By Paul J. Davies and Caitlin Ostroff
U.K. financial regulators froze the British operations of
Wirecard AG, stranding consumers whose payment cards rely on the
insolvent Germany company's technology.
Wirecard Card Solutions, based in Newcastle Upon Tyne in
northeast England, isn't allowed to dispose of any funds or assets,
or carry on its normal financial business, the U.K.'s Financial
Conduct Authority said Friday.
Wirecard's U.K. business issued prepaid cards and electronic
wallets for consumers and served as a backbone for other digital
payments businesses. Some customers in the U.K. won't be able to
access money on existing Wirecard prepaid cards or held
The financial regulator also said Wirecard's U.K. business
wasn't covered by the Financial Services Compensation Scheme, which
protects consumers from financial businesses that go bad.
A Wirecard spokesman didn't immediately respond to a request for
Curve, a U.K.-based fintech, said its customers would be
temporarily unable to use their cards because Wirecard had been
Curve, which has called itself the Netflix of banking, links
users' various banking accounts in a single card or app. The
company said it was already in the process of moving customers to
its own card-issuing and e-money operations rather than rely on
Curve announced a deal this week to run Samsung's phone-based
payments app in the U.K. A Samsung spokeswoman said Wirecard's
problems wouldn't affect the launch of the app.
Tom Findell, 32 years old, an emergency-services worker in
Milton Keynes, northwest of London, had his Curve card declined
Friday when he tried to buy a train ticket. He pays around GBP15,
or $18, a month to use the card, which aggregates his various
credit-card and banking accounts and comes with other benefits such
as travel insurance.
"I convinced a load of friends to get it as well, and when I go
into work tomorrow they're going to be like why did you suggest
it?," said Mr. Findell.
"Curve customers have today been informed that they are likely
to see a temporary disruption to their service and are advised to
carry an alternative payment method," Curve said in a statement.
"This disruption is expected to last for a limited time only."
Wirecard's prepaid card service was an add-on to its main
business providing software and terminals that collect credit-card
payments for retailers in stores and online.
Prepaid cards store a set amount of value and can be used for
shopping like credit cards. The prepaid cards can serve as gift
cards, and some employers distribute them as incentive bonuses for
workers. They can also be used by people without bank accounts or
as a type of modern travelers check.
FairFX PLC, a prepaid travel card provider that relies on
Wirecard, said services were down Friday. FairFX said it was
working to restore functionality and told customers that funds
wouldn't be lost and were held "in a safeguarded account."
Laurelie Walter, who lives in south London, saved up EUR1,800
($2,022) over six months on her FairFX card in preparation to take
her grandchildren to Croatia and France before Covid-19 hit.
"I don't think for one moment everybody realized the
implications of this," she said. "I'm glad I'm not there in France
In 2017, Wirecard purchased Citigroup's U.S. prepaid card
business for an undisclosed sum.
Wirecard shares crashed after auditors revealed a $2 billion
hole in its accounts last week. Its market capitalization plunged
to EUR250 million from nearly EUR13 billion, and on Thursday the
company filed for insolvency in Germany.
It didn't appear that Wirecard's troubles were rippling through
the wider payments industry. Though it counted hundreds of
companies as partners and customers, many are likely to have backup
It is also possible that Wirecard's legitimate business was
smaller than it appeared. The company's auditor, Ernst & Young
GMBH, said Thursday there were "clear indications that this was an
elaborate and sophisticated fraud, involving multiple parties
around the world in different institutions, with a deliberate aim
Germany's financial regulator said Thursday it had appointed a
special representative to oversee Wirecard Bank, a company
subsidiary with EUR1.7 billion in deposits that wasn't part of the
wider insolvency proceedings. The company faces continuing
government investigations in Germany, Singapore and the
German prosecutors arrested Markus Braun, who resigned as
Wirecard's chief executive last week, alleging he helped the
company generate fake revenue and profit. He was released on bail
Tuesday. His lawyer didn't respond to requests for comment.
Write to Paul J. Davies at email@example.com and Caitlin
Ostroff at firstname.lastname@example.org
(END) Dow Jones Newswires
June 26, 2020 14:31 ET (18:31 GMT)
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