Wirecard is currently the black sheep of the payment industry but is it really the case that the longtime fintech star is an inglorious exception? Or is it not the case that companies that sit like parasites on global cash flows are fundamentally susceptible to unethical behavior?
In any case, there are some indications for me that the hype in the e-payment circus has reached an exaggerated level and investors should note that Wirecard alternatives also carry risks.
The hubris of the e-payment industry
Wirecard wanted to win over 100 million customers with boon.PLANET. It is a mobile banking app that is to be rolled out worldwide but many competitors throw around similar numbers.
Worldpay’s 2020 global payment report lists 140 payment methods and almost all promise the great revolution. They combine the payment process with loyalty programs, micro credit and data analysis. All well and good, but is that really so incredibly innovative? From the customer’s point of view, I just want to pay for my bookings comfortably and securely and that actually worked quite well 15 years ago during my time at Asiarooms.
I am suspicious that every fintech company wants to become a global player and that every payment platform speaks of tens of millions of customers and billions of transactions. Even if I am registered with a dozen services, I can only use one of them when making a purchase.
Where does all the wealth come from?
VISA and Mastercard were global brands decades ago and little has changed in their competitive situation since then however, the stock prices have increased a hundredfold.
Sure, online purchases have exploded and payment is also often made by card in retail stores. One of the two payment systems is often directly or indirectly involved in the transactions. And yet the incredible profitability is surprising. In the last quarter ending March 31, Mastercard managed to squeeze a whopping $ 1.7 billion in profits out of $ 4.0 billion in revenues – net!
The rising transaction volume and falling costs thanks to digitization may explain part of it but another factor is higher fees. In the important home market, the two were able to increase their transfer fees by a hefty 77% from 2012 to 2018, according to the Payment Methods Report 2019. But why can the two enforce higher prices on the market? It appears to be a mixture of failure of competition supervision and abuse of market power.
Another example is the pioneer PayPal for online money transfers. Since the recent price gains, the company has been valued at around $ 200 billion. PayPal was one of the best known providers 20 years ago and is still one of
the most popular options today, however, there are now powerful competitors such as ApplePay, Alipay (ANT Financial) and a number of others.
If Paypal wants to stay at the top, it has to dig deep into its pocket to take on smaller competitors. Most recently, Honey Science was acquired for $ 4 billion. This means that many fintech stocks have goodwill on their balance sheets, the value of which is not always guaranteed. As an example Honey Science raised around $ 50 million in funding which is relative low compared to other Fintech companies.
Further doubts about Fintech stocks are warranted
While US competition control is often dysfunctional and promotes lucrative monopoly structures at the expense of domestic consumers, its counterparts in Europe are more vigilant. It is a thorn in your side that such indirectly subsidized systems strive for world power. Local solutions have long dominated in China, which in turn are now trying to conquer the international markets such as ANT Financial (Alibaba).
Just a few days ago, it was also announced that the UK Supreme Court ruled that certain VISA and Mastercard clearing fees were to high and some retail chains will now need to reimburse millions of pounds back to the consumers.
At the same time, the European Union is working hard to establish an instant payment system that is independent of international providers – SEPA Instant Credit-Debit Transfer. Once this works as it should, then the time for parasitical tapping of fees along the digital payment streams may be over within the EU market.
After all, the essence is simply a simple transfer – one account balance is debited and another is credited. From start to finish, it is a fully automated process that, once properly implemented, causes practically no additional costs. It is therefore difficult to understand why you have to pour billions of payment service providers into it.
My conclusion: E-commerce will continue its triumphal march inexorably and the volume of transaction will also skyrocket, therefore there are certainly growth opportunities for innovative Fintechs however, competition is intense in many areas, while the monopoly structures are under fire at the top end.
I cannot imagine that unreasonable margins can be achieved under these circumstances. Wirecard will not be the last payment company to leave its shareholders in tears. In terms of integrations I would very carefully consider switching to Wirecard alternatives such as Asiapay in Asia and Stripe in North America and Europe. We developed payment solutions with Wirecard, Asiapay and Stripe over the last 10 years but it was our German office in Wiesbaden that ordered a stop to cooperate with Wirecard since March last year.
The Wirecard offices in the UK and Singapore (since 2007) hold the keys on finding out the truth of what went wrong at Wirecard.
Thai Parliament Opens Special Session Over Protest Tensions
Thailand’s Parliament began a special session Monday that was called to address tensions as pro-democracy protests draw students and other demonstrators into the streets almost daily demanding the prime minister's resignation.
As Speaker of the House Chuan Leekpai began the session, only 450 of the total of 731 members of both houses had signed in for the meeting.
The demonstrations by student-led groups in the Bangkok and other cities have three main demands: that Prime Minister Prayuth Chan-ocha step down, the constitution be amended to make it more democratic and reforms be made to the monarchy to make it more accountable.
Public criticism of the monarchy is unprecedented in a country where the royal institution has been considered sacrosanct, and royalists have denounced the protesters for raising the issue.
“The only way to a lasting solution for all sides that is fair for those on the streets as well as for the many millions who choose not to go on the streets is to discuss and resolve these differences through the parliamentary process,” Prayuth said last week.
The non-voting session of Parliament is expected to last two days.
The protesters have little confidence in the parliamentary path, declaring the government’s efforts insincere.
They noted the points of discussion submitted by Prayuth’s government for debate dealt not with the protesters' concerns but were thinly disguised criticisms of the protests themselves.
They concern instead the risk of the coronavirus spreading at rallies, the alleged interference with a royal motorcade by a small crowd earlier this month, and illegal gatherings and the destruction of images of the royal family.
The protesters allege Prayuth, who led a coup in 2014 as the army chief, was returned to power unfairly in last year’s election because laws had been changed to favor a pro-military party. The protesters also say the constitution, written and enacted under military rule, is undemocratic.
Parliament in September was scheduled to vote on six proposed constitutional amendments but instead set up a committee to further consider such proposals, and then recessed.
Constitutional changes require a joint vote of the House and the Senate, but the proposals lack support in the Senate, whose members are not elected and are generally very conservative and hostile to the protesters.
Instead of confronting lawmakers and counter-protesters on Monday, the pro-democracy protest organizers have called for an afternoon march to the German Embassy, apparently to bring attention to the time King Maha Vajiralongkorn spends in Germany.
Germany's foreign minister, questioned in Parliament by a member of the Green Party, recently expressed concern over any political activities the king might be conducting on the country's soil.
Protesters’ criticism of the royal institution has roiled conservative Thais. Self-proclaimed “defenders of the monarchy” mobilized last week online and in rallies in several cities, in many cases led by local civil servants.
A small group of royalist demonstrators were outside Parliament on Monday morning, saying they were there to let lawmakers know of their opposition to any changes in the status of the monarchy.
Typhoon Displaces Thousands, Floods Villages in Philippines
A fast-moving typhoon forced thousands of villagers to flee to safety in provinces south of the Philippine capital Monday, flooding rural villages and ripping off roofs, officials said.
There were no immediate reports of casualties from Typhoon Molave, but authorities reported at least one person was missing and seven others were rescued after their yacht sank off Batangas province south of Manila.
The typhoon has sustained winds of 125 kilometers (77 miles) per hour and gusts of up to 180 kph (112 miles) per hour and was blowing westward at 25 kph (15 mph). Molave is expected to start blowing out of the country into the South China Sea on Monday, government forecasters said.
At least 25,000 villagers were displaced with about 20,000 taking shelter in schools and government buildings which were turned into evacuation centers, according to the Office of Civil Defense.
“Villagers are now asking to be rescued because of the sudden wind which blew away roofs,” Humerlito Dolor, governor of Oriental Mindoro province, told DZMM radio.
Dolor said pounding rains overnight swamped farming villages in his province then fierce winds toppled trees and power posts early on Monday, knocking off power. Authorities were clearing roads of fallen trees and debris in some towns after the typhoon passed, he said.
More than 1,800 cargo truck drivers, workers and passengers were stranded in ports after the coast guard barred ships and ferry boats from venturing into rough seas.
About 20 typhoons and storms annually batter the Philippines, and the Southeast Asian archipelago is seismically active, with earthquakes and volcanic eruptions, making it one of the world’s most disaster-prone countries.
Australian Anguish at Passenger Strip Searches in Qatar
The Australian Broadcasting Corporation reports Australia has formally complained about what it is calling the "offensive and grossly inappropriate" treatment of passengers at Doha airport in Qatar. The report says thirteen Australian women were taken off a flight to Sydney after a newborn baby was found in an airport bathroom and the travelers were forced to have invasive internal examinations.
Airport authorities say when a premature baby was discovered in a bathroom at the Hamad International Airport in Doha, Qatar, on October 2, all female passengers onboard a flight preparing to fly to Sydney were taken off the aircraft. The group included 13 Australian women.
They were taken to two ambulances waiting outside the airport and subjected to strip searches. Some of the women have told local media they were terrified and were not told why the examinations were being carried out.
The Australian Federal Police have been informed, although it is unclear what powers investigators might have over an incident that occurred in the Middle East.
Australian foreign minister Marise Payne says Australia has formally complained to Qatar.
“We also understand the matter has been reported to the Australian Federal Police. This is a grossly, grossly disturbing, offensive, concerning set of events. It is not something I have ever heard of occurring in my life in any context. We have made our views very clear to the Qatari authorities on this matter,” Payne said.
Media reports have said the Australian women could take legal action against authorities in Qatar.
Australian Labor opposition leader Anthony Albanese says their treatment has been unbelievable.
“Reports of this treatment are really disturbing. The idea that women could be subject to these very intrusive searches is in my view an absolute disgrace," Albanese said.
In a statement, airport officials in Doha said the baby was “safe” and being cared for in Qatar.
They added that medical staff had expressed concern to them “about the health and welfare of a mother who had just given birth and requested she be located prior to departing.”
Australian authorities have said they are expecting a report on the incident from the Qatari Government later this week.
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