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-   -   Multi Currency Credit Card ["Revolut"] (https://www.englishforum.ch/finance-banking-taxation/240252-multi-currency-credit-card-revolut.html)

ChrisNeedsToKnow 18.09.2015 18:38

Re: Multi Currency Credit Card
 
Quote:

Originally Posted by The_Love_Doctor (Post 2451790)
I can see them setting up an option to say which order of priority the customer would like the money to be changed.

Where do you see that?

The_Love_Doctor 19.09.2015 12:19

Re: Multi Currency Credit Card
 
Quote:

Originally Posted by ChrisNeedsToKnow (Post 2451802)
Where do you see that?

In the future I mean ;)

By the way, I checked my post this morning and the physical card has arrived! I shall be testing it today!

It comes in a snazzy little cadboard cover which when pulled from the right side pushes the credit card to the left... When the credit card is taken out you read the message... "Be Different. Be Free."

Nice touch Revolut!

fatmanfilms 19.09.2015 13:00

Re: Multi Currency Credit Card
 
Quote:

Originally Posted by The_Love_Doctor (Post 2451790)
I can just see these kind of things cropping up more and more and people annoying them with questions about the behaviour of the algo they use to debit the amounts from the multiple currencies.

I can see them setting up an option to say which order of priority the customer would like the money to be changed.

To be fair if they do it at interbank rate then it doesn't really matter which currency is used up. But this begs a more important question as to how they are actually hedging their exposure to the currency movements, as it's not always possible to meet the demand from someone else trying to do the opposite transaction for every single customer. So they have to take some risk or/and feed the FX transaction to an external bank at some point.

It's an ambitious product and I would advise caution for anyone using it, the cost of using this card will certainly rise in 12 months time once they've figured out how much it's costing them to operate their business.

It your getting a live rate, that's what your getting, they are not hedging as would cost money. If the demand is not there, the price falls that's how a market works.

The_Love_Doctor 19.09.2015 13:40

Re: Multi Currency Credit Card
 
Quote:

Originally Posted by fatmanfilms (Post 2452012)
It your getting a live rate, that's what your getting, they are not hedging as would cost money. If the demand is not there, the price falls that's how a market works.


Here we go fatman is back! ;)

Do you know they're not hedging or do you want to qualify that with something like "In my opinion"??

If they don't hedge their FX exposure at all then that's very dangerous and I'm pretty sure the VCs behind it wouldn't be able to sleep at night.

Getting a live rate doesn't mean you don't hedge, just means you don't mark it up for your customers. There is a cost associated with hedging and these guys are not passing on the cost to the customers during the 12 month promotional period. There is absolutely no need to take such exposure.

Phil_MCR 19.09.2015 14:17

Re: Multi Currency Credit Card
 
Quote:

Originally Posted by The_Love_Doctor (Post 2452034)
Here we go fatman is back! ;)

Do you know they're not hedging or do you want to qualify that with something like "In my opinion"??

If they don't hedge their FX exposure at all then that's very dangerous and I'm pretty sure the VCs behind it wouldn't be able to sleep at night.

Getting a live rate doesn't mean you don't hedge, just means you don't mark it up for your customers. There is a cost associated with hedging and these guys are not passing on the cost to the customers during the 12 month promotional period. There is absolutely no need to take such exposure.

if they have no exposure, then they have no requirement to hedge and so won't incur any hedging costs. simples.

fatmanfilms 19.09.2015 15:18

Re: Multi Currency Credit Card
 
Quote:

Originally Posted by The_Love_Doctor (Post 2452034)
Here we go fatman is back! ;)

Do you know they're not hedging or do you want to qualify that with something like "In my opinion"??

If they don't hedge their FX exposure at all then that's very dangerous and I'm pretty sure the VCs behind it wouldn't be able to sleep at night.

Getting a live rate doesn't mean you don't hedge, just means you don't mark it up for your customers. There is a cost associated with hedging and these guys are not passing on the cost to the customers during the 12 month promotional period. There is absolutely no need to take such exposure.

Do you actually understand a hedge? It's a position in the market.

So to have a position will cost money if the market works against you it costs money.

You can't hedge against exposure you don't know about.

Perhaps you mean they buy an option rather than a hedge, options are very expensive as someone else is taking the risk.

I know someone who bought a property in CH using pounds, they hedged & the hedge has cost 2,500,000 to date. The CHF asset has increased by 2,500,000 so it nets off as he owns both assets.

You can't hedge against exposure you don't know about.

The_Love_Doctor 19.09.2015 20:54

Re: Multi Currency Credit Card
 
Quote:

Originally Posted by Phil_MCR (Post 2452043)
if they have no exposure, then they have no requirement to hedge and so won't incur any hedging costs. simples.

