Opinion: FinTech vs High Street

If you’re a regular reader of this blog, you may have noticed that I have strong opinions regarding consumer financial services, particularly when it comes to Revolut, which I wrote about a lot by now.

I didn’t start writing about these services because of a professional interest, but rather because when I moved from Italy to Dublin (via Los Angeles), I felt like I stepped back ten or more years with the banking system. And while this improved significantly when I moved to London, there are still a few things baffling me from time to time.

But as I discussed in one of my recent Revolut-bashing posts, compared to Ireland the high street banking options in London are so much more interesting that I’ve effectively ditched Revolut for day-to-day payments. So why would anyone care about FinTech products?

I have been thinking this for a while, not just as a customer, but with an awareness that, if I decided to change my perspective in life and go for a riskier professional position, from my rather cushy one, FinTech appears to be the place to be right now. Particularly given the unfortunate experience I have gained in this field by now.

One of the issues appears to be one of branding, and trust. Quite a few people appear to have a dislike for high street banks because of their association with previous scandals or news. And that’s what makes it funny to see how high street banks appear to just want to enter the market with new brands.

Another thing that Monzo appears to capitalize on, in their tube advertisements, is the ability to receive instant notification of the money spent. And that’s something that I deifnitely can relate to. This is particularly important when you get to more shady stores, or to coffee stores with untrained staff, that may suggest that a transaction didn’t really go through, and suggest you to pay cash instead, charging you twice.

Indeed, this was one of the biggest advantages of using Revolut for me in Ireland. The “famous” Tesco Bank credit card didn’t really have even an online banking platform, and the only way for me to confirm whether a transaction went through was by looking at my Tesco points statements. But this is not something revolutionary: I had notifications of all online transactions, and card-present transactions over €50, on my Italian pre-paid card in 2006 (via SMS, not via app at the time, of course.)

While I feel Monzo is right to take a swing to most high street banks for not implementing these notifications, even in 2019 London it’s not true that you need to “go FinTech” to have this level of support. My American Express does the same, and you cannot say that AmEx is a new player on the market!

And it doesn’t stop at just sending me notifications for the charges: American Express goes one step further, and integrates with Google Pay so that you get the notifications even without having the American Express application installed.

Indeed, I have a feeling that, for the most part, customers would be happy if the level of support in high street banking was on par with American Express:

  • Their website lets you log in with a simple username/password combination, rather than the silly security theatre of “Give me the 1st, 2nd, 123th character of your password, and 1st, 5th and 6th digit of your PIN” (seriously, setting aside the random index selection, why on Earth do you need two equivalent factors?)
  • New charges on the card are notified immediately, either through app or through Google Pay (I don’t know about Apple Pay but I assume that’s the case there as well).
  • You can get your card’s PIN online, which is usually verified by a text message OTP.

One of the things that AmEx does not do, that I think all of the FinTech players appear to do, is freezing/unfreezing the card on the fly. A feature that Barclays has been advertising all over as if they had invented it.

It is pretty much possible, or certain, that some UK high street banks already started providing all of these options, maybe in different combinations. As I said, Barclays does appear to have the ability to freeze/unfreeze the card. Fineco does not mail out the PIN but rather has you requesting it online and delivers it as text message. And as I made as a point before, Santander has a credit card with no foreign transaction fees.

Many of the articles I read over the importance to FinTech startups imply that the main reason why big banks can’t be this flexible or “innovative” is that they have old, heavy and difficult to manage backends. From second hand discussions, I can believe that the backends are indeed as heavy and clunky as they are purported to be, but it does seem to me that many of the features involved can’t be that tied to the backends, given that most of the banks can provide those features already.

A number of features that I see being deployed throughout different banks is the ability to “budget” expenses. While they sound particularly interesting, this appears to be mostly a “frontend” feature. Santander has this feature, but somehow they decided to implement this on a separate Android app only, which I gave up on. Indeed, it does not allow you to correct their classification of expenses, which makes it pretty much useless, not just because some vendors are classified completely wrong, but also because sometimes the same vendor might be used for different reasons (Boots, CVS, Walgreens, and similar all provide both medicines and groceries; how you categorize their spend depends on what you bought!)

While Santander have already won me over as a bank customer, I do feel that they would win over more of my credit card expenses from American Express if they implemented “this one weird trick” of informing me of charges as they happen. Because small things like that are one of the reasons I use my AmEx quite a lot in the UK, even after I reach the needed spend to upgrade my Marriott membership to gold.

So yeah, my hope is that high street banks will finally see the competition from FinTech as a list of features that they should, opportunistically, implement, rather than an excuse for the branding and marketing departments to come up with new ideas to be “hip”.

Speaking of Foreign Transaction Fees

In the previous post about Revolut, I have left open a topic that I wanted to move to its own post: foreign transaction fees.

For those who are not acquainted with the terminology here, with foreign transaction fee I’m referring to the additional fee levied by banks and payment card companies when you incur expenses in a different currency than the one the card was issued for. Sometimes (particularly in UK and Ireland) this is referred to as an “overseas transaction fee” — which is confusing, particularly for Ireland, where the fee is applied for expenses in GBP (which is not overseas, but rather “up the road”), but not in EUR (which is mostly oversea).

