Wirecard Scandal Affects UK Clients as Online Banking Apps Freeze Accounts


UK’s financial regulator, the FCA has suspended Wirecard’s UK subsidiary and left thousands of British consumers unable to access their money.

June 29 2020 | AtoZ Markets – Thousands of people in the UK have been unable to access their cash as some financial technology apps relying on scandal-hit payments processor Wirecard were forced to freeze their accounts.

FCA ordered Wirecard’s U.K. unit to stop carrying out regulated activities

On Friday, the Financial Conduct Authority (FCA) ordered the German firm’s U.K. unit, Wirecard Card Solutions, to stop carrying out regulated activities. It comes after Wirecard filed for insolvency following the revelation the missing 1.9 billion euros ($2.1 billion).

That regulatory action impacted several British online banking apps, including Curve, Anna, Pockit, and U Account. These apps relied on Wirecard’s systems to process payments.

The Anna app warned its customers that they had less than an hour to withdraw their money before