. "Instead of applying a one- size-fits-all approach, we sepa- rated our compliance team into two special forces, compliance technology – the machine – and compliance services, the peo- ple." He says that thanks to the lat- est emerging technology, the financial sector is moving at "lightning speed" which "leaves little room for old-school pro- cesses and unchallenged think- ing" – one of the main reasons banks are lagging behind, he says. "We're passionate about learn- ing and improving as a company and compliance is no excep- tion." Whether or not the company succeeds in reaching its target of 60,000 users by the end of the year remains to be seen, but with Revolut aiming to have a European banking licence by the end of the year its growth shows no sign of letting up. Revolut boss convinced Malta ready to ditch cash A prime ministerial endorsement? Revolut regional manager Dimitris Litsikakis says Malta is 'willing to move into digital payments' Revolut regional manager Dimitris Litsikakis (left): banks would be better off investing more in modernising their "outdated technology" rather than "wasting time trying to find new ways of introducing hidden fees to their clients" Below: Too easy - the Revolut app and its payment card