(Cross-posting at both LinkedIn and Substack - please visit our Substack page if you’d prefer to read this newsletter there/subscribe there!) Show For those in the UK, Ireland, or in Europe, you probably already know about Revolut. The phrases “neobank,” “challenger bank,” and “superapp” have taken off in the last few years, but arguably Revolut is one of the first institutions from which the terms originate. For the uninitiated, they were founded in 2015 and the company offers consumers in the aforementioned markets a variety of different products, including bank accounts, debit cards, currency exchange, brokerage services/stock trading, a crypto exchange, and peer to peer money transfer. What has made them a formidable player is not just the fact that they offer all of these services, but the fact that they offer them in a way that specifically undercuts the slow or customer-unfriendly practices of the bank, to do it in faster or more consumer-friendly ways. For example, currency exchange can be an onerous process when travelling abroad, but Revolut offers this service for free. They also have gotten into the practice of “staking” in cryptocurrency, which for consumers is essentially the crypto equivalent of earning interest on deposit accounts. They even have gotten into the acquiring business a few years ago, allowing them nearly full end to end coverage of consumer financial services. Where they have been in the financial/regulatory news over the last few years is for their efforts and mixed success in acquiring licenses. Currently, they are regulated as follows:
The world of licensure is a long and complicated one especially in fintech, but why this matters is because of the benefits it brings from the institution and consumer’s perspective. From the institution’s perspective, it allows them to offer more products and tout the regulatory backing as part of their brand/legitimacy, separating them even further from the rest of their peers in the space (for context, the next closest “challenger bank” in size to Revolut’s over $30 billion valuation is N26 with just under $10 billion) (courtesy of the previously linked article from the Financial Times): From the customer’s perspective, they get the benefit of regulatory protections if they are impacted by fraud, which is where banks can offer “zero fraud liability” with confidence. In addition, in these cases many of these banks have the money to make the customer whole right away and then can take their time investigating the fraud properly, sometimes even teaming up with law enforcement to recover the funds so they can become whole. And that’s where today’s horror story comes in. I’ll let the customer (who happens to work in the tech space himself) tell the story directly (or you can view his post here): It’s a pretty maddening situation, but unfortunately it’s not the only example of this happening. So the question that naturally follows is “is this legal? Who is liable? How could I get my money back?” To first off determine how Revolut can take such a seemingly brazen attitude towards this sort of thing occurring, it’s important to review their Terms and Conditions, specifically the portion that talks about “what happens if someone steals from my accounts?” The answer is not the you-would-think-it’s-obvious “it wasn’t my fault so the bank should assume the liability”: It’s this last part that is critical, regarding the claim that Revolut will not be responsible for the customer “carelessly failing…to keep your security details or Revolut Card safe (unless you told us about this before the payment was taken from your account). For example, we won't refund you if you gave someone your Revolut Card PIN and they made a payment using your card without you knowing about it.” So in an instance like the above, where you are caught in a scam and get duped into sharing your information with the fraudster, Revolut is taking the stance that they have no liability. You would think that the licensure situation could remedy this. After all, regulators have more scrutiny and oversight over the bank. In this instance, regardless of what the terms of service say, the customer was based in Ireland, which is governed by the bank’s EU license (obtained in Lithuania, but still applies here) and thus those regulations supersede any terms stated by the company. While in the UK or the US (where licenses haven’t yet been approved) there might be no immediate remedy, in the EU this is a straight up violation. But the reality of how these regulations are enforced is very different than what is on paper. Cynically, it is likely that Revolut is willing to gamble that most customers will not have any idea of their remedies under law. For all the noise they make about ending discrimination for their EU customers (particularly those in Ireland) because of the fact that they had Lithuanian IBANs, the fact that they also don’t have a proper customer service function (I.e. no phone number, just chat functionality on the app) shows how little of a priority it is for them (and is reinforced by their standing in the world of consumer complaints). If you have to jump through hoops to contact their own customer service, they are likely willing to bet you won’t have the energy to jump through hoops to get a hold of an EU regulator. This isn’t the only instance of this kind of an issue happening to a customer, in other words not a one-off occurrence. And a look at competitors reveals this is happening to their customers as well (here’s an example of a Starling customer getting scammed and another of a Monzo customer getting scammed). It does raise the question of how much responsibility the banks bear for fraudsters impersonating them since fraud is getting more and more rampant. It is not as simple as saying “man, how dumb do you have to be to click a link from an email sent by a Nigerian prince offering you millions of dollars?” The days of those kind of scam attempts are long gone (or much less successful). Phishing, spoofing, and the like are becoming more and more sophisticated. With advances in AI, it’s very possible that we could be looking at fraud through more and more advanced means including voice-based and face-based authentication. What is the takeaway if you’ve been a victim of this scam? If you’re in a EU member state, you can contact the regulators affiliated in with your central bank (in this Irish customer’s case, a good resource would be the Competition and Consumer Protection Commission) and it will help to open up a case to ensure that Revolut is abiding by the law. If you’re in the UK, there’s a service called “Refundee” that specifically caters towards these situations and helps to make customers whole, and they are one of many “consumer champions” that have been empowered by the main regulator, the FCA, to help consumers out. If you’re in the US, the current deposit products are offered in partnership with Metropolitan Commercial Bank which is FDIC regulated. Some customers have also started complaining to the CFPB (with a degree of success - of the 68 complaints that have been made about Revolut since they started operating in the US, 11 of them successfully won monetary relief). Alternatively, you could take the purported aim Revolut and its peers have of displacing the entire existing infrastructure with a grain of salt, and from the start make sure to use the account only for small amounts or “petty cash,” as some commenters recommended to our original victim. And if you’re a merchant, you could follow the example of a bus company in the UK which straight up just banned “online-only” banks outright. The broader theme here? It seems like the “innovation-first” mindset is going to continue to face a great deal of backlash as it continuously appears to have been adopted by many organizations at the expense of the very people they are supposed to be serving. Which bank is better N26 or Revolut?For money transfer services, when we compared N26 vs Revolut, I would say that they are both at a draw. Their core services are the same and are both great! However, only Revolut lets you hold different currencies in the account. This feature could be great if you need it! Is N26 a trustworthy bank?Is N26 Safe? N26 is a regulated German bank, meaning that the deposit protection scheme protects your money up to €100,000. The banking app offers a variety of security features such as passwords, PINs, two-factor authentication, and biometrics. You will also be asked to verify your login or any outgoing payments. How safe is Revolut as a bank?Your money, protected We've been guarding funds like the crown jewels since 2015. How? Your money is held in a safeguarded account with a regulated bank or in high quality liquid assets. Your savings are deposited with partner banks. How safe is Ally online banking?Is Ally a safe bank? Your money is safe with Ally Bank because it is FDIC-insured. This means that your funds in Ally deposit accounts are insured up to $250,000 per person, per ownership category if the bank goes out of business. |
