Revolut Warning

Red flags

1) Theft
The Financial Times reported on Sunday (9 July 2023) that thieves exploiting loopholes in Revolut’s payment system caused a $20 million loss. Every smart thief will be reading about this problem and Revolut’s other struggles, and will try to have a go themselves.

The money lost was Revolut’s own money, not its customers. So you got lucky – this time.

2) Hacking
In September 2022, hackers accessed the personal details of 50,000 Revolut users. That was only 0.16% of their customer base, but it’s enough to encourage hackers to try again.

3) Scams
Fraudsters are targeting Revolut’s customers with sophisticated scams. It’s easy to set up an account, move money in and out, or even tumble it into crypto. The number of fraud complaints involving Revolut UK was second only to Barclays in January & February 2023, with Revolut having far fewer bank accounts than the big high street banks.

Beware of OTP (One-Time Password) requests that can give scammers access to your account or card. Scammed customers have also been complaining that Revolut wasn’t particularly sympathetic to their problems either.

4) Disappearing money
A SimplyFI member was transferring 50,000 AED ($13.6k) between Revolut and HSBC. It didn’t make it. Revolut and HSBC blamed each other. After a few weeks, both companies closed their investigations. So where’s the money? Who knows. It’s definitely somewhere. Neither company gave a monkey’s about the problem.

It’s not a situation I’d like to find myself in, especially when all I’d want to do is save a few dollars on transfers. What is a bank if not secure? Revolut isn’t a bank though… even if it wants to be.

5) Lack of trust
Revolut still does not have a UK banking licence after two years of trying. Most successful applications take less than a year. The regulatory authorities are strongly hinting that they are not going to grant the licence (note – this could change).

They don’t trust Revolut after concerns around poor compliance practices, weak anti-money laundering controls, an aggressive corporate culture and the number of times the EU regulator has had to ‘regulate’ the company. Without a banking licence, Revolut can’t offer its own accounts, loans and mortgages. Watch this space.

Banks and brokers have also seemed to be wary of Revolut accounts and transfers. Interactive Brokers often freezes funds for 5 days after a Revolut transfer.              

6) Key staff departures
Revolut’s UK entity has recently lost its UK chief executive, chief financial officer and chief of staff / head of banking products. Who’s running the show? Reports abound of an aggressive workplace culture, even ‘toxic’. Compliance experts are said to be reluctant to work there.

That still leaves the main Revolut entity in Lithuania, but that has also faced problems.

7) EU troubles
Lithuania is in the EU, so getting a banking licence brings you under the eye of the EU regulators. So far the Lithuanian and EU regulators have slapped Revolut for the data breaches mentioned above, late filing of accounts (see below), failing to have sufficient checks in place to stop dodgy customers and not collecting sufficient information. They’ve also been worried about…

8) Russian connections
The father of Revolut’s founder is a Russian with a senior position at Gazprom, the Russian oil & gas company. That’s been sufficient for two Lithuanian parliamentary enquiries and for British embassies to ban certain staff from using Revolut.

I’m not sure this is by itself a reason to avoid Revolut, but it doesn’t help either.

9) Accounts
Revolut filed its 2021 late, though claimed to have made a profit for the first time. What’s more concerning is the auditor BDO noted that it couldn’t independently verify three quarters of the company’s revenue. Three quarters! A mere $765 milllion. BDO was also criticised by the accountancy regulator for the unacceptable quality of the accounts.

If a company can’t figure the money in its financial accounts properly, I don’t see why you should trust it with your own money. It’s also sensible to limit your relationship with companies that aren’t profitable yet. If growth stops, they can implode. While Revolut claims to be profitable, a swing of +/-75% of revenue might affect that…

10) Valuation write-downs
3 major shareholders of Revolut have recently slashed the value of their stakes in the company by around half from the previous funding round where it raised money in 2021. Lots of companies have been having a tough time since the heady almost-post-Covid days. But a rapid drop in valuation makes it harder to raise more money. If Revolut is barey profitable, where will the money for growth come from? And what is driving the drop in valuation?

None of these 10 issues is sufficient in isolation to say I recommend you stop using Revolut. But they all contribute to a concerning picture. That’s why I suggest you restrict your usuage to small amounts – what you consider ‘small’ is up to you. I won’t be closing my account just yet, but I won’t be in a hurry to use it either. I certainly won’t be recommending Revolut to people, especially those who are new to expat personal finance and potentially less cautious.

Thanks
Steve

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