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The major European processor filed for insolvency last week after it was found to be missing €1.9 billion ($2.1 billion) on its balance sheet and its former CEO was arrested and accused of inflating the firm’s income, per The Wall Street Journal.
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This situation is still evolving — Wirecard could be restructured or liquidated, and questions are being raised about Germany’s financial regulator and Wirecard’s financial auditor — but Wirecard’s issues are already impacting several payment stakeholders.
Here’s how Wirecard’s scandal is complicating the operations of other firms so far:
- The UK’s Financial Conduct Authority (FCA) forced Wirecard’s UK business to suspend several operations, suddenly limiting the abilities of firms that worked with Wirecard. Fintechs including Curve and Anna Money had to temporarily suspend users’ payment cards because of the FCA’s decision, per CNBC. It also forced firms to suddenly adjust their operations: Revolut reportedly moved customers who would’ve been affected by the FCA’s efforts to other providers, for example. The disruptions caused by this situation likely frustrated users, and having to find processors and other payment stakeholders to quickly replace Wirecard puts firms in a difficult position where they may not be able to plan out their operations as they might like to.
- Mastercard and Visa have informed some Wirecard clients that they may stop allowing Wirecard to process payments on their networks, Bloomberg reports. The card networks accounted for 69.3% of all global brand general purpose purchase transactions in 2018, per The Nilson Report, so such a decision would surely push payment stakeholders that need to keep accepting payments from the networks to seek out new processing partners. And it’s possible the threat of Mastercard and Visa revoking Wirecard’s processing capabilities will cause a mass exodus of Wirecard clients even before a decision is made, as firms may quickly rework their payment partnerships to avoid disruptions.
Wirecard’s insolvency and scandal will surely scare firms away from it, giving processors the chance to boost their volume and potentially leading to a number of new partnership opportunities. Wirecard claimed that its transaction volume totaled €124.2 billion ($139.2 billion) in the first nine months of 2019, so a great deal of volume could be available as firms move away from working with Wirecard, provided these figures aren’t inflated.
And with Grab pausing its partnership with Wirecard, which would have seen the processor handle payments for Grab’s digital wallet, Wirecard’s competitors may be able to secure new partnerships with firms that have previously teamed up with Wirecard, like Klarna, SES-imagotag, and UnionPay.
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