This is a different cost incurred than the possible bad exchange rate that the financial institution may be applying, and it has nothing to do with the various DCC scams that you may run into when going to touristy destinations with a non-local card, although there is a link there: even online, services may suggest you to apply the charge in your local currency to avoid foreign transaction fees — as you can see in the linked post, that’s rarely a good idea, with a few exceptions (e.g. PayPal actually applies sane conversion fees in my experience, even if not the best ever).

These foreign transaction fees are set by the card issuers, and vary widely. I have seen cards with up to 6% “fex fees”, but that was back in Italy (why I say that will be clearer in a moment). In Ireland, with the exception of various fintech companies, the typical fex fees were of 2-3% — I was very happy with Tesco Banks‘s 1.75% fex fee (Tesco Bank no longer operates in Ireland.) In the UK, it appears most cards either have 0% fex fee, or 2.99% fex fee; there are a few divergences, but those two appear to be the most common options.

The reason why I am specifying this information with a country attached is that, in addition to telling you what the currency is, the mix of local-vs-foreign spend for the average person is also connected to the country. For instance, for my friends and family living in Italy, foreign transaction fees only exist when buying from foreign websites (or eBay), or when going on a “far” trip — Croatia and Switzerland being the closest countries that incur the fex fee. On the other hand, if you live in Ireland, you’ll probably have at least one recurring expense in GBP — depending on how Brexit is going to go this may change.

Indeed, for electronics you often need to look at the UK, rather than the continent — because of plugs, regulations, availability, etc. And quite a few eShops with presence both in the continent and the UK used to refuse you service from the European website, referring you to the UK one instead — this is another thing that may change after Brexit. There is a reason why, when discussing markets, most companies call it “UKI”.

I’m told that a similar situation exists for those living in Switzerland, and I can imagine this goes similar in the Nordics, given that Denmark, Sweden, and Norway have their own currencies as well, and likely a lot of services overlap.

In the UK (and again this may change after Brexit), you may very well never spend money outside of GBP because all the services exist within the country. Unless you’re an expat, in which case you’re probably still visiting the continent (Eurozone or not) fairly often, or may be paying for ongoing services (such as cellphone contracts) in that currency. This probably explains why the two sets of fex fee groups: if you’re part of the first group, you probably don’t need a card with no foreign transaction fees — while you really do in the latter case.

In my case, I have two credit cards: one from Santander, which I spoke of last time, with no foreign transaction fee, and an American Express with a 2.99% foreign transaction fee. I effectively spread the expenses on the two cards, depending on where I am — namely I try to use the Amex in the UK, and the Santander anywhere the other does not work. I could give up on the Amex, as the Santander is strictly a superset usage, but the perks provided by Amex are worth having. And that’s the most important thing: cards have perks, so you should probably consider those as well.

Thus the utility of fintech services like Revolut and Curve depend on the country you live in not just because it sets the band for foreign transaction fees, but also because they set the tone of foreign currency usage. In the UK, with the wide availability of debit and credit cards with no foreign transaction fees, their services are likely less useful than in other countries — except when it comes to perks. Indeed in the case of Curve, you would be able to keep most of the perks of a credit card, such as cashback, even if the card comes with a hefty foreign transaction fee. Except for Amex of course.

But is it convenient for you to pay for such a service? That’s another very good question. And to answer it, I’ll try to forget about the UK and go back to Ireland — mainly because here, as I now repeated a number of times, cards with no foreign transaction fee exists and you can just use one of those. Metro Bank has free current accounts with cards that come with cards without foreign transaction fees in Europe. Santander has a £3/month credit card with no foreign transaction fees, and 0.5% cashback. Halifax has a Clarity MasterCard that comes with no monthly fee, no foreign transaction fees (and of course no perks.)

But let’s go back to Ireland and take a look at the options. As I said the usual foreign transaction fee in the country was between 2% and 3%. In the case of Ulster Bank, the card I used to have had 2.75% foreign transaction fee. At which point would it have been cheaper for me to subscribe to Curve Black, at €9.99/month, rather than give Ulster Bank their fees? (And for simplicity here, I’m not talking about exchange rates; the exchange rate for their MasterCard is network-provided so it’s not at all bad, and in fact it’s comparable to Revolut’s.)

As most services would require a yearly commitment, we should consider the spend on an yearly basis too. This makes the cost €119.88, but we’ll call it €120 to make it easier to run umbers on them. Let’s just call the twelve cents a rounding error. If we’re ignoring the cashback options (as in Ireland there were none, beside Tesco Bank), the amount of foreign expenses you’d need to break even on Curve black with the foreign transaction fee noted above is about €4364 (divide the yearly cost by the foreign transaction fee). That’s the cost of fairly big vacation for a family (note that you can’t include flights in the vacation cost, as those would be billed by the currency of the country of origin, which is likely local).

If you have a card that provides cashback, then things become more complicated, because you’d have to include the cashback in the calculation. If you’re curious the following formula will give you the number, making S the yearly subscription cost of the service, F the foreign transaction fee percentage, and C the cashback percentage:

(S + (S/F) * C) / F

For Revolut Metal, with their variable cashback, figuring out the number is a bit more annoying. But we’re also talking about 1% in the best case scenario (all non-European spend). So the basic number (€5673) only goes down to €5616. The 0.1% cashback option of all European spend is so minimal that it’s not worth calculating exactly.

So what should you do if you don’t usually spend that kind of money on foreign transactions? You can still use the Revolut and Curve and other fintech services without paying for them, and grab the best deal you can until they go bust. Or if you don’t want to bother, you can just spend on your normal cards, get your usual perks and ignore the need for no foreign transaction fees.

