Breach of Payment Services Directive


#1

Two friends whom I introduced to Revolut have experienced delays in paying out money from Revolut as bank transfers.

Article 69(1) of Directive 2007/64/EC (the “Payment Services Directive”) requires the payer’s payment service provider to ensure that the payment “is credited to the payee’s payment service provider’s account at the latest by the end of the next business day”. This is enacted in the United Kingdom under Regulation 70(1) of the Payment Services Regulations 2009 with similar wording.

GBP payments via Faster Payments Service are same-day, i.e. the money arrives in the payee’s account on the same day that it leaves the payer’s account. EUR payments via SEPA arrive on the same day or one working day later, i.e. the money arrives in the payee’s account no later than the next working day after it leaves the payer’s account. FPS and SEPA thereby both comply with the legislation.

My friends tell me that Revolut takes 2 to 5 working days for an FPS or SEPA payment, and that Revolut support even falsely claims that 3 to 5 working days is the norm for a SEPA payment. These non-compliant timescales are confirmed at https://revolut.com/faq/gettingstarted.php?cat_id=7&cat_name=Bank%20Transfer#parentVerticalTab7

Does Revolut believe that it is exempt from complying with Article 69(1) of Directive 2007/64/EC or Regulation 70(1) of the Payment Services Regulations 2009, and if so, why?


#2

I don’t think the community forum is the right place for such matter :slight_smile:


#3

Why isn’t it the right place? I e-mailed Revolut about this and received no response. So the next step is to ask the question in the forum.


#4

Hi @NFH,

Thank you for bringing this to our attention.

Of course our community is a friendly forum for our users to share their knowledges, ideas, learning and discuss about Revolut.

Please be sure we’ll respond to your query as soon as possible.


#5

I guess the exception provided by Article 3(j) might apply:

(j) services provided by technical service providers, which support the provision of payment services, without them entering at any time into possession of the funds to be transferred, including processing and storage of data, trust and privacy protection services, data and entity authentication, information technology (IT) and communication network provision, provision and maintenance of terminals and devices used for payment services;

In the FAQs, Revolut claims that the money is not in their possession:

Revolut does not transact, take or keep any money from customers directly. All your money is held in ring-fenced client accounts at Barclays. That means if anything happens to Paysafe Financial Services or Revolut, your money is still safe.

But only a more in-depth analysis would give an answer. Good luck to Revolut’s legal dept… :slight_smile:


#6

Good catch. Yes, it is Revolut’s payment provider, The Currency Cloud, which would be in breach of the directive if the transfer takes longer than the stated timescales once Revolut has instructed the transfer. It must be a bit of a grey area as to whether Revolut has a legal obligation to instruct the transfer within anything other than its own advertised transfer times. Compare with a notice account at a bank: the bank isn’t in breach of the directive if it takes 30 days to transfer money out of a 30-day notice account… Hmmm.


#7

Revolut has a responsibility to the end-user to ensure that the legislation is complied with. In turn, the Currency Cloud has a responsibility to Revolut to ensure that the legislation is complied with. Having multiple parties in the payment chain does not preclude any party from being bound by the legislation with respect to its own immediate customer.


#8

Hi @NFH,

Thank you for contacting us.

First of all, please do allow me to apologise for the late reply to your email. We endeavour to answer every query as soon as possible, but it seems that due to the month of August, your email ‘slipped through the cracks’ and this wasn’t brought to my attention until you raised it here on our community page.

To respond to your question directly, first it is important to clarify some details:

When a user issues a transfer through the Bank section of the Revolut app, that transfer is not sent out by Revolut, but by our payment processor which is Currency Cloud LTD. That is, we are not a ‘payment service provider’ as defined and for the purposes of Directive 2007/64/EC. You can confirm this in the Terms and Conditions of our service which clearly state in item 1.1 that “Revolut Limited does not at any time (…) provide any payment service activities (as defined in the Payment Services Regulations 2009) to Users of the Revolut Service”.

It is also important to clarify that the ‘payment service user’ or ‘payer’ referred to both in the Directive and the Regulations is Revolut, and not the individual Revolut user.

This being said, as you pointed out correctly, Article 69 (1) of the Directive and Article 70 of the Regulation require that payment service provider (i.e. Currency Cloud and not Revolut) ensure that the amount of the transaction is credited to the payee’s payment service provider’s account at the latest by the end of the next business day. This must be done “after the point in time of receipt in accordance with Article 64”.

The body of Article 64 states that “(…) the point in time of receipt is the time when the payment order transmitted directly by the payer or indirectly by or through a payee is received by the payer’s payment service provider. If the point in time of receipt is not on a business day for the payer’s payment service provider, the payment order shall be deemed to have been received on the following business day. The payment service provider may establish a cut-off time near the end of a business day beyond which any payment order received shall be deemed to have been received on the following business day.”

Also, (2) of Article 64 also establishes that “If the payment service user initiating a payment order and his payment service provider agree that execution of the payment order shall start on a specific day or at the end of a certain period or on the day on which the payer has set funds at his payment service provider’s disposal, the point in time of receipt for the purposes of Article 69 is deemed to be the agreed day.” (our bold)

To translate all of this into simpler language, our payment service provider - Currency Cloud LTD - must ensure that the transfer is executed within one business day from the day that the funds for the transfer are made available to them by Revolut. Indeed, they do comply with this rule and you can review their daily cut-off times for each currency in the following link.

You can also see that at the top of that page it clearly states that: “Currency Cloud must have received cleared funds and a Settlement report (if required) before the following cut off times in order for the payments to be processed in that particular run”.

