Revolut, a United Kingdom fintech, received the highest number of fraud complaints compared to its peers last year, raising concerns about its fraud prevention program.
As reported by the BBC, Revolut had 9,793 complaints, almost two thousand more than Barclays. Many of these complaints involved automated push payment (APP) fraud tactics, such as a case where a Revolut customer lost £165,000 through a scam.
In this incident, fraudsters called the customer, falsely claiming his Revolut account was compromised after using open WiFi. The customer was tricked into providing login information and security codes, allowing the criminals to withdraw money from his account.
“Revolut and similar products offer quick account opening and fast money transfers, which, although convenient for consumers, can also lead to fraud and money laundering,” said Jennifer Pitt, Senior Fraud and Security Analyst at Javelin Strategy & Research. “All financial service providers, including fintechs and digital-first banks, need to properly screen new customers, including implementing identity verification measures.”
Circumventing Recognition
The authentication methods of Revolut came under scrutiny by the customer who lost £165,000, as the fraudsters were able to bypass the fintech’s facial recognition software. The software requires users to submit a selfie to authorize transactions, which the customer claimed he did not provide.
“With advances in technology, fraudsters can easily circumvent or trick facial recognition software and set up fraudulent accounts,” she added. “Instead of just requesting static photos or selfies, Revolut should require dynamic actions photos or videos, along with liveness detection solutions and robust document verification to detect alterations or counterfeits.”
Red Flags
While APP fraud is common, the customer faced issues as he was unable to contact Revolut immediately – there was no customer service phone number, just a chatbot within the app. During the 23 minutes it took for the customer to reach the correct department, £67,000 was stolen from his account, as reported by the BBC.
Another concern was the money being taken through over a hundred payments within an hour, which should have raised red flags. Most financial institutions notify customers and freeze accounts for frequent and substantial transactions.
Regulatory Flashpoint
Revolut is not classified as a financial institution yet; it holds status as a UK e-money firm but is awaiting full bank approval. Nevertheless, the company stated that it has implemented strong fraud controls in line with other banks in the United Kingdom.
The role of fintechs in the emerging banking-as-a-service model has drawn increased regulatory scrutiny globally. Regulators are worried about the reliance on fintech companies that do not face the same regulations as traditional banks. The recent collapse of U.S. fintech Synapse, leading to significant consumer losses, has heightened concerns among regulators.
While fintech companies have played a key role in advancing the financial industry towards digitalization, the lack of a regulatory framework governing these platforms – along with their user-friendly nature – has made them attractive targets for malicious actors.
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Arwen Volkov, A graduate of the University of St. Gallen in Switzerland with a degree in International Finance, Arwen specializes in sustainable finance and green investments. She began her career at an investment bank in London, where she developed financing models for environmentally friendly projects. Known for her analytical and strategic thinking skills, Arwen is a sought-after financial consultant. In her spare time, she mentors fintech startups, contributing to their growth strategies. She is also a nature enthusiast and an amateur photographer.
