Revolut for Dummies
These numbers go to show Revolut has an active customer base to save so much in such a short timeframe:
This is all very positive news
Hopefully it will support their application in becoming a bank
Thatās the only thing missing but in many ways a little important
I signed up but asked them to cancel my account pretty quickly.
I found the app to be a bit clunky, I got as far as ordering a card and they wanted me to become premium/pay for my card to be delivered. Iāve never paid (directly) for anything from a bank, so being asked for money with no free alternative put me off.
Finally it took about 15 hours to talk to a member of support (it was a weekend but still thatās a really long time) they explained once Iām gone it will be difficult to return, then I saw a notification but Iām not sure what it said and Iām cancelled. I was surprised they didnāt try to retain me or at least talk about my reason for leaving
I much prefer how Monzo just sent me a card and havenāt asked for anything in return.
Weekend support on Monzo was a refund for a duplicate payment in under 10 minutes! I canāt knock that!
Revolut isnāt a bank (yet) so you wouldnāt be paying anything to a bank by paying for Revolut Premium. Many financial companies offer a Premium tiered brand.
You donāt need to become a premium member to get a card delivered. If I remember right, you have to pay a delivery fee to get your card delivered, unless you go premium when delivery is free. They do have a free alternative - again, unless it has changed - you can get your first virtual card free.
Support wise, I have never had any issues contacting Revolut support. However there are lots of examples in this thread of people who do. There has started to be complaints about the speed Monzo replies to messages recently which made me think of this thread but I will agree Monzo are generally very good at responding.
To me itās a bank regardless of its official status, many companies do offer premium tiers, Iāve never taken up the offer and never will.
Correct, it was something like Ā£4.99 to get a physical card delivered the other option was to become a premium user for Ā£ a month or Ā£Ā£ for a year. (I canāt remember the exact fees) I set up the virtual card for free with no issue.
As stated before Iāve never paid a bank or a ābankā for a service directly, by this I mean I have many cards from many providers but Iāve never paid a delivery fee, or for a premium tier, Iām sure they make money from me some how, interest, hidden fees stuff like that.
I wouldnāt say it was hard to contact them, I sent a message and went about my life and I got a reply the next day. I feel it wasnāt very timely and they didnāt ask why I was leaving so soon.
My chat with Monzo was very quick, the issue was resolved, he gave me some additional info, then we sent some happy emojis to each other.
TL;DR I have had a mostly positive experience with Monzo so far and I wanted to get the same from Revolut but didnāt.
My other complaint was speed.
Revolut took 2 or so hours to credit a bank transfer from my highstreet bank.
Monzo and Starling both work very fast, the notification comes up while Iām still in my high street bank app.
I wouldnāt put a ton of money in Revolut either, it doesnāt have an official banking licence (though it seems to be offering current accounts on its site? strange) so it isnāt FCSC protected- you are covered up to Ā£85,000 usually. Itās not like I have a massive amount of money at the moment to lose, but Iād imagine it would be a concern to people who are earning a lot more money and looking for a bank to properly keep savings in.
@PeteyPie Eve makes an important distinction here. From a regulatory point of view Revolut are not a bank as they donāt have full authorisation and therefore deposits are not covered by FSCS. Instead your money with Revolut sits in a ring fenced client account - Barclays possibly? They operate under E-Money Regulations which have different requirements and protections to a full banking licence.
They have applied for EU full banking authorisation, though in the past Nik has claimed that their customers are safer under their current operating structure as their money is ring fenced, as opposed to a fully authorised tier 2/3 bankā¦
FCSC protection is what is called deposit insurance and it only exists to provide what is called an āoff-equilibrium threatā as a solution to the problem of a bank run (bad equilibrium in the Diamond-Dybvig Model). Bank runs can occur on banks because they engage in maturity transformation (where they lend out your short-term demand deposits and make long-term loans).
Economics aside, becauseā¦
ā¦ this means that your money is 100% safe already and there is no prospect of a bank run (such as what happened when we saw long queues outside Northern Rock during the onset of the financial crisis) that would need deposit insurance i.e. FCSC protection in the first place.
I completely understand why consumers have misunderstandings about this because for peace of mind we look for things like regulation and licences as they equate to security for us. My ten pence on this; hopefully itās helpful.
Iāve used Revolut for 9 months without any problems and itās saved me a considerable amount of money. I highly recommend them based on my experience. Take time to understand the T&Cs, especially the account limits and issues are unlikely.
Could you elaborate a little more on this please? I donāt have much in-depth knowledge about the workings about banks so Iāve always just presumed this scheme existed to protect consumers and itās just something companies with an official banking licence had. (though I understand it doesnāt protect every user in the UK depending on where they live)
So if something were to happen to Revolut, would you just be able to withdraw all the money that you hold in your account?
