A2Z Fintech
00:33:41 · Zubin Vandrevala, Aman Narain
[00:33:41] S1: Yeah. Which is, I guess, Revolut people. It's the Spanish ATM, the same instinct forty eight years apart. [00:33:47] S0: And here's the detail I love, Zubin. Reed later reckoned they spent maybe $200,000,000 on those machines and the network behind them. And when he was asked whether shareholders objected, he said they had no real voice in those days. [00:34:02] S1: Which is revolute for the last eleven years. Private, no quality calls, a founder who can put ATMs in Madrid because nobody gets to work. [00:34:12] S0: And keep that thought. It comes back at the end. Now Reed had a phrase for the rest of it. Success transfer. Build an idea in one country and then ship it to the next. ATMs, cards, and then Citi Gold, a wealth offer for affluent customers that started in Asia and was exported across the network. Citi's private banking rung forty odd years before Revolut. [00:34:38] S1: So card, app, ATM, private bank, ship it to the next country. That's the Revolut roadmap with, I guess, a nineties, haircut. And the slogan comes with it. Right? Citi never sleeps, twenty four hour bank, banking as a brand, decades before anyone said it was.
00:34:38 · Zubin Vandrevala, Aman Narain
[00:34:38] S1: So card, app, ATM, private bank, ship it to the next country. That's the Revolut roadmap with, I guess, a nineties, haircut. And the slogan comes with it. Right? Citi never sleeps, twenty four hour bank, banking as a brand, decades before anyone said it was. [00:34:56] S0: You know? Zubin, Sonorsky is doing it in plain sight. The Spanish ATM came with a stated plan to take them to Germany, Italy, Portugal next. That's success transfer in a press release. Now let's look at the heirs of what the three banks are doing today. April 2021, Citi announces it's leaving consumer banking in 13 markets, 14 with Mexico. Jane Fraser's reason, they don't have the scale to compete. And the line of hers, I love this, I'd put it on a T shirt, the second T shirt, Nostalgia is not a strategy. [00:35:35] S1: Which is the one thing that she and Storonsky would violently agree on, I guess. Violently. [00:35:42] S0: Two people reading the same two hundred years and refusing to be sentimental about it. She closes 13 markets. He opens 40. Same refusal. Opposite strategy. [00:35:54] S1: HSBC sold its French retail bank, you know, completed on the 01/01/2024 at a loss of, what, up to €2,000,000,000, sold Canada to RBC, pulled out of the mass market retail in America. And so... [00:36:08] S0: Yeah. Yeah. And Standard Chartered in 2022 announced a full exit from seven markets across Africa and The Middle East, Angola, Zimbabwe, which together made about 1% of the group's income. Then retail into Botswana, Uganda, and Zambia, all up for sale.
00:36:08 · Aman Narain, Zubin Vandrevala
[00:36:08] S0: Yeah. Yeah. And Standard Chartered in 2022 announced a full exit from seven markets across Africa and The Middle East, Angola, Zimbabwe, which together made about 1% of the group's income. Then retail into Botswana, Uganda, and Zambia, all up for sale. [00:36:26] S1: So the three banks that invented global retail banking are closing countries, and a company in its old Reuters building is opening them. [00:36:36] S0: 40 countries live, a 100 as the target, 100. New licenses this year in Britain, in France, under the ECB, a full bank in Mexico, and this month, conditional approval for a national charter in America. [00:36:53] S1: And for scale, right? Nubank, the the Nubank that we both admire most, runs three countries. Nobody in this class is attempting attempting what he is. Right? Like, not Nubank, not SoFi, not Chime. [00:37:06] S0: We call this focus versus breath in Nubank's... That mini so that we did. Nubank mastered Brazil before it even touched Mexico. Revolut went to 40 markets on one app alone. [00:37:18] S1: What's changed since is the licenses, right? Like The UK bank, French bank under ECB, a Mexico bank, and an American one on its way. Right? So breadth with Charter is a different animal. [00:37:32] S0: So there's an uncomfortable question. [00:37:35] S1: Why would the same economics push three giants out and pull one upstart in, I guess?
