Fintech unicorn Revolut has a problem with scammers and angry customers who have been victims of fraud. Customers complain about poor support and would not take the problem seriously. The accusations come at an inopportune time. The fintech has been seeking a UK banking license for two years. Insiders say Revolut’s failure to obtain a banking license so far could also be linked to the company’s compliance issues.
Compliance Issues
Currently, Revolut operates with a full banking license granted by the Bank of Lithuania (BoL). In the UK, Revolut Ltd has a license as a payment institution. In addition, Revolut Trading Ltd operates as an agent of FCA-regulated Resolution Compliance Ltd.
According to the Financial Times, progress on the FCA application was nearly halted. However, the delay not only prevents Revolut from expanding its product range to things such as loans but also impacts its business in the US, Canada, and Australia, where regulators are watching the UK’s approach to the company.
Revolut CEO, the Russian-born Nik Storonsky, says the fintech’s two-year quest to secure a UK banking license would be held up by “extra cautious” of regulators, which are spooked by the banking crisis and the collapse of Silicon Valley Bank, Signature Bank, and Credit Suisse.
Ultimately it is not really us, it is generally the banking crisis we see at the moment that makes regulators extra cautious.”
Nik Storonsky, Co-founder and CEO REvolut (link)
A British small business owner opens reported that he was missing more than GBP 62,000 from his Revolut account. He allegedly spent it at the luxury department store Selfridges at Cartier. But he was never there. Instead, a stranger shopped there with his money, having stolen his card details the day before with the help of a clever trick.
The Scam Attacks
As the customer told the financial portal This is Money, the scammer called him from a number that appeared to belong to Revolut. He asked him to re-authenticate his Apple Pay. The customer thought nothing of it – after all, the caller knew his name, address, and card number. So he told him the Apple Pay access code that had been resent to him. This allowed the scammer to load his victim’s card onto his smartphone – and go on a shopping spree. This business owner and Revolut customer isn’t the only one who fell for this or similar scams.
The fintech has not signed up to the Contigent Reimbursement Model (CRM). In it, banks voluntarily agree to pay back money to victims of certain types of fraud. The guidelines of the British regulator FCA do state that banks must compensate their customers after a fraud – but only if it cannot be proven that a customer acted negligently.
Revolut operates with a full banking license from the Lithuanian banking regulator but has been seeking a license from the UK regulator FCA for over two years. However, the FCA faulted the fintech’s audit of its financial statements, carried out by auditing firm BDO, as “inadequate” last September, the Financial Times reported. It was not until March of this year that Revolut managed to present its 2021 annual report.
Strong Numbers, But …
Revolut reported revenue growth of 185% to GBP 636 million (€710 million) and a profit of GBP 26 million (€29 million). The number of customers also grew strongly, from eleven million at the beginning of 2021 to 29 million. But the deposited balance per customer could only be increased from GBP 418 to 450. This shows that many customers only used Revolut for part of their expenses.