Indeed, if your options are spending on Curve attached to a debit card with no cashback and no perks, or spend on an American Express Platinum Cashback Credit Card, you would need to spend more than £5330 a year in foreign transactions for it to be worth it — and that’s assuming you don’t qualify for the higher tier. And this is probably the worst case scenario for the UK, for a non-zero foreign transaction fee card.

Is Revolut Still a Good Thing?

You may remember that a few years ago I wrote a positive review of Revolut, the fintech startup that provides payment cards with stored value and no foreign transaction fees. I have been using it for a long time by now, and had mostly stood by that review, until the second half of last year, where things started to appear more complicated. Given the current flurry of stories on the company, from silly advertising shenanigans to uncovering of poisonous working conditions, I thought it would be a good time to write some more up to date words, as I don’t think I can recommend Revolut as much as I did before anymore.

First of all, I started feeling uneasy recommending Revolut since they started down the path of selling cryptocurrencies as an added-value feature. I hold a personal belief that participating in the trading of Bitcoin and other similar “currencies” is unethical (see Thomas’s rant on the topic), and I don’t like being associated with companies focusing on them. I have looked the other way for a while, though, because I knew that using the words “cryptocurrency” and “blockchain” make money appear out of nowhere for most startups, even when there’s no rhyme or reason for it. I just had a bad taste in my mouth for this.

The problem is that Revolut, even when I had the Premium version, built something very cool, but a bit rough around the edges. And as a customer, it is annoying to see them jumping the shark onto cryptocurrencies, instead of making location-based security actually reliable, implementing 3DSecure/VBV integrations, or finding a way to get a proper banking license and FSCS insurance (all of which would be requirements for me and most people to use Revolut as a replacement for high-street banking).

Instead, what we see is that Revolut is adding “features” trying to upsell you into their premium services. This is not entirely bad, because you need paying customers to run a business. Unfortunately my impression is that they offered and offer so much on their free tier, that they are tackling on random stuff that has nothing to do with banking itself, just to get people to sign up for their Premium and Metal tiers.

As an aside, I still don’t understand this trend of providing heavy (“18g” as they boast some companies) metal cards. The last thing I want from a credit card is to be heavy, as I barely even want to have to take it out. I’m all in favour of the trend of not embossing the name and number, preferring to print it on the back, but it does not need to be metal for it. Indeed, Curve (that I’ll get again in a moment) did exactly that.

We’ve just come back from a trip to the Continent, and what we did notice that Revolut tried to upsell us medical and travel insurance at every change of country (even when we just connected flights through third countries). This is not just annoying as we’re not interested in it (we’re European citizens, visiting European countries, and work provides both of us with a basic travel insurance), but it’s also annoying because it makes use of the location information, which I provide for the security feature, for marketing. Similarly, I recently had more notifications about them trying to upsell me Metal than actual transactions.

For a while, I actually did pay for the Premium service. Mostly under the idea of “putting my money where my mouth is”, that is to make sure that the company could keep operating a service I loved. Unfortunately it turned out a bad idea: not just because Revolut cannot replace a high street bank in the UK (no FSCS to protect your account, no BACS direct debits, etc), but also because the Premium “perks” were not something I cared about, and the dedicated service team was still useless when it came to even telling me the top-up limits when I changed the card I used for top-up.

If you already have two physical cards (and paid for it), you need to pay to replace one of them with a Premium card, if you so wish (but it gains nothing but a different colour, so I never did that). The unlimited exchange is not particularly useful when you already don’t reach the free tier’s spend, and the ATM limits is only useful if you plan to actually use cash, which I really try not to. The one interesting feature that is advertised for Premium customers, but as far as I can tell is also present as a one-off charge for non-Premium one, is the disposable virtual card, that changes PAN every time you use it. But even that is not as secure as it looks, as I’m told that vendors are still able to charge again a disposable card that already changed number.

Okay admittedly there’s the travel and medical insurance, but as I said earlier, I get a better travel medical insurance from work (and probably there’ s better out there) and a credit card such as American Express would provide a better baggage/flight insurance. This is very subjective of course, it’s well possible that for other people, with other employers, and in other countries, these insurances are actually worth it.

Speaking of circumstances, I think I might not have felt so strongly against Revolut if I was still in Ireland. Not just because they seem to have implemented SEPA DD Core support, so you can actually use it to pay your bills there, but also because the alternatives of high street banking there are significantly worse than here.

In London, I now settled on Santander as my primary bank, both for the current account and for a 0% foreign transaction fee credit card, their All-in-One Credit Card. These come to £5 per month for the account, and another £3 per month for the credit card (compare against Revolut’s premium at £6.99 and Metal tier at £12.99), and while the free foreign ATMs withdrawal are limited to Santander’s own network (limiting the countries you can use them on), this is a full-featured, FSCS-insured account, with cashback, retailer offers, and active interest on the current account’s deposit. If you don’t want (or can’t afford) a credit card, Metro Bank offers 0% foreign transaction fee for European transactions on their free accounts’ debit cards. And I’m sure that other banks have similar arrangements all over the place. Basically, the UK has a significantly wider range of offers, that make Revolut less necessary than in Ireland.

