The sudden fall of Wirecard has triggered a fallout in the wider payments system, as fintech groups move to distance themselves from partnerships they struck with the troubled German company.
Wirecard’s crisis has already affected millions of British savers while raising questions about the oversight of technology companies that claim to disrupt payment systems, which have long been the domain of banks and other financial institutions.
Wirecard’s rise up the ranks of German industry was bolstered by deals with dozens of companies for services ranging from credit card processing to merchant payments.
But some of those partners have begun to back away from the insolvent company after it admitted that €1.9bn of cash was missing.
One notable ally had been SoftBank, which agreed to facilitate introductions to its portfolio of companies and help Wirecard’s push into Asia as part of a complex €900m investment deal. SoftBank struck the deal even after the Financial Times reported on accounting irregularities at the German company.
At least half a dozen SoftBank affiliates or portfolio companies — Auto1, Brightstar, GetYourGuide, Grab, Oyo and Sprint — had announced partnerships with Wirecard, but the future of those deals and of the broader SoftBank partnership are now under question.
Singapore-based ride hailing and payments group Grab and German travel booking site GetYourGuide both said in statements they had not begun their partnership integrations with Wirecard.
Grab said it was “pausing the partnership till further notice”, while GetYourGuide said it terminated the agreement in the first quarter after its “product strategy changed in early 2020”.
Auto1 said that its dealings with Wirecard were limited to “a phase of brainstorming.”
Softbank and Wirecard both declined to comment.
Elsewhere, Klarna, the Swedish point-of-sale lender valued at $5.5bn, said that it was in dialogue with Wirecard and that the unit housing its partnership “would appear legitimate but of course that is subject to review and the future [is] unknown with the insolvency filing”.
The start-up said it did not rely on Wirecard for any “fundamental services for our business or products.”
Silicon Valley’s reaction has been more muted, though some venture capitalists and fintech executives have spoken out following this month’s revelations.
“As a European and someone who works in the payments industry, what seems to have happened at and around Wirecard is very disturbing,” wrote Patrick Collison, chief executive of the US payments start-up Stripe.
Meanwhile, former Bank of England adviser Huw van Steenis on Monday called for a review of how European authorities regulate digital payments.
“Wirecard’s bankruptcy underscores the urgency of next-generation payments regulation,” Mr van Steenis wrote in the Financial Times.
Additional reporting by Stefania Palma in Singapore
For all the latest on the collapse of Wirecard, visit the Financial Times’ Wirecard homepage. There you’ll find a timeline of what happened and when, a video featuring reporter Dan McCrum, analysis of how the collapse has hit consumers, and a profile of former chief executive Markus Braun, as well as our complete archive of Wirecard stories.
Quick Fire Q&A
Company name: Getsafe
When founded: 2015
Where based: Heidelberg, Germany
CEO: Christian Wiens
What do you sell, and who do you sell it to: Getsafe offers digital insurance products for the millennial market, allowing customers to cover themselves and their universe from their smartphone.
How did you get started: Getsafe started out as a digital broker, and in early 2020 the company applied for its own insurance licence.
Amount of money raised so far: €20m
Valuation at latest fundraising: N/A
Major shareholders: Earlybird, CommerzVentures, BtoV, GFC, Partech, Capnamic
There are lots of fintechs out there — what makes you so special: Offering digital insurance products in all lines of business, Getsafe is growing faster than traditional insurers with first-time insurance buyers.
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Further fintech fascination
Follow the money: Mastercard has spent $1bn buying Finicity, a US open-banking company, reports the Financial Times. Open banking allows financial data to be shared between fintechs and big banks to open up a variety of services. Mastercard expects this to be a growing area of business because of the coronavirus crisis.
Trendwatch: In an interview with Sifted, Plaid chief operating officer Eric Sager pushed the line that the pandemic would “accelerate the digitisation of financial services” with people becoming more comfortable about applying for products such as mortgages online than they used to be.
Follow the money (2): US health insurance specialist Oscar has raised another $225m in a funding round, according to TechCrunch. Baillie Gifford and Coatue have joined a list of investors that already includes Alphabet and General Catalyst. The company, which has 420,000 members in 15 US states, may be preparing for a public offering.
AOB: Alibaba affiliate Ant is to drop “Financial” from its name, becoming Ant Technology Group instead, reports the Wall Street Journal. Fintech start-up Karat has launched a credit card designed for influencers on YouTube and Twitch, says Finextra.
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