Quote:

Originally Posted by fatmanfilms (Post 2452065)
Do you actually understand a hedge? It's a position in the market.

So to have a position will cost money if the market works against you it costs money.

You can't hedge against exposure you don't know about.

Perhaps you mean they buy an option rather than a hedge, options are very expensive as someone else is taking the risk.

I know someone who bought a property in CH using pounds, they hedged & the hedge has cost 2,500,000 to date. The CHF asset has increased by 2,500,000 so it nets off as he owns both assets.

You can't hedge against exposure you don't know about.

I think you two have got the wrong end of the stick here. Please read the information about the card and how it works before you start commenting on things you don't know about.

I'm not talking about somebody buying something in Zimbabwe dollars and the credit card operator (MasterCard in this case) charging the card holder in one of the three currencies at interbank rate and having to pay the merchant in Zimbabwe dollars, where you guys think there is no exposure and I would agree with you to acertain extent. Because there is no exposure to Revolut as all of that background stuff is delegated to Mastercard and they just get their fee based on volume. (Mastercard of course have an FX exposure as they charge the customer in one currency and have to pay the merchant in another currency so at some point they have to buy the Zimbabwe dollars for a rate that might be different to that that they charged the customer, incidently I believe Mastercard get around this by charging the card holder at a rate that they can secure a hedge against once all of their positions have been consolidated for the day / given interval. Mastercard publishes these rates from day to another and card issuers can add a mark up to these rates which Revolut doesn't and call it interbank)

Anyway going back to the point I was making, Revolut operate this new concept where you hold three different currencies where you are able to convert money between the three different pairs at interbank rate throughout the day. Revolut is a tech company with no ability to do any financial transactions so the process of exchanging money is delegated to the card issuer Optimal Payments Ltd (which is behind Neteller and a similar Credit Card they operate). Optimal Payments Ltd is the one managing these positions / hedging processes. When I exchange 100 to EUR at a specific point in time, the counter party givng me the EUR is Optimal Payments. They take the opposite side of the trade and do this kind of thing with god knows how many customers, at some point though they have to hedge the exposure to the positions they will invariably build up in one of the currencies.

Think of it like this, Optimal Payments have three pots of GBP, USD and EUR, as the customers exchange money those pots will go up and down and at given interval Optimal Payments will want to go back to the orginal three pots of money that they started off with. How do they do that? Well they have to enter a trade in the opposite direction of the net long / short currency that they find themselves with. This "hedging process" is not free and the exposure is there. If you two can't see it then hopefully you do now ;)

fatmanfilms 19.09.2015 21:00

Re: Multi Currency Credit Card
 
Quote:

Originally Posted by The_Love_Doctor (Post 2452164)

Think of it like this, Optimal Payments have three pots of GBP, USD and EUR, as the customers exchange money those pots will go up and down and at given interval Optimal Payments will want to go back to the orginal three pots of money that they started of with. How do they do that? Well they have to enter a trade in the opposite direction of the net long / short currency that they find themselves with. This "hedging process" is not free and the exposure is there. If you two can't see it then hopefully you do now ;)

Why would Optimal hold any pots for themselves & want to get back to what they had? They are just executing deals for their clients as far as I can see so no need to hedge anything as they have no skin in the game themselves. It's clients own funds that get transferred at interbank rates.

So client cash is held by Barclays, I doubt there is any depositors protection, well possibly 100k euro split between everyone.

FX transactions are not regulated, which is why punters get ripped off at airports.

The_Love_Doctor 19.09.2015 22:28

Re: Multi Currency Credit Card
 
Quote:

Originally Posted by fatmanfilms (Post 2452169)
Why would Optimal hold any pots for themselves & want to get back to what they had? They are just executing deals for their clients as far as I can see so no need to hedge anything as they have no skin in the game themselves. It's clients own funds that get transferred at interbank rates.

So client cash is held by Barclays, I doubt there is any depositors protection, well possibly 100k euro split between everyone.

FX transactions are not regulated, which is why punters get ripped off at airports.

One entity or another will have an exposure to these customer FX transactions. The entity taking on the exposure will not take the exposure for no premium. That premium has to be passed on to the customer one way or another.

At this point in time it's not clear who is taking the exposure of the fx transactions between the three currencies. And when they say that they do it at interbank at no additional cost it seems a bit too good to be true hence my call for caution.

Now let's not get too worked up over this shall we ;)

fatmanfilms 19.09.2015 22:43

Re: Multi Currency Credit Card
 
Quote:

Originally Posted by The_Love_Doctor (Post 2452216)
One entity or another will have an exposure to these customer FX transactions. The entity taking on the exposure will not take the exposure for no premium. That premium has to be passed on to the customer one way or another.