But even for Ireland, and for other countries that do not have such a selection of high-street banks, Curve – that I complained about before – decided to change their target marketing a bit, now offering a “front” for any Visa and MasterCard card to provide 0% foreign transaction fee, with their premium option existing to raise the limit of monthly transactions. That would have been something awesome to have when I lived in Dublin, to keep getting Tesco points, while not paying the 1.75% of foreign transaction fee on their credit card. (If you are interested to try that, my referral code is BG2G3).

Both Curve and Revolut have a Metal card with which they provide cashback. In the case of the former, these are retailers-limited, and I can only assume they are based on some third party’s selection of perks, as the retailers are pretty much the same that Santander and Lloyd’s provide retailers offers for. Revolut instead provides cashback on all spend, 0.1% on European spend, and 1% for non-European spend (although there does not seem to be an obvious definition of Europe on their marketing material, I assume it’s deep into the terms of service).

While cashback is always a nice bonus, it only makes sense if you can break even on the cost of one’s service by spending. With Revolut Metal, that would be an astounding £13k (thirteen thousands pound) per month in European spend, or £1299 of non-European spend. I do know some extremely frequent travellers to the States or Asia that would be able to spend the latter, but that’s more of an exception than a rule. And if you can spend the former, you probably can get more than that in interest by keeping the money in an active-interest current account, and paying with a normal credit card.

For comparison, Santander’s card I linked above costs £3/month (you don’t even need their bank account). It has 0% foreign transaction fee on all spend. And a cashback of 0.5% (five times Revolut’s European cashback) on all spend. It takes only £600 a month to break even, and that’s without counting additional retailer offers, or additional perks from their current accounts.

And even if you look at American Express (which is never considered a cheap option) and their cashback options, the numbers are significantly different. Their Platinum cashsback card is £25 per year, and includes a better travel insurance, 1% cashback on all spend to £10k and 1.25% over that. Plus retailers offers and supplementary cards for the family. Although be warned if you want to go down that road, that American Express charges you 2.99% foreign transaction fees, for every single one of their cards in the UK.

I was going to take a detour talking about foreign transaction fees, but I will leave it for another post, because it’s a lot of content, and a lot of explanation to be done there.

So the final words of this post are: I’m not sure I trust Revolut anymore. They seem to be taking “marketing risks” to get people to pay for services, but at the same time there’s very little value in their paid services. I don’t think that the company will be able to sustain the current trajectory without venture capital money, and I find scary the idea of relying on a VC-funded pseudo-bank for my own money.

Update (2019-03-27): just a few days after I wrote this blog post, I received two email from Revolut, with widely different content, that I think merit a bit of description, thus why this update.

The latest email is an announcement of new details (new sort code and account number) for their GBP accounts. This is effectively a change in intermediary bank that maintains the GBP account proxies for Revolut. Nothing particularly eventful in by itself, but there are a few notable things. The announcement is declared “great news” for their customers, but it also highlight yet another feature that high street banking would have, and Revolut lacks: redirections.

When you switch bank account with a high street bank, the bank will take care of moving standing orders, direct debits, automatic salary payments, and redirect any transfer to the old bank account to the new one. Revolut is instead telling all the customers that they have to deal with all the required changes of both payment and transfer. Not just that, but they don’t appear to guarantee any specific grace period in which both accounts would exist: they say that the new details will appear in the app before May 22nd, which is when the old account will stop working:

⚠️ Your old account details will stop working from the 22nd May 2019. 

Salaries and standing orders 

If you receive your salary into your Revolut account, you’ll need to send your new account details to your employer before the 22nd May. Again, we’ll let you know as soon as they arrive. 

For standing orders from your external bank to your Revolut account, you’ll need to update your bank with your new details before 22nd May. For recurring payments set up from your Revolut account to another bank, you don’t need to do anything. 

Revolut email arrived on 2019-03-27

To give you an idea of time frame involved, the company I work for freezes the salary payment details around the 5th of the month for payments on the 25th. This means that if the new details arrive after 5th of May, and you’re paid monthly, you may be unable to receive the salary. Hopefully, the old accounts would just reject the transfer, but even in that case, retrieving the missing salary can easily take two weeks, which for a number of people would be a significant risk.

For comparison, the previous email I received just twenty hours before, also from Revolut, had as subject «👕Should we release Revolut merch?». This is a company that just before announcing a significant disruption of service, that a high street bank would never subject their customers to, asks whether you would like to wear their brand around, making yourself not just a product, but a walking billboard.

UK Banking, Fineco is not enough

You may remember that the last time I blogged about UK banking I had just dismissed Barclays in favour of Fineco, the Italian investment bank, branch of UniCredit, This seemed a good move, both because people spoke very good of Fineco in my circles, at least in Italy, and because the sign up flow seemed so good that it sounded like a good idea.

I found out almost right away that something was not quite perfect for the UK market, in particular because there was (and is) no way to set up a standing order, which is the standard way to pay for your rent in the UK (and Ireland, for what it’s worth). But it seemed a minor thing to worry about, as the rest of the features of the bank (ability to spend up to £10k in a single transaction by requesting an explicit lift on the card limits with SMS authentication, just to say one).

Unfortunately, a couple of months later I know for sure it is not possible to use Fineco as a primary account in the UK at all. There are two problems, the first being very much a problem to anyone, and the second being a problem for my situation. I’ll start with the first one: direct debit support.

The direct debit system, for those not used to it in Europe, is one where you give a “debtor” (usually, an utility service, such as your ISP or power company) your account details (Sort Code and Account Number in the case of the UK), and they will tell the bank to give them money at certain time of the month. And it is the way Jeremy Clarkson lost £200, ten years ago. There is a nearly identical system in the rest of the EU, called SEPA Direct Debit (with SDD Core being the more commonly known about, as it deals with B2C, business-to-consumer) debits.

