Wirecard goes bust - implications for Revolut?

[EmmDee]

Would it not only be the case that the funds are at risk if there is a fraud i.e. Revolut doesn't put your money in the client account? I thought under E-money regulation the institution is required to place client money with a 3rd party bank? So your true exposure/counterparty risk is with the bank?

I 100% agree, holding large sums of money in Revolut is not the same as with a high street bank.

True - though as we've seen over the years, brokers holding client money have not always correctly followed proper segregation rules. But that would be fraud or certainly against the rules.

The major difference is that if you deposit with a bank you get the full deposit protection (€100k). However, when Revolut deposit with a bank, the underlying bank doesn't recognise the underlying beneficial owners. So it is one amount of €100k which would fall under the scheme.

 

[RedOnion]

it not only be the case that the funds are at risk if there is a fraud i.e. Revolut doesn't put your money in the client account? I thought under E-money regulation the institution is required to place client money with a 3rd party bank? So your true exposure/counterparty risk is with the bank?

So, the exact same as with wirecard?

 

[Brendan Burgess]

Why should anyone take the risk?

It's easy to load your Revolut card.

Put in €500 or whatever you are comfortable with losing.

I am shocked by the people who are using it as a bank account. As I say, the risk is small, but the consequences for the person are huge. Imagine if someone had the deposit for their home in their Revolut account and it went bust!

Brendan

 

[NoRegretsCoyote]

I am shocked by the people who are using it as a bank account. As I say, the risk is small, but the consequences for the person are huge. Imagine if someone had the deposit for their home in their Revolut account and it went bust!

You would just become a creditor and get in the queue. You would probably not lose anything close to everything.

Even if you were made whole you could be waiting a while for your funds

 

[DublinHead54]

So, the exact same as with wirecard?

The risk is the same but they are idiosyncratic events. Fraud at WireCard does not mean there is fraud in Revolut. This was the original question.

 

[DublinHead54]

Why should anyone take the risk?

It's easy to load your Revolut card.

Put in €500 or whatever you are comfortable with losing.

I am shocked by the people who are using it as a bank account. As I say, the risk is small, but the consequences for the person are huge. Imagine if someone had the deposit for their home in their Revolut account and it went bust!

Brendan

This is an interesting point on trust and risk.

I use Revolut for my day to day spending and load the card with my budget once a month. I do this because I feel it gives me a better user experience than say for example my BoI account both in security od payments, cost and analytics.

I am willing to accept the risk for the better product experience.

I actually like that Revolut is a product born out of a real world problem and has therefore always been a customer centric platform. Whereas my experience with online banking with Irish banks is they are built because they have to offer the service and are functionslity driven rsther thsn customer driven. I understand banks are investing in tech heavily niw to catch up

 

[RedOnion]

The risk is the same but they are idiosyncratic events. Fraud at WireCard does not mean there is fraud in Revolut. This was the original question.

Yes, fraud was the issue.

However it was you that originally incorrectly suggested that the licencing & regulation were different between Revolut & Wirecard.

If fraud was the issue, then why confuse things by incorrectly stating that Revolut is a bank?

 

[DublinHead54]

Yes, fraud was the issue.

However it was you that originally incorrectly suggested that the licencing & regulation were different between Revolut & Wirecard.

If fraud was the issue, then why confuse things by incorrectly stating that Revolut is a bank?

I accepted the error I made in my description in previous posts.

You are agreeing that the issue at Wirecard has no direct implication for Revolut?

 

[NoRegretsCoyote]

If fraud was the issue, then why confuse things by incorrectly stating that Revolut is a bank?

I think this is well understood by now

The fraud is indeed an idiosyncratic issue.

I still have my doubts about Revolut. They have a really nice product for sure, but to my eye the business model is opaque and there are documented issues with AML risk. Extremely rapid growth in customer base is also risky in any industry.

 

[Brendan Burgess]

I use Revolut for my day to day spending and load the card with my budget once a month.

I am willing to accept the risk for the better product experience.

I agree fully with the principle. I really like my Revolut card and am prepared to take the risk that I will lose whatever cash I have in it if there is a problem.

But I don't see why you would load a whole month's budget?

One of the advantages is that it is so easy to top up. Why not split your budget in 4 and top it up every Monday?

Brendan

 

[DublinHead54]

I agree fully with the principle. I really like my Revolut card and am prepared to take the risk that I will lose whatever cash I have in it if there is a problem.

But I don't see why you would load a whole month's budget?

One of the advantages is that it is so easy to top up. Why not split your budget in 4 and top it up every Monday?

Brendan

Good question, I have never considered that approach. I like simplicity so why transfer money four times, when I can do it once. Maybe it is because I have not been burnt by the tech bubble or financial crisis and have grown up with emerging technologies so I am much more trusting.