Wirecard goes bust - implications for Revolut?

RedOnion said:
No it's not, unless you are a customer in Lithuania.
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Even if you're a Revolut customer in Lithuania I'll lay money you are a customer of the payment processor and not the bank. I suspect the bank license is for technical and treasury management reasons and not a customer facing entity
 
Dublinbay12 said:
Wirecard is a payment processor, Revolut is a bank, these companies are essentially different industries and are regulated differently. We should not mix the two up.
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It is very worrying that a confident, well informed poster can make this dangerous error.

If anything happens Revolut, Joe Duffy will be full of callers calling for the government to do something as they allowed 1m people to be fooled into thinking that they were a bank and their money was safe.

No one should have money in Revolut for very long. Just enough for your payments over the next few days.

If you are making a large payment in a foreign currency via Revolut, you should lodge the money just before you pay it out.

Brendan
 
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EmmDee said:
Even if you're a Revolut customer in Lithuania I'll lay money you are a customer of the payment processor and not the bank. I suspect the bank license is for technical and treasury management reasons and not a customer facing entity
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Just checked - as I suspected, Lithuanian customers of Revolut contract with "Revolut Payments UAB"
 
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No mention of bank guarantee, much more like leaving money with a stockbroker client account afaiu.
 
Agreed. I'm not encouraging folks to leave funds there. I have advised friends in past not to leave large sums there.
 
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I know someone who uses Revolut as his only account. He gets his salary mandated into it and keeps his life savings there. Very foolish. He conflates its wonderful functionality with competence and protection. When I pointed out to him that they have a high probability of failure and that he could lose a significant amount of money should they go wallop he dismissed me as an anti-tech philistine.
 
Just transferred my holiday savings back out of Revolut after reading this. We'd wanna be careful not to cause a run on them!
 
Fair enough, perhaps "run" was not the correct term but surely of everyone withdrew their money, Revolut would cease to exist?
 
I was talking to a colleague about Revolut yesterday. He spent five years in retail banking and works on regulatory issues.

In his head he thought Revolut had a "banking license in Estonia" and that this was the entity that app-users dealt with. Completely wrong!

If someone knowledgeable doesn't know this stuff then how on earth is a retail customer supposed to know?
 
RedOnion said:
No, it's not a bank.

You should read up a bit before you correct other people.
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Revolut offers banking services such as savings and debit cards for retail users, whilst Wirecard operates in the payment processing space for businesses. Revolut does have a banking license in Lithuania, but trades through an e-money license in Ireland, so the regulation is different to that of say BofI.

However, the premise outlined here is that because Wirecard a 'FinTech' has gone due to Fraud, that Revolut another 'Fintech' is also susceptible. My opinion, is that is an example of a casual connection fallacy. They are independent companies, and whilst Revolut has its own business model challenges. In fact, even under a more stringent regulatory environment that a banking licence brings we can't be sure that the WireCard fraud would have been caught, as regulators do not audit. Fraud of this nature is a company-specific event, so every company has an element of fraud risk associated, the Fraud at Wirecard shows no indication of this being a systemic industry-wide occurrence. My biggest concern is the strength of auditors and their ability to find fraud examples in any industry.

I agree with the points on using Revolut you are putting your trust in a loss-making technology firm, but that is a completely independent issue to the Fraud at Wirecard. I also, do not disagree with the suggestions of keeping money in Revolut, I am just trying to bring the conversation back to the original question rather debating the risk of keeping money in revolut.

My two cents, is that e-money regulation is going to be enhanced via PSD3 and other regulation in the coming years as European regulators really focus on a customer-centric platform based form of regulation. We have already seen this in PSD2 with more authority given to the EBA. Payments is still a rapidly evolving area.
 
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Dublinbay12 said:
Revolut offers banking services such as savings and debit cards for retail users...
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Definitions are important - Revolut doesn't offer banking services. It can't do that without contracting as a bank. It offers payment processing and maintains customer cash with another (actual) bank

Dublinbay12 said:
...Revolut does have a banking license in Lithuania, but trades through an e-money license in Ireland, so the regulation is different to that of say BofI.
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They have a bank license but don't use it for client facing activity. So it isn't a "bank trading through" anything. They use the e-money license for all customers (not just Ireland). But it isn't an intermediary between the customers and a bank. The bank and e-money entities are in the same group but there shouldn't be any confusion between the two

Dublinbay12 said:
...However, the premise outlined here is that because Wirecard a 'FinTech' has gone due to Fraud, that Revolut another 'Fintech' is also susceptible.
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I don't think that is what people are saying. I think the point being made is that (often) retail customers don't fully understand what counterparties they have exposure to and often make assumptions such as Revolut being a bank

Dublinbay12 said:
My two cents, is that e-money regulation is going to be enhanced via PSD3 and other regulation in the coming years as European regulators really focus on a customer-centric platform based form of regulation. We have already seen this in PSD2 with more authority given to the EBA. Payments is still a rapidly evolving area.
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This may be true - but I don't think any e-money regulation will bring full banking requirements to payment services firm. So risk won't be the same as with a bank but if people don't understand the differences there could be problems
 
Dublinbay12 said:
Revolut offers banking services such as savings and debit cards for retail users, whilst Wirecard operates in the payment processing space for businesses. Revolut does have a banking license in Lithuania, but trades through an e-money license in Ireland, so the regulation is different to that of say BofI.