After I opened the Fineco account, I checked on Payments UK’s Sort Code Checker which features were enabled for it (30-02-48) and then, as well as the time of writing, it says «Bacs Direct Debits can be set up on this sort code.» So I had no refrain in closing my Barclays account and moving all the money into the newly created account. All of my utilities were more than happy to do so, except for ThamesWater that refused to let me set up the debit online. Turns out they were the only ones with a clue.

Indeed, when in January the first debit was supposed to land, instead of seeing the debit on the statement, I saw a BACS credit of the same amount. I contacted my ISP (Hyperoptic, with the awesome customer support) to verify if something failed on their side, but they didn’t see anything amiss for them. When even Netflix showed up the same way, and both of the transaction showed up an “entry reversal” of the same amount, I knew something was off with the bank and contacted them, originally to no avail.

Indeed, a few more debits showed up the same way, so I have been waiting for the shoe to drop, which it did at the end of January, when Fineco sent me an email (or actually, a ticket, it even has a ticket number!) telling me that they processed the debits as a one-off, but to cancel them because they won’t do this again. This was professional of them, particularly as this way it does not hit my credit score at all, but it still is a major pain in the neck.

My first hope was to be able to just use Revolut to pay the direct debits, since they are all relatively low amounts, which fit my usual auto top-up strategy. When you look at the Revolut information page with your account details for GBP, the text says explicitly «Use this personal UK current account to get salary and to pay bills», which brought me hope, and indeed the Payment UK’s checker also confirmed that it supposedly accepts Bacs Direct Debit. But when I checked with the in-app chat support, I was told that, no Revolut does not support direct debits, which makes that phrase extremely misleading. At least TransferWise explicitly denies supporting Direct Debit in the sort code checker, kudos to them.

The next problem with Fineco is not actually their fault, but is still due to them not having the “full features” of a UK high street bank. I got contacted by Dexters, the real estate company that among other things manages my apartment and collects my rent. While they told me the money arrived all good when I moved to Fineco (I asked them explicitly), they sent me a scary and threatening email (after failing to reach me on the phone, I was going to be charged excessively high roaming charges to answer an unknown number)… because £12 were missing from my payment. The email exchange wasn’t particularly productive (I sent them a photo of the payment confirmation, they told me «[they] received a large sum of money[sic] however it is £12.00 that is outstanding on the account.» So I called them on Monday, and they managed to confirm that it was actually £6 missing in December, and another £6 missing in January.

Throwing this around with colleague, and then discussing with a more reasonable person from Dexters on the phone, we came to figure out that Barclays (as the bank used by Dexters to receive the rent) is charging them £6 to receive these transfers because they are “international” — despite the fact that they are indeed local, it appears Barclays apply that fee for any transfer received over the SWIFT network rather than through the Faster Payments system used by most of the other UK banks. I didn’t want to keep arguing with Dexters over the fact that it’s their bank charging them the fee, I paid the extra £12, and decided to switch the rent payment over to the new account as well. I really dislike Barclays.

I’ll post later this month on the following attempts with other bank accounts. For now I decided that I’ll keep getting my salary into Fineco, and keep a running balance on the “high street” account for the direct debits, and the rent. Right now for my only GBP credit card (American Express) I still pay the balance off Fineco via debit card payment anyway, because the credit limit they gave me is quite limited for my usual spending, particularly now that I can actually charge that card when booking flights on BA without having to spend extra money in fees.

Europe and USA: my personal market comparison

While I have already announced I’m moving to London, I don’t want to give the idea that I don’t trust Europe. One of my acquaintances, an eurosceptic, thought it was apt o congratulate me for dropping out of Europe when I announced my move, but that couldn’t be farthest from my intention. As I said already repeatedly now, my decision is all to be found in my lack of a social circle in Dublin, and the feelings of loneliness that really need to be taken care of.

Indeed, I’m more than an Europeist, I’m a Globalist, in so far as I don’t see any reason why we should have borders, or limitations on travel. So my hope is not just for Europe to become a bigger, more common block. Having run a business for a number of years in Italy, where business rules are overly complicated, and the tax system assumes that you’re a cheater by default, and fines you if you don’t invoice enough, I would have seriously loved the option to have an “European business” rather than an “Italian business” — since a good chunk of my customers were based outside of Italy anyway.

This concept of “European business”, unfortunately, does not exist. Even VAT handling in Europe is not unified, and even though we should have at least a common VAT ID registration, back when I set up my business, it required an explicit registration at the Finance Ministry to be able to make use of the ID outside of Italy. At the time, at least, I think Spain also opted out to registering their VAT IDs on the European system by default. Indeed that was the reason why Amazon used to the run separate processes for most European business customers, and for Italian and Spanish customers.

Speaking of Amazon, those of you reading me from outside Europe may be surprised to know that there is no such thing as “Amazon Europe”, – heck, we don’t even have Amazon Ireland! – at least as a consumer website. Each country has its own Amazon website, with similar, but not identical listings, prices and “rules of engagement” (what can be shipped where and for which prices). For the customers this has quite a few detrimental effects: the prices may be lower in a country that they may not usually look at the store of, or they may have to weight the options based on price, shipping restrictions and shipping costs.