Either way, even though we endeavour to stay within this rule, if payments would take longer than the one day established it would still be within the legal scope of the Directive as Article 68 (2) states that “(…) when the payment service user and his payment service provider agree on a longer period than those laid down in Article 69, for intra-Community payment transactions such period shall not exceed 4 business days (…)” (our bold).

So the time at which a transfer issued via the Revolut app is sent out can depend on a number of factors. First, it is affected by when the user issues the transfer. If the funds will only arrive at the payment service provider after the cut-off time for the specified currency, then the transfer will only be sent out in the next run. That is, for example, if a transfer in GBP to a UK account is communicated to the payment service provider at 14:30, then that transfer will only be sent out on the next run at 14:00 of the next day. For this reason, since the actual arrival date for the transfer is dependant on factors outside of Revolut’s control, we state in our FAQs that it could take 1 to 2 days to arrive as to ensure that we inform the user of the maximum possible timeframe.

Likewise, if the transfer necessitates a conversion in currency, then it will imply a slight increase in time both to make the funds available for transfer as well as for the payee’s payment service provider (i.e. usually the beneficiary’s bank) to make the funds available if a conversion is necessary on their end. Due to this, we state in our FAQs that international deliveries can take a maximum of 5 working days to arrive (although some of these transfers are outside of the scope of the Directive).

In summary, you asked if Revolut felt that it was exempt from complying with Directive 2007/64/EC or the Payment Services Regulations 2009. Indeed, it seems that you have confused the terminology and the position of Revolut in this chain. Revolut is the payment service user and not the payment service provider, and it is up to them to be compliant with the legislation alluded to above. As I have demonstrated, our choice of third party payment service provider - Currency Cloud LTD - does in fact comply with all the relevant requirements.

Incidentally, if you are interested in this topic, I would also point out that Directive 2007/64/EC has been repealed by Directive 2015/2366 which will come into effect in January 2018.

I will also send all of this information to you via email and I might be able to help with your friend’s transfers as well if you send me some of their details to my email. I have posted it here as other users have taken an interest in this topic so I believe it to be fair that they can see it as well.

I do hope that this helped to clarify this matter a bit and please do not hesitate to let me know if you have any further queries or concerns on this issue. Many thanks.


#9

Thank you very much for your comprehensive and explanatory response. It is excellent that Revolut’s compliance team responds directly in these forums and engages with users in this way.

[quote=“filipe.sousa, post:8, topic:1844”]Also, (2) of Article 64 also establishes that “If the payment service user initiating a payment order and his payment service provider agree that execution of the payment order shall start on a specific day or at the end of a certain period or on the day on which the payer has set funds at his payment service provider’s disposal, the point in time of receipt for the purposes of Article 69 is deemed to be the agreed day.” (our bold)
[/quote]
This is correct. Article 64 of the directive is enacted in the UK under Regulation 65 of the Payment Services Regulations 2009. However, your helpful response raises two questions:

  1. Why does Revolut delay the execution date for up to three days?
  2. Why does Revolut not inform the user, who is instructing the payment, that the execution date will be on a future date? Informing the user that the payment (waiting time for execution and the payment itself) will take 3 to 5 working days is not the same as informing them that execution will be on a future date. Perhaps the wording could be clarified in the app when sending a payment.

#10

Hi again @NFH ,

Thank you for your kind words. It is not often that members of the compliance team get to engage directly with the community, so it is a nice change of pace to receive relevant questions and to be able to post here.

To answer your questions directly:

Why does Revolut delay the execution date for up to three days?

We do not delay the execution, quite to the contrary, we try to ensure that every transfer is sent out as soon as possible. However, the date it will actually be ready to sent out on the payment service provider’s side will be dependent on some factors which may influence the execution date.

For example, several users issue a request for a transfer through the app. All of those requests are accumulated and then communicated every day to our Issuer to make the funds available to our payment service provider, Currency Cloud LTD. Once they have the funds and the information for the transfer - as you correctly pointed out - they are under a legal obligation to execute the transfer within 1 day, which they do.

So this would mean that if a user issues a transfer just before the cut off time for the communication to the Issuer on that day, and the funds are also made available to Currency Cloud before their cut off time for that day, then the transfer will be executed in the minimum amount of time possible. The reverse also applies, of course. That is, if the user just barely misses the cut off time, then it will only be sent in the next run on the following day from each cut off.

As for international transfers, we mention a longer timeframe as these often require for the funds to be converted before being able to be sent out - or may require a conversion on the beneficiary bank’s side - which will lead to a slightly longer timeframe until both the funds and the information regarding the transfer are fully communicated to our payment service provider.

The new Directive will also bring some news to this situation by including in Article 87 (b) that the payment service provider of the payee - usually the beneficiary bank - will only have to ensure that the funds are credited to the beneficiary account immeadiately if there is no currency conversion involved.

Why does Revolut not inform the user, who is instructing the payment, that the execution date will be on a future date? Informing the user that the payment (waiting time for execution and the payment itself) will take 3 to 5 working days is not the same as informing them that execution will be on a future date. Perhaps the wording could be clarified in the app when sending a payment.

To clarify, the 3 to 5 days are the maximum time frame, so at the end of the 5 working days the transfer will have had to be executed and the funds will have to be in the beneficiary’s account. For the large majority of transfers, it is indeed credited much sooner than the 5 days. In case it is not, then we advise to contact us so we can look into the matter.

Regardless, we are currently working on some improvements to our outbound transfers and I do agree that the wording and how it is displayed should be part of the discussion, so please stay tuned for developments on this.

Once again, please be sure to let me know if I can assist with anything else. Thank you.