The London-based fintech has revolutionized banking since its launch in 2015. But is your money safe with it?
You know a product or a company has truly taken off when its name can be used as a verb. We all google things online almost every single day. We hoover our homes. And now we regularly revolut our friends money. It’s a testament to the fintech's huge popularity that it’s managed to achieve this ubiquity in English parlance in the space of a few short years.
But what exactly is Revolut? Is it a bank? Does it actually offer a current account in the traditional sense? And is your money as safe in its app as it is with any of the main pillar banks?
Who is Revolut?
Revolut is a UK-headquartered fintech company which launched in 2015 and has over 15 million customers worldwide, over one million of whom are in Ireland according to the company's head of operations here.
Revolut is oftentimes referred to as a ‘digital bank’, with all its services being carried out through its mobile app.
Revolut offers largely free day-to-day banking. There’s no monthly or annual maintenance fee for using its app, there’s no charge for chip and pin or contactless transactions. There’s no fee for standing orders or direct debit payments either. And best of all, there’s no foreign exchange fees on purchases made outside the Eurozone up to a limit of €1,000 a month.
Is Revolut a bank?
Not in Ireland. At least not yet.
Revolut is licensed in the UK by the Financial Conduct Authority (FCA). It has an electronic money or e-money licence in the UK, not a banking licence, and up until Brexit had used that same licence to operate in Ireland.
In late 2018 Revolut received a banking licence in Lithuania to operate as a bank there. Under EU passporting rules, a bank or financial institution which is licensed in one EU country is able to ‘passport’ or transfer that licence to another country without having to get full regulatory approval all over again. However Revolut hasn’t done that yet for Ireland. So it's a bank in Lithuania but not one in Ireland.
As well as its banking licence in Lithuania it also has an e-money licensed business there. Since January 2021 it has passported that licence over to Ireland as its UK e-money licence was no longer valid.
It's unclear why it didn't passport over its Lithuanian banking licence - though this would have involved more work.
Is my money safe with Revolut?
Many people are probably familiar with the Central Bank’s Deposit Guarantee Scheme (DGS). This scheme guarantees deposits with financial institutions, credit unions and banks in Ireland that are authorised by the Central Bank up to €100,000 per person per institution. The Irish DGS also protects deposits held at EU branches of authorised Irish institutions. So for example if AIB was offering savings accounts to German customers from a branch in Berlin, these customers would be covered by the Irish scheme and not the German one.
As Revolut has a banking licence in Lithuania, its customers there are covered by Lithuania's own version of the DGS up to €100,000. Had Revolut passported its banking licence from Lithuania to Ireland then customers of Revolut in Ireland would also have been covered by the Lithuanian deposit protection scheme. But this hasn’t happened.
Instead, as previously mentioned, Revolut is using its Lithuanian e-money licence to operate here, so customers in Ireland aren't protected by any Deposit Guarantee Scheme.
So how are customers protected?
Through what's called 'safeguarding'.
According to Revolut, as an electronic money institution, it is: “required to safeguard money we receive from (or for) customers... Safeguarding means that we deposit the money we receive from you (or for you) into a client money bank account. The money in these client accounts is held by us on your behalf. We have client accounts with a range of large banks (that meet our and our regulator's requirements)."
In the case of Irish customers, the main client money bank account is JP Morgan (before Brexit it was Lloyds in the UK) and Revolut, in theory, should have no access to this money.
If Revolut were to become insolvent, customers would be able to claim this money back from JP Morgan.
According to EU rules, depositors will get their funds back in priority to all other creditors. So Irish Revolut users can take comfort from this.
However the issue could arise where Revolut fails to "safeguard" or segregate all of its depositors’ money or where the costs of winding up the fintech, in the unlikely event of it going bust, outweigh the funds available. So there is a small risk here.
What happens if JP Morgan goes bust?
If Revolut keeps your money in a JP Morgan bank account the question then arises as to what would happen if JP Morgan goes bust?
It's unclear whether Revolut customers would be covered by the Lithuanian government in some form or whether the Irish government would step in to help Irish account holders and some experts say we'd only know for sure in the event of an actual default.
Will Revolut ever become a bank in Ireland?
Revolut is currently applying for an e-money licence from the Central Bank of Ireland and approval is expected within 12 to 18 months.
Once this happens users will be issued with Irish Ibans.
However it has no plans for now to either apply for an Irish banking licence or to passport its Lithuanian banking licence over here.
We've focussed mainly on how safe your money is with Revolut in the unlikely event of a default.
But how safe is your money on a day-to-day basis?
Here Revolut seems to have a big advantage over its rivals. It claims to be seven times better at stopping card fraud than the main high-street banks, and allows customers to easily stay in control of their money with a range of in-app security features that you can toggle on and off at the touch of a button.
Its virtual disposable cards also make paying for goods online super safe.
Plus, all of your card transactions are processed by either the Mastercard or Visa network (depending on the card you have) and are therefore protected by their payment rules.
The bonkers.ie opinion
We're huge fans of Revolut here at bonkers.ie and love how the fintech has helped revolutionise banking and forced the main Irish banks to up their game. However, although there are rules protecting your money, it would be tough to deny that your money isn't quite as safe in a Revolut account as it is in an Irish bank account.
So if you're lucky enough to have €20k or so lying around in savings then maybe Revolut isn't the safest of places to put it. However Revolut pays no interest on savings whatsoever anyway, so leaving excess money with it isn't a good idea to begin with.
But if you're just looking for a good value 'bank' account to carry out your day-to-day banking needs it's tough to find a better app to use.
Recent Revolut news
If you’re looking for more information on Revolut, here are a few articles that will help:
- Check out this blog post for a more in-depth look into Revolut’s status as an e-money licence company.
- Revolut recently announced that Joe Heneghan, the CEO of its Irish operations, was set to lead the company’s European operations in Lithuania. Here he will oversee Revolut’s further expansion in the European Economic Area.
- Earlier in the year, Revolut announced an increase in its fees for standard customers for the second time in less than a year, which will affect ATM withdrawal fees and international money transfers.
Consider all options
When looking for a current account, it’s essential to consider all of the options available to you so that you can choose the account that best suits your needs.
At bonkers.ie, you can compare current accounts across a range of providers with our easy-to-use comparison tool. It only takes a few minutes and could help save you money on monthly banking fees.
We recently released an episode of our bonkers.ie podcast, which took a deep dive into current accounts. In the podcast episode, we outlined the pros and cons of current account options, from traditional banks to fintechs like Revolut.