However, the premise outlined here is that because Wirecard a 'FinTech' has gone due to Fraud, that Revolut another 'Fintech' is also susceptible. My opinion, is that is an example of a casual connection fallacy. They are independent companies, and whilst Revolut has its own business model challenges. In fact, even under a more stringent regulatory environment that a banking licence brings we can't be sure that the WireCard fraud would have been caught, as regulators do not audit. Fraud of this nature is a company-specific event, so every company has an element of fraud risk associated, the Fraud at Wirecard shows no indication of this being a systemic industry-wide occurrence. My biggest concern is the strength of auditors and their ability to find fraud examples in any industry.

I agree with the points on using Revolut you are putting your trust in a loss-making technology firm, but that is a completely independent issue to the Fraud at Wirecard. I also, do not disagree with the suggestions of keeping money in Revolut, I am just trying to bring the conversation back to the original question rather debating the risk of keeping money in revolut.

My two cents, is that e-money regulation is going to be enhanced via PSD3 and other regulation in the coming years as European regulators really focus on a customer-centric platform based form of regulation. We have already seen this in PSD2 with more authority given to the EBA. Payments is still a rapidly evolving area.
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Why are you still comparing Revolut to Bank of Ireland and going on about the Banking Licence in Lithuania like consumers should be comforted by that? It has nothing to do with it. Revolut operates under a UK e-money licence and passports that into the EU. It is not bank. It is nothing like a bank. To suggest otherwise is just misleading.

Nobody is suggesting that just because there was a fraud in Wirecard, then there is something wrong with Revolut. The point is that a lot of people do not understand Revolut and think it is something it is not. You stated more than once that Revolut is a bank. It is not and it is dangerous to think that. There is nothing wrong telling people that at the end of the day Revolut is a loss making technology company owned by two Russians, a banking licence that is not really used in a Country like Lithuania whose banking system is high up on every money laundering and sanctions check because of links to Russia. By all accounts it has a toxic work atmosphere with huge turnover of staff. The company has gone through 4-5 highly regarded Compliance Officers in the last few years. Not saying there is anything wrong with the company but it seems to have developed a 'cult' like following which always sets alarm bells ringing in my head.

Revolut could turn out to to be biggest thing in financial services but would I mandate my salary to Revolut today or save large amounts on the App today? Not a chance. So while Revolut might not see the same fraud as seen in Wirecard, there are questions that need to be asked about all these companies that operate in the e-money space. The lines between these companies and traditional banks are getting blurred all the time and people need to be aware of that because anyone who thinks they are dealing with a bank is wrong.
 
EmmDee said:
Definitions are important - Revolut doesn't offer banking services. It can't do that without contracting as a bank. It offers payment processing and maintains customer cash with another (actual) bank
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Ok fair enough, I was incorrect in my terminology of a Bank, I was not using it in the context of the regulatory definition, but rather the services I can get vs an actual bank for a checking account. I agree it can be misleading for those that do not understand the regulation and protection.
 
It's clear that there is no connection between Wirecard and Revolut.

But the demise of Wirecard highlights something important - people who have money lodged with it are not protected in the same way that they would be protected were it a bank.

It also highlights that a company can be very successful and provide a really fantastic service but if it's not making profits, its customers are at risk.

I am shocked at the reports of people who have large amounts on deposit in their Revolut account. The risk might be small, but the consequences would be huge.

It would probably be a good regulatory mover for Revolut to refuse to allow deposits which bring the balance to in excess of, say, €3,000.

Brendan
 
Brendan Burgess said:
It's clear that there is no connection between Wirecard and Revolut.

But the demise of Wirecard highlights something important - people who have money lodged with it are not protected in the same way that they would be protected were it a bank.

It also highlights that a company can be very successful and provide a really fantastic service but if it's not making profits, its customers are at risk.

I am shocked at the reports of people who have large amounts on deposit in their Revolut account. The risk might be small, but the consequences would be huge.

It would probably be a good regulatory mover for Revolut to refuse to allow deposits which bring the balance to in excess of, say, €3,000.

Brendan
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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.
 
@Dublinbay12

I think the risk is that client funds are aggregated and Revolut's balances at third-party banks are much greater than 100k, therefore not subject to individual-level guarantee.
 
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