00:37:35 · Zubin Vandrevala, Aman Narain
[00:37:35] S1: Why would the same economics push three giants out and pull one upstart in, I guess? [00:37:41] S0: If I answer it myself, because the retreat and the advance are, if you'd like, the same spreadsheet, read from opposite ends. For an incumbent, every country is a branch network, a legacy core, and a compliance team all paid for locally. If the country is 1% of the income, the spreadsheet says, Leave. For Revolut, a new country is a new license, but also a compliance and a translation all on one global stack. The marginal country is incredibly cheap, Zubin. [00:38:17] S1: Yeah. Except the part that isn't cheap is the part the incumbents are really fleeing. Right? It isn't the branches. It's the compliance. And compliance doesn't get cheaper on a better stack. He admits it himself with political tension. Right? Especially sanctions. You can't do a lot of things in many, many, many, many countries. [00:38:37] S0: Yeah. And that's the unpaid bill that he knows about. [00:38:41] S1: And there's a second difference from HSBC and Standard Chart. Their network was ports, physical places where ships tied up. Shanghai, Bombay, Singapore, and a branch on the quayside to finance whatever came off the board. [00:38:56] S0: And Revolut's network is platforms. No quayside, no ships, one stack, and a customer anywhere you can reach it.
00:38:56 · Aman Narain, Zubin Vandrevala
[00:38:56] S0: And Revolut's network is platforms. No quayside, no ships, one stack, and a customer anywhere you can reach it. [00:39:04] S1: Right. They bank ports. He banks a platform. And that changes who you're for. Right? A port banks, follows cargo, trade finance, corporate clients, high margin. A platform follows peoples, travelers, expats, a money builder in Texas sends home to Mexico. That corridor alone is $65,000,000,000 a year. [00:39:27] S0: Thinner margins, a vastly bigger crowd, and that decides the retreat. When the numbers turn, you can close a port. You can't really close a platform. Which is why they could [00:39:37] S1: leave, and I guess he can't. [00:39:40] S0: Which is why the American charter matters so much and why it may just be a trap. [00:39:45] S1: Right. Let's go back to Durban, and that's one's my department. I'm going to take this, right? US debit exchange for big banks is capped at around, what, 22¢ a swipe. Banks under $10,000,000,000 of assets under management are exempt and can earn well over a dollar on a $100 purchase. Right? So Revolut raised that exemption today through a partner bank. Win your own charter, cross 10,000,000,000, and up to 70 of that income goes. [00:40:16] S0: Yeah. I... You know, I think you need to have a new portrait of Dick Durbin right next to Dee Hawk for you. So the license he's chasing may cost him the income it was supposed to protect. [00:40:31] S1: Yeah. And and Europe says he'll survive it. Interchange there has been capped at, what, 20, 30 basis points for years, and he built this anyway.
00:40:31 · Zubin Vandrevala, Aman Narain
[00:40:31] S1: Yeah. And and Europe says he'll survive it. Interchange there has been capped at, what, 20, 30 basis points for years, and he built this anyway. [00:40:41] S0: Then a prediction, I suppose, because we should put our money where our mouths are. Citi's ATMs lead didn't last. The competitors took years to catch up, but they did catch up. Reed's global consumer bank lasted, though, for forty years before his successes began selling it. The stack advantage is real, but the compliance is where it gets tested. So before Revolut reaches a 100 countries, it will pull out, I think, of at least a couple. [00:41:10] S1: Yeah. And I'll take the other side. Right? Every red cell he's ever met, he's tried to engineer in a way. A country is just a very large red cell. He'll fix it before he leaves it. [00:41:20] S0: In the log, we check-in three years. [00:41:23] S1: Yeah. And if I win, you're buying the flat whites, man. Oak knock. [00:41:26] S0: Oak knock. Yeah. Canary Wharf large one. [00:41:30] S1: When he'll call it a relaunch? [00:41:32] S0: And notice what the bet really is, Zubin. It's a bet on one man's patience with a red cell, which actually neatly brings us to what that patience is worth to him. [00:41:44] S1: $33,000,000,000 his reported stake, right? 28.7% of $150,000,000,000 right? Make it physical. Dollars 33,000,000,000 is what the whole of Revolut was worth at its, what, 2021 fund round. Five years ago, that number was the company. Today, it's his slice.