At this point in time it's not clear who is taking the exposure of the fx transactions between the three currencies. And when they say that they do it at interbank at no additional cost it seems a bit too good to be true hence my call for caution.

Now let's not get too worked up over this shall we ;)

The customer is taking the risk as far as I can see, with no compensation arrangements counterpart risk as well..

Goodwill increased by 175 million USD for the year now totalling 230 Million USD, profits for the year 57 million. Could easily be bankrupt with a write down on goodwill alone. Not sure I would want to hold significant funds with them.

poot 21.09.2015 13:31

Re: Multi Currency Credit Card
 
What a good concept- I have signed up and funded my account already with a trial 10. Not sure if there'll be a problem as I funded from a UK account but my Revolut account is held with my Swiss address details etc, but it got added to the account ok.

I shall be using this to spend and withdraw cash in the eurozone, shopping trips to Germany, long weekends in Italy etc.

Agree that I wouldn't want to have significant funds with them, but it certainly seems to fill a great gap in the market: I've been thinking for a while about a better solution for both shopping in eurozone and general worldwide travelling, and this seems to be it!

ChrisNeedsToKnow 21.09.2015 14:12

Re: Multi Currency Credit Card
 
Just found the same concept on www.weswap.com

They charge the customer a percentage for loading the card, and obvisouly also get a cut on the merchant's side.

Interesting: If you manage to refer "5 friends this summer" (whatever that means in detail), the percentage on the customer's side is dropped "for life".

Now, usually I wouldn't bother, but 2 details make this interesting:
  • they seem to have their fees at a final stage, so less prone to increases
  • they offer CHF as a holding-currency (however, it's not possible to charge in CHF)
Drawback: It's not possible to unload the card by default

Ill stick to Revolut for now - unless 5 people want an invitation for weswap ;)

The_Love_Doctor 21.09.2015 14:42

Re: Multi Currency Credit Card
 
Quote:

Originally Posted by ChrisNeedsToKnow (Post 2452980)
Just found the same concept on www.weswap.com


Similar concept but not that same. The money exchange is peer-to-peer with Weswap whereas with Revolut they don't really say which leads me to think that they're somehow running the FX book or delegating it to the card issuer (Optimal Payments) or MasterCard or Barclays which holds customer funds.

For the sake of completeness / comparison purposes I also came across the following similar concepts:

- Number26 (Apparently only open to Germans and Austrians at the minute)
- And of course Neteller + Plastic which is operated by the same company Optimal Payments.

ChrisNeedsToKnow 21.09.2015 14:53

Re: Multi Currency Credit Card
 
Quote:

Originally Posted by The_Love_Doctor (Post 2453003)
- Number26 (Apparently only open to Germans and Austrians at the minute)

I opened this using my sister's address in Germany.

They didn't want any proof of address, I just had to show my ID during an authorisation-videoconference.

It's effectively a free checking account with associated credit card. Everything is EUR based, fx transactions are converted at the time they're incurred.

Paying and withdrawing cash is free, worldwide, at mean fx-rates (at least that's what they say, I didn't try).

No interest is paid, so balances and mastercard-revenue is their only source of income. However they intend to become a "real" bank at some stage.

Their internetbanking has some interesting features, which I always wondered why they don't exist with established banks: For any transaction on the account there's a "note" box, allowing to write something into it and also change it later. Its a text box for customer's own use and not sent with the transfer in any way. Great idea.

I guess if you want to have a normal German current account, this could be a solution if DKB refuses you for unknown reasons.

As for me: I just opened it for curiosity's sake. Not sure what to do with this now. If the balance remains at zero, will I have to declare this account?

Phil_MCR 21.09.2015 14:59

Re: Multi Currency Credit Card
 
customer has a $ card. buys something costing 6 zorks. 6 zorks is $60 at the time of the transaction, so seller gets paid the 6 zorks and buyer owes $60 on his card. only outstanding transaction is for the buyer to pay off his card.

no other exposures and no need for hedging. easy-peasy. why try to imagine another scenario to complicate things when you can do it the easy way?

The_Love_Doctor 21.09.2015 15:07

Re: Multi Currency Credit Card
 
Quote:

Originally Posted by Phil_MCR (Post 2453021)
customer has a $ card. buys something costing 6 zorks. 6 zorks is $60 at the time of the transaction, so seller gets paid the 6 zorks and buyer owes $60 on his card. only outstanding transaction is for the buyer to pay off his card.

no other exposures and no need for hedging. easy-peasy. why try to imagine another scenario to complicate things when you can do it the easy way?

