A flaw in Revolut’s U.S. payment system reportedly let criminals steal more than $20 million.
As the Financial Times (FT) reported Sunday (July 9), the thefts occurred over several months in 2022 before the British FinTech was able to fix the issue.
According to FT, sources with knowledge of the situation said the problem resulted from differences between American and European payment systems. When some transactions were declined, Revolut would erroneously refund accounts, using its own money.
Although Revolut recouped part of the roughly $23 million stolen by pursuing some of those who had taken funds, the net loss was about $20 million — equal to almost two-thirds of its annual net profit in 2021, those people added.
The problem first began manifesting on and off in 2021, but organized criminal groups began abusing the loophole in 2022, having people making expensive purchases that would be declined, and then cashing out the refunds at ATMs.
A Revolut spokesperson declined to comment when contacted by PYMNTS Sunday.
The report notes that the incident is likely to put more pressure on Revolut, which in recent months has seen a number of departures, an audit by regulators and a drop in valuation as it waits for a British banking license.
Last month, Molten Ventures, a venture capital firm that has invested in Revolut, marked down the value of its stake in the company by 40%.
In an interview with CityA.M. Molten CEO Martin Davis said that Revolut’s as-yet-unsuccessful campaign to acquire a U.K. banking license was behind the markdown, though he maintained that his firm remained confident in the FinTech.
“But the reality is, we all know that there are some proof points the market wants to see around increased revenues for 2022, to get a clean set of accounts 2022,” he added. “They want to see visibility around profitability, they want to see visibility around the banking license in the U.K.”
Revolut has been trying to get a British banking license since 2021. In May, CEO Nik Storonsky blamed recent turmoil in the banking sector for its ongoing holdup.
“Ultimately, it is not really us, it is generally the banking crisis we see at the moment that makes regulators extra cautious,” Storonsky said at the time.
The company has been expanding its operations in the U.S. of late. Last week, Revolut debuted a Shops feature that provides up to 3% instant cash back rewards at participating brands and retailers listed in its app.
And in late June, Revolut brought its robo-advisor to the U.S., a tool that manages and invests in a variety of portfolios for consumers.
