Payment System Shortage Costs Revolut $20M

Revolut fintech startup has reportedly lost around $20 million due to an error in its payment system in the United States, according to the Financial Times. The problem arose from differences between European and American payment systems, which caused Revolut to mistakenly return money when rejecting certain transactions. This error was first noticed at the end of 2021 but was only exploited by attackers at the beginning of 2022. The attackers encouraged people to make expensive purchases, which were later reversed, and the money that was returned to the account was then cashed through ATMs.

The large-scale fraud went unnoticed by Revolut, but was identified by the company’s partner bank in the United States. The bank reported that it was holding less cash than expected. Consequently, the American division of Revolut requested several million dollars in cash from its parent company. By spring 2022, the startup had fixed the problem.

The sources mention that Revolut managed to recover a portion of the stolen $23 million, although the company’s losses from the incident amounted to approximately $20 million. This amount represents nearly two-thirds of the startup’s value in 2021. However, Revolut has not publicly reported these losses and a representative of the company declined to comment on the case.

It is worth noting that Revolut did not mention the theft in its 2021 report, which marked the company’s first profitable year since its founding. The report stated an annual profit of $31 million. However, auditing firm BDO warned that the income may be significantly distorted. The auditors revealed that they did not receive sufficient evidence regarding the completeness and reliability of the income from three Revolut business units, totaling £477 million ($612 million), which accounted for 75% of the company’s overall income.

Following this, Revolut issued a statement claiming the BDO auditors’ conclusion reaffirmed that the financial statements accurately presented the company’s situation. The startup criticized the media’s inaccurate portrayal of the audit report, emphasizing that the entire £636 million income had been independently verified and was not in doubt.

The theft incident could have a negative impact on Revolut’s reputation and the trust placed in the company, especially following the recent departure of several top managers. Additionally, two investors, Molten Ventures and Schroders, reduced their shares in Revolut by 40% and 46% respectively.

/Reports, release notes, official announcements.