I've made post #47 as idiot-proof as possible. If you don't get it that's not really my problem. :rolleyes:

ChrisNeedsToKnow 21.09.2015 15:26

Re: Multi Currency Credit Card
 
Don't want to interrupt your friendly exchanges, but I think yee are talking about 2 different issues / possible exposures:
  • #1 is all one currency:
  • Customer pays "x". As a result the creditcard company owes the merchant "x", while the client owes "x" to the creditcard company. (ignoring respective margins)
  • Possible exposure: The client doesn't pay up.
  • For Revolut this risk doesn't exist, as the card is strictly credit based.
  • #2 is the fact that the client can, in the case of Revolut, fx his balance between currencies, and even more so even intraday.
  • The customer might fx USD to GBP in the morning, GBP to EUR around noon, and completing the circle from EUR to USD in the evening.
  • Should he have done this with good timing, the customer might have more USD on his account than in the morning. Someone must bear this gain as a loss.
I guess the answer to #2 is that "optimalpayments" provide their services to quite a bunch of Fintechs, so really they will always have demand of most currencies in most directions, so they can offset one demand against another. Id imagine them as combining peer-to-peer exchange demands in such big amounts, that they can live purely off the interest made by holding those funds, and/or of a markup on the 4th digit after the dot (0.000x).

Should above be correct, it's also obvious who bears the imaginatory loss as per above: Whoever peer-to-peerd the other way.

The_Love_Doctor 21.09.2015 16:39

Re: Multi Currency Credit Card
 
Quote:

Originally Posted by ChrisNeedsToKnow (Post 2453046)
  • #1 is all one currency:
  • Customer pays "x". As a result the creditcard company owes the merchant "x", while the client owes "x" to the creditcard company. (ignoring respective margins)
  • Possible exposure: The client doesn't pay up.
  • For Revolut this risk doesn't exist, as the card is strictly credit based.
  • #2 is the fact that the client can, in the case of Revolut, fx his balance between currencies, and even more so even intraday.
  • The customer might fx USD to GBP in the morning, GBP to EUR around noon, and completing the circle from EUR to USD in the evening.
  • Should he have done this with good timing, the customer might have more USD on his account than in the morning. Someone must bear this gain as a loss.
I guess the answer to #2 is that "optimalpayments" provide their services to quite a bunch of Fintechs, so really they will always have demand of most currencies in most directions, so they can offset one demand against another. Id imagine them as combining peer-to-peer exchange demands in such big amounts, that they can live purely off the interest made by holding those funds, and/or of a markup on the 4th digit after the dot (0.000x).

Should above be correct, it's also obvious who bears the imaginatory loss as per above: Whoever peer-to-peerd the other way.

Thank you for summarising it so succinctly and sticking to the known facts! ;)

Phil_MCR 21.09.2015 16:49

Re: Multi Currency Credit Card
 
Quote:

Originally Posted by ChrisNeedsToKnow (Post 2453046)
Don't want to interrupt your friendly exchanges, but I think yee are talking about 2 different issues / possible exposures:
  • #1 is all one currency:
  • Customer pays "x". As a result the creditcard company owes the merchant "x", while the client owes "x" to the creditcard company. (ignoring respective margins)
  • Possible exposure: The client doesn't pay up.
  • For Revolut this risk doesn't exist, as the card is strictly credit based.
  • #2 is the fact that the client can, in the case of Revolut, fx his balance between currencies, and even more so even intraday.
  • The customer might fx USD to GBP in the morning, GBP to EUR around noon, and completing the circle from EUR to USD in the evening.
  • Should he have done this with good timing, the customer might have more USD on his account than in the morning. Someone must bear this gain as a loss.
I guess the answer to #2 is that "optimalpayments" provide their services to quite a bunch of Fintechs, so really they will always have demand of most currencies in most directions, so they can offset one demand against another. Id imagine them as combining peer-to-peer exchange demands in such big amounts, that they can live purely off the interest made by holding those funds, and/or of a markup on the 4th digit after the dot (0.000x).

Should above be correct, it's also obvious who bears the imaginatory loss as per above: Whoever peer-to-peerd the other way.

I agree with you. For the #2 risk, I expect they should be able to net off demand. where they have to get external funds, presumably the cost of getting it externally is the price the customer pays (perhaps with mark-up).

The_Love_Doctor 21.09.2015 17:10

Re: Multi Currency Credit Card
 
Quote:

Originally Posted by Phil_MCR (Post 2453104)
I agree with you. For the #2 risk, I expect they should be able to net off demand. where they have to get external funds, presumably the cost of getting it externally is the price the customer pays (perhaps with mark-up).

But they do it for FREE! Which brings us full circle! How do they do it?

*** RANT ALERT ***
There you go, next time read the previous posts before you start disagreeing with people. Most of the times you are right on the money, this time it's disappointing to see you post without understanding what the product is and what others have said before and then post to say that you agree with another post that says exactly what I said a few posts earlier.

*** END RANT ***


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