Deep Dives

Revolut's $20mn security breach

July 9, 2023
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Revolut, a high-profile fintech company, suffered a major financial loss due to a flaw in its US payment system, leading to theft of more than $20 million. This undisclosed incident, caused by differences between European and US payment systems, has further strained the already troubled firm, waiting for a banking license in the UK amid significant departures of senior personnel.

Security Flaw and Financial Loss: A flaw in Revolut's US payment system led to an estimated loss of $20 million.
  • When certain transactions were declined, Revolut erroneously refunded accounts with its own money.
  • The theft equated to about two-thirds of Revolut's net profit in 2021.

  • Discovery and Response: The issue was initially noticed sporadically in late 2021 and exploited by organized criminal groups in early 2022.
  • Despite recouping some losses, Revolut was largely unaware of the massive fraud until a US partner bank highlighted a discrepancy in expected cash.
  • The flaw was eventually addressed and closed by spring 2022.

  • Impact on Customers and Revolut: The incident affected Revolut’s corporate funds and not customer accounts.
  • Revolut declined to comment on the matter and the related loss was not explicitly reported in the delayed 2021 results.

  • Regulatory Issues and Financial Misstatements: Revolut's banking license application in the UK has been pending for over two years, much longer than the typical processing period.
  • An independent review of Revolut's policies to prevent and detect financial crime was ordered by the UK’s Financial Conduct Authority in 2020.
  • Revolut's auditor, BDO, raised concerns about potential misstatements in the company's 2021 revenues.

  • Staff Departures and Stake Valuation: Revolut has seen a number of senior staff departures, adding to the company's challenges.
  • Revolut's valuation has been reduced by 40% and 46% by two investors, Molten Ventures and asset manager Schroders respectively.

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