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Is Wirecard just the tip of the iceberg? There is a lot wrong with Fintech Companies

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.

 

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Reporting mainly on the Asia Pacific region and the global Coronavirus crises in countries such as the United States, Mainland China, Brazil, Mexico, Italy and Germany. Love to Travel and report daily on destinations reopening with a focus on Domestic travel within Europe, North America and the Caribbean. Fan of the English Premier League , the German Bundesliga,, the Spanish La Liga.

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