Since, as I said, there is no Amazon Ireland, living in Dublin also is an interesting exercise with Amazon: you may want to order things from Amazon UK, either because of language reasons, or simply because it requires a power plug and Ireland has the same British plug as the UK. And most of the shipping costs are lower, either by themselves, or because there are re-mailers from Northern Ireland to Dublin, if you are okay with waiting an extra day. But at the same time, you’re forced to pay in GBP rather than Euro (well, okay not forced, but at least strongly advised to — Amazon currency conversion has a significantly worse exchange rate than any of my cards, especially Revolut) and some of the sellers will actually refuse to send to Ireland, for no specific reason. Sometimes, you can actually buy the same device from Amazon Germany, which will then ship from a UK-based storehouse anyway, despite the item not being available to send to Ireland from Amazon UK. And sometimes Amazon Italy may be a good 15% cheaper (on a multiple-hundreds euro item) than Amazon UK.

So why does Amazon not run a global European website? Or why doesn’t an European-native alternative appears? It looks to me like the European Union and its various bodies and people keep hoping to find European-native alternatives to the big American names all the times, at least on the papers, probably in the hope of not being tied to the destiny of American with what comes down in the future, particularly given how things have gone with the current politics on all sides. But in all their words, there does not appear to be any option of opening up opportunities for creating cross-Europe collaboration on corporations.

The current situation of the countries that make up Europe and the States that make up the USA, is that you are just not allowed to do certain types, or levels of business in all the countries without registering and operating as a company in that country. That is the case for instance of phone operators, that get licenses per country, and so each operates independent units. This becomes sometimes ludicrous because you then have Vodafone providing services in about half of Europe, but with such independent units that their level of competence for instance on security and privacy is extremely variable. In particular it looks like Vodafone Italy still has not learnt how to set up HTTPS correctly, and despite logging you in a TLS-encrypted connection, it does not set the cookie as secure, so a downgrade is enough to steal authentication cookies. In 2017.

If you remember, when I complained about the half-baked roaming directive results, I have suggested that one of my favourite options would be to have a “European number” — just give me a special “country code” that can be replaced by any one member’s code, and the phone number is still valid, and appears local. This is important because, despite the roaming directive allowing me to keep my regular Irish (for now) SIM card on my phone while travelling to either UK or Finland, it prevents me from getting a local phone number. And since signing up for some local services, including sometimes free WiFi hotspots from various cafes and establishment, relies on being able to receive a local SMS, it is sometimes more of an hindrance than a favour.

Both Revolut and Transferwise, as well as other similar “FinTech” companies have started providing users with what they call “borderless” accounts: Euro, Sterling and Dollar accounts all into one system. Unfortunately this is only half of the battle. Indeed, while I welcome in particular Revolut’s option of using a single balance that can provide all the currencies in a single card is a great option. But this only works to a point, because these accounts are “special” — in particular the Revolut Euro account is provided with a Lithuanian IBAN, but a UK BIC code, which makes a few system that still expect both throw up. And this is not even going into how SEPA Direct Debit just does not work: my Italian services can only debit an Italian bank, my Irish services can only charge an Irish bank, and my one French service can only charge a French bank. Using credit cards via VISA has actually better success rate for me, even though at least Vodafone Italy can only charge a specific one of my credit cards, rather than any of them. Oh yeah and let’s not forget the fact that you just can’t get your salary paid into a non-Irish bank account in Ireland.

Banks in Europe end up operating as country-wide silos, to the point that even Ulster Bank Republic of Ireland cannot (at least, can no longer) provide me with an Ulster Bank Northern Ireland bank account — or to be precise, cannot act on my already-existing foreigner bank account that is open in Northern Ireland. And because of all these things happening, the moment I will actually move to London I’ll have to figure out how to get a proper account there. I’m having trouble right now opening an account there already not because I don’t have the local tax ID but because they need proof of employment from a UK company, while I’m still employed by the Irish company. Of the same multinational. Oh my.

You could say that banks and telcos are special cases. They are partial monopolies and there are good reasons why they should be administered on a country-by-country basis. But the reality is that in the United States, these things are mostly solved — plenty of telco stuff is still pretty much local, but that’s because of network access and antitrust requirements, as well, to a point, the need of building and servicing local infrastructure (a solution to this is effectively splitting the operation of the telco from the provider of physical infrastructure, but that comes with its own problems). But at the very least, banking in the US is not something that people have to deal with when changing State, or having to work with companies of other states.

These silos are also visible to consumers in other forms, that may not be quite obvious. TV, movie and similar rights are also a problem the same way. Netflix for instance will only show a subset of the programming they have access to depending on the country you’re currently located in. This is because, except for the content they produce themselves, they have to acquire rights from different companies holding them in different countries, because different TV networks would already have secured rights and not want to let them broadcast in their place.

I brought up this part last, despite being probably the one most consumers know or even care about, because it shows the other problem that companies trying to build up support for Europe, or even to be started as Europe-native companies, have to deal with. TV networks are significantly more fragmented than in the USA. There is no HBO, despite Sky being present in a number of different countries. There is nothing akin to CNN. There are a number of 24-hours news channels that are reachable over more-or-less freeview means, but the truth is that if you want to watch TV in Europe, you need a local company to provide you with it. And the reason is not one that is easy to solve: different countries just speak different languages, sometimes more than once.

It’s not just a matter of providing a second channel in a different language: content needs to be translated, sometimes adapted. This is very clear in video games, where some countries (cough Germany cough) require cutting content explicitly, to avoid upsetting something or someone. Indeed, video games releases for many platforms, in the past at least including PC, but luckily it appears not the case nowadays, end up distributing games only in a subset of European languages at a time. Which is why I loathed playing Skyrim on the PlayStation 3, as the disk only includes Italian, French and German, but no English, which would be my default option (okay, nowadays I would probably play it in French to freshen up my understanding of it).

For American start-ups – but this is true also for open source project, and authors of media such as books, TV series or movies – internationalization or localization are problems that can be easily shelved for the “after we’re famous” pile. First make the fame, or the money, then export and care about other languages. In Europe that cannot possibly be the case. Even for English, that in the computer world is still for now the lingua franca (pun intended), I wouldn’t expect there would be a majority of users happy to use a non-localized software, particularly when you consider as part of that localization the differences in date handling. I mean, I started using “English (UK)” rather than the default American for my Google account years ago because I wanted a sane date format in Gmail!

All of this makes the fragmented European market harder for most projects, companies, and even ideas to move as fast as the American or (I presume, but have not enough detail about it) the Chinese market, in which a much wider audience can be gained without spending so much effort to deal with cross-border bureaucracy and cross-culture porting. But let me be clear, I do not think that the solution is to normalize Europe onto a single language. We can’t even do that for countries, and I don’t think it would be fair to anyone to even consider this. What we need is to remove as many other roadblocks as it’s feasible to remove, and then try to come up with an easier way to fund translation and localization processes, or an easier way to access rights at a Union level rather than on a country-by-country basis.

Unfortunately, I do not expect that this is going to happen in my lifetime. I still wish we’ll end up with a United Federation of Planets, at the end of the day, though.

Revolut Review: a traveller’s best friend?

Update 2019-03-24: A few years later, I have some concerns about Revolut, so after you read this post, I will suggest you to read Is Revolut Still a Good Thing?.

Given the amount of words I have spent on payment cards you would expect that since starting to use Revolut last year I would have already written about it. But almost every time I started writing about it, something else changed that made some of my points moot. I think it’s time to break silence.

For those who have not heard yet, Revolut is an UK company that fits into the current profile of FinTech companies. It all starts with a mobile app, that allows you to sign up for their service, which effectively is an “electronic wallet” (or bank account). When you confirm identity, you can get sent a physical MasterCard payment card for a smallish fee (the fee was not present when I signed up – which is why one of the things that confused me when I suggested this to friends, the other being that it appears to be different country by country).

While at first sight this might look like one of the many prepaid debit cards that exist across most of Europe, the most famous of which, in Italy, would be PostePay, it turns out to have a number of technical differences. The first of which is that the card is a MasterCard Prepaid, rather than a MasterCard Debit, which has both good and bad sides to it: it can be used where debit cards usually can’t (e.g. hotels), but it also can be charged extra (e.g. by Ryanair).

The main advantage over the classical debit (or credit) cards is that the company built the payment system as a mobile-native platform, rather than bolting on mobile apps as an afterthought like effectively any other consumer bank I have used. In particular, the security of the card is tied to the app itself: from the app itself you can configure the card, allowing or disallowing transactions made with the magnetic stripe, the contactless payment, or “online” (card not present), as well as whether you want to allow ATM withdrawal, and whether you want to make use of Revolut’s Location Security feature – which is honestly my favourite feature.

This feature relies on the fact that the phone’s location is known to the company through the app, and they can take that into account when they decide to approve or reject a transaction. In most cases, this is exactly what you want. When my Tesco Bank credit card got skimmed, the fraudulent transaction that had them notice was made in New York, while I Was peacefully sleeping in Dublin. Unfortunately this feature is still a bit fragile, and relies on you having connection when you travel, and sometimes it takes more time than you’d like to realize that you have been travelling. For instance I had to disable location security to enter the DLR from London City Airport, after landing (for those who don’t know the airport, it takes less then 10 minutes walking from landing to public transport).

The good thing is that all these settings take effect immediately if you have Internet connection on your phone, so in most places in Europe, where the transaction happens with you holding, or eyeing, your card, it’s easy to just open the app, disable location security, and retry the transactions. In the USA, though, things are more interesting, as in most restaurant you just give the card to a waiter and they’ll run the transaction for you at the till. And if you have a mistake in the way the terminal is set, so that paying at, for the sake of example, a Mexican restaurant in Pittsburgh would appear as coming from Columbo, then you’re going to have a bit of a headache.

In addition ot the security features, the other reason why the Revolut card is a good fit for travelling is that they offer a 0% foreign transaction fee, and so-called interbank rates for converting to whichever currency you have your balance in (it supports euro, sterling, US dollars, and, added between me writing the draft and posting this, Swiss franks and Polish złoty). This is an improvement over the 1.75% of Tesco Bank and 2.75% of Ulster Bank (approximate, this is the rate for VISA cards; since my Ulster Bank card is MasterCard the fee is variable, and it’s more complicated to calculate).

The interbank rates are very hard to judge, but I have some data points, although for now mostly biased. When I went to London last, in April, I used at different places both my Tesco Bank card and Revolut, so I can compare the rate that they gave me: £0.8569 for Revolut vs £0.8531 (effective, exclusing transaction fee, alternatively £0.838 as declared by Tesco Bank in the statement, which includes the transaction fee). This is biased, since both cards are actually UK-based, so Sterling might not be the right currency to compare on. I’ll be able to compare Chinese Yuan Remibi next month, when the Tesco Bank statement arrive. The other comparison I was able to make was with my company card by Citi, but that’s unfair. For what it’s worth, it’s within reasonable variation, sometimes with Revolut standing on the better side.

If I have such a bright opinion of the service, then why did I not write about this before? As I said, there has been a few things that changed, and a few snags, that got me wary about writing about it too quickly. The first problem is that Revolut’s start looked a lot like Number 26 (now N26), the German bank that promised very similar features, although with a different setup. In particular, I don’t remember them having location-based security features, but on the other hand, they did give you a full IBAN you could use to wire money to directly, or issue SEPA Direct Debit against, assuming your provider was happy to accept said requests.

This is a problem particularly when you realize how bad a job they made of security (those particular problems addressed since then, but t’s still hard for me to trust them). But as the talk points out, it was an obvious answer to say “Well, okay, but I only keep €50 on it”; the same answer I could have given Revolut. Except that N26 first, and now Revolut, both allow you to ask for credit. And that makes the accounts a much more interesting target. I really wish Revolut had an option to say “I don’t want credit, please never provide credit to this account” – but alas that’s not the case right now.

There are more issues. In at least one case, I got scared and pissed at Revolut because after a payment at Red Rock, the exchange rate, the charge in dollars and the charge in euro did not match at all. Indeed the value of the charge in euro was almost double the dollars, which made no sense! Some bickering on Twitter about it, we could confirm the problem is that the Red Rock payment terminal does a pre-auth for the base total of the receipt, and then confirms the transaction with the amount including the tip. The Revolut app knows to update the total in euro with the settled amount, but it does not know to update the amount in dollars, unless you logout and log back in. Which requires you have access to your phone number to receive SMS. I noticed this during my trip in January; the bug was still present in April, when I visited London.

There is another problem with aesthetics. Since the names of credit card charges are usually difficult to decipher, as they appears to be still written in the same flat-file format as made popular by AS/400, the app tries to give you an easier tell of what a given charge is. The internal tracking of the transaction type is translated to one out of a handful of options such as Shopping, Groceries, Travel and Transportation, and the logo of a recognizable vendor is provided to make it easier to tell who’s charging you. This works great for things like Starbucks or McDonald’s, but it’s a bit less useful for Amazon, as it’ll bundle marketplace, Comixology and other third party Amazon Payments, but you can survive. The problem is that sometimes it’s completely wrong.

I assume the problem is that they do some fuzzy matching, as different pathways through the same charging entity may appear differently; that is the case for sure of Amazon, but as I also found out, of Uber, even within the same country. Starbucks and McDonald’s have at least the excuse of using different processors for different stores or at least countries.

More concering is the way they handle the breakdown by vendor in their Spending Analytics feature. The feature itself is actually pretty cool, and gives you an idea of how much you’re spending where, although for me that is only a very partial figure, as it does not factor in the other three cards and three accounts where other charges happen. The problem is not that, the problem is with companies such as PayPal, Square, or iZettle. These are intermediaries that don’t usually let their customers set the whole charge line, but rather only allow personalizing the suffix of the line. Most of these use the asterisk symbol (*) as the separator, so you have things like PAYPAL *STEAM GAMES or PAYPAL *PLAYSTATION.

What happens is that Revolut bunches together the “sub-vendors”, which is consistent with their fuzzy matching. Unfortunately they do not drop the suffix, just showing Square or Iz (they do that for PayPal), but they actually show an unrelated sub-vendor, probably the first charge they saw from the intermediary with the given charge type. Oops.

Finally I have one more concern, for now. While the card security is clearly improved by the location awareness, and the ability to enable/disable various payment options – including, finally, the contactless payments! – it appears Revolut did not actually set limits on how much vendors are allowed to charge you over contactless. As it happens, most terminals have limits imposed by the banks, which are often lower than the customer limits, or at best equal to them, but Revolut does not appear to have such. In Ireland, that limit would be between €25 to €35 depending on the bank, when using a physical card (Apple Pay and Android Pay use the same protocol but are considered different); in the UK, that would be £25 to £40.

I got very confused when in Hong Kong I bought my usual Starbucks souvenir mugs and a bearista, for a total of just shy of HK$500, and a contactless payment worth €57 was approved by Revolut with no issue! After contacting them on Twitter they said the limits are per-country, and quoted a CAD $100 limit in Canada. I asked them if they can provide a table of limits, so one can decide whether to leave contactless enabled or not in a card when they travel, but they have to look into it. The limit in Hong Kong appears to be around HK$1000, which is around €117, almost double the Canadian one.

This is of particular importance for a card that declares itself Sterling, by default, because it was not even three years ago that the foreign currency vulnerability got published in almost all the papers (including the Daily Mail, but I won’t link to that). And the fact that Revolut does not appear to have a proper published plan to deal with this bothers me more than a little bit.

All in all, I’m fairly happy with the service. I ended up getting an extra virtual card, which I use online almost exclusively for Amazon (but I have used it for other things including the China Eastern flights to Hong Kong, particularly as Tesco Bank refused the transaction). I calculated that just in the 1.75% foreign transaction fees on my Amazon UK orders (remember: the is no Amazon Ireland), the €6 fee was being paid off quickly.

Update 2019-03-24: continue by reading Is Revolut Still a Good Thing?