This presumption is entirely correct. FCSC protection for banks in particular exists to prevent bank runs (too many customers attempting to withdraw their money at the same time) which causes the bank itself liquidity problems that can lead to the bank failure. If a bank fails, then customers lose money. Therefore, preventing them is the primary form of protection and this is what deposit insurance does (stops perverse incentives of depositors lining up outside the bank all trying to withdraw their money) because you know that with FCSC protection you donāt need to worry because the governments guarantees that even if the bank were to fail, you wouldnāt lose any money.
Essentially if Revolut or the company behind their segregated accounts failed, your money would not be lost. Itās protected by a ring fence so that after all the necessary admin/litigation has been processed, your money will be returned to you and not creditors. This is the case with Glint Pay (another app that i use) and Monzo before it became a licensed bank. Maybe @simonb could confirm this.
I always understood it as if Revolut went bust youād get your money back as itās ring fenced by say Barclays. But if Barclays went bust you arenāt guaranteed the money.
Is my money safe?
Client funds are stored under a segregated account at Lloydās or Barclays, depending on the type of account you hold. As an FCA authorised institution, Revolut safeguards your funds as per FCA requirements, the Electronic Money Regulations 2011, and the Payment Services Regulations 2017. In the event of an insolvency of Lloydās or Barclays, you will be able to claim your funds from this segregated account and your claim will be paid above all other creditors.
Ringfenced funds figuratively have a moat built around them. The funds are not lent out by the ringfence provider, e.g. Barclays, nor the e-money institution, e.g. Revolut. They are not lost as they canāt magically disappear.
https://www.revolut.com/business/help/more/security/is-my-money-safe
This, of course, is a massively important aspect: FSCS promises your money back within a few days. This process is likely to take significantly longer - I could see it dragging on for many months - all the while you are potentially penny less.
Also, ringfencing has one important weakness: as far as I can see it offers no protections against malicious acts, or system failures (ie if money for whatever reason doesnāt make it into the ringfenced account, or disappears from it).
Generally, this is the FSCS promiseā¦
However, itās not a simple, short process. The FSCS will only pay out once is declares the bank has defaulted (this will not done after an investigation and will not be quick if the bank isnāt a Systemically Important Financial Institution) and after the depositor has made a formal claim.
See the link for more info.
This is just conjecture (are you citing any valid theory/evidence behind the weakness of ringfencing?) and could apply equally to a bank. At the end of the day, in both cases a consumer has to make a judgement about who the can trust to place their hard earned money with.
Isnāt this (i.e. ānot a simple, short processā) conjecture as well? Do we have historical precedence?
I have two theories, based on two facts:
- Fact: No software is perfect. Theory: Every software can have bugs. Consequently there may be a lack of funds in the ring fenced accounts due to software failure.
- Fact: Criminals exist. Theory: Consequently there is a possibility that funds may be missing from the ring fenced account due to criminal actions.
I donāt think these things apply āequallyā to FSCS protection: This is basically guaranteed, as itās backed by the government: Even if a criminal were to rob the FSCS of all funds, then the government would chip in. Of course there are other risks (government default, total collapse of government) which are unique to FSCS. Iām not disputing this, and Iām not saying FSC is perfect, or superior to ring fencing in every aspect. Iām just saying ring fencing isnāt perfect either.
That I wholeheartedly agree with!
What I donāt agree with is some providers advertising 100% security of your deposits thanks to ring fencing, or even just claiming that ring fencing is inherently better than FSCS protection in every way. Thatās just not true.
I think the most recent example of ring-fenced client money being jeopardised is that of Beaufort Securities, who were rightly shunted into insolvency by the FCA.
The key issue in this case is the smash and grab being carried out by PwC, who initially quoted a Ā£100m fee to wind up the business. As Beaufort were as light on assets as they were on integrity (DoJ indictment incoming), the administrators fees will have to come from somewhereā¦
Though, PwC have as of last week offered close to a 50% reduction in fees (oh the benevolence!) but this hasnāt yet been agreed. Minor digression: the likely net outcome is some clients will lose money.
@nanos is absolutely right that the assertion of ring fenced money is as safe as houses (oops) is really not 100% correct but @evangelskies, to go back to your question in a round about way, Theodore makes the most important point on this when he said this:
And key to making those calls is having abundant and accurate information.
Links to the Beaufort situation below, I think this constitutes as some evidence.
[Title: Beaufort Securitiesā clients in angry clashes with PwC]
Do you mind sharing the title of that story? It will allow those who donāt have an FT sub to read it after a Google search.