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Wirecard Fallout hits a number of Fintechs and their customers

Wirecard was a troubled company at least that was the lesson of the past week, but Wirecard also had a core that actually existed – that is the painful experience for hundreds of thousands of European Fintech customers. The hardest hit was the highly British credit card startup Curve, which is also used by many people in Germany and Europe.

Nothing went there from Friday after the British financial regulator took Wirecard subsidiary “Wirecard Card Solutions” out of circulation. In addition, a number of other prominent financial startups rely on the services of Wirecard, including Holvi, Kontist, Funding Circle – what about them?

Another Company that was hard hit was Payoneer Inc. which has the largest network of Freelancer and around 4 million Prepaid cards issued by Wirecard, however 99% of users are based outside the European Union which Ukraine, Serbia, Pakistan, India, Bangladesh, Nigeria, Columbia and Brazil taken the largest share of users.

And what about prominent Wirecard customers like Aldi and Allianz?

We tried over the weekend to measure the consequences of the Wirecard fallout as best as possible.

Curve

On April 29 and immediately after the devastating KPMG report on Wirecard, the British credit card Fintech Curve, which is also very popular among German and European technology nerds, announced that it would no longer use Wirecard’s payment infrastructure for its e-money services to fall back on.

On Friday, the British financial regulator FCA withdrew the approval for your business from the local Wirecard company “Wirecard Card Solutions Limited”. A number of Curve customers then received the following email (original emphasis):

” Your Curve card and all associated Curve transaction and money transfer services will be temporarily suspended with immediate effect . Please be assured, we expect to be up and running again shortly but it may take a few days. Your money and card details held at Curve are safe and secure. […] For now, please carry a backup card. 

For a Fintech, it’s almost like the worst case: not being able to provide their own service anymore – and having to tell the customer that it wouldn’t be bad if they still had an alternative card or bank account.

Yesterday evening, Curve announced via Twitter that everything would work again from Monday.

The FCA (the abbreviation stands for “Financial Conduct Authoriy”) has been explaining its procedure in detail on its homepage since Friday ( see here ). In doing so, the FCA also addresses the question of what happens to so-called e-money, which occurs, for example, when a customer has uploaded credit to a prepaid card issued by “Wirecard Card Solutions”.

Anyone who thought that this money was subject to some form of classic deposit insurance – nope, is not as the FCA made clear to users in its FAQ:

“Are my funds protected by FSCS?” – No. The Financial Services Compensation Scheme (FSCS) only applies to certain types of activity which does not include issuing electronic money or payment services. “

Even the popular “Boon” service in Germany is blocked for users, and it is still unclear to what extent and when the customers get their money back.

In theory, customer funds are protected even without traditional deposit insurance. According to the FCA, the “safeguarding” approach is to ensure that payment service providers like Wirecard are obliged to keep their customers’ money in accounts that are kept separate from the company’s accounts.

“Wirecard is required […] to maintain appropriate measures to safeguard customers money. It does this by holding it separate from its own money in accounts with banks (or another credit institution). Effective safeguarding arrangements are critical to help ensure that customers’ money is protected and returned if a firm fails. “

It will be seen whether Wirecard complies with these requirements – whether the theoretical protection also exists in practice.

The “Boon Planet” / Wirecard Bank AG case

“Boon Planet” is Wirecard’s retail banking offering (and its services and functions are comparable to N26). The offer is operated by Wirecard Bank AG. Means: This is not just about payment services according to the e-money license, but it is about real banking services and real deposits.

All in all, Wirecard Bank AG is said to have had customer deposits of around EUR 1.7 billion recently. In our opinion, however, customers do not need to tremble here. Wirecard Bank AG is a member of the German deposit insurance scheme, both in the statutory and in addition in the voluntary protection of the Federal Association of German Banks (BdB) and customers are therefore likely to be compensated.

According to German news reports, BaFin is likely to impose a “moratorium” on the institute in the next few days. After that, the BdB deposit insurance company will take control and ultimately send the Wirecard Bank into bankruptcy.

It remains to be seen what will happen to the other creditors of Wirecard Bank AG. At the end of 2018 (more recent figures are not yet available) and the institute also had liabilities of EUR 3.3 billion to other banks.

In a letter from Wirecard Bank AG to customers, it said on Friday:

“The area of ​​protection basically includes creditors who are natural persons as well as commercial partnerships and legal entities. However, creditors are exempted if they are credit institutions, financial institutions, securities companies or regional authorities, such as the federal government, states and municipalities. “

Which German Fintechs (and other companies) are affected by the Wirecard bankruptcy?

To be honest: We don’t have a complete overview yet – also because our research capacities were limited over the weekend.

Which other Fintech cooperate with Wirecard?

In the archives and conditions, for example, one comes across the following names, whereby it becomes apparent that the number of affected Fintechs in Great Britain is considerably larger than in Germany:

  • STA Travel Cash Flex Prepaid Mastercard
  • Dzing Cards
  • Payoneer (“Payoneer is popular among freelancers in Africa, Eastern Europe and South Asia who make money from online freelance work. Platforms that pay into Payoneer cards include Freelancer, Fiverr, Gettyimages, Upwork, 99Designs, Peopleperhour, Topcoder, Envato, Pond5, and even AirBnB)
  • Pockit
  • Dozens
  • Soldo
  • B4B
  • FairFX
  • U account
  • McLear ring
  • Anna Money
  • EPay Cards
  • Blue cards
  • International Student Identity Card (ISIC) with the Travel Cash Flex Prepaid
  • Crypto.com MCO Card

What about Revolut?

Anglo-Saxon business media has repeatedly referred to the connection between Revolut and Wirecard in the past week. In fact, Wirecard was said to have issued and processed Mastercard prepaid cards in the early stages of the British N26 rival. It is not entirely clear to us what the current status of this relationship is: It feels like if a significant number of Revolut customers were massively affected, you would get something out of it. “Forbes” writes (presumably after asking the company): “In the market, it is assumed that Revolut has migrated its payment services away from Wirecard in order to avoid possible complications.” Revolut also says this on social networks: All cards remain functional , all functions of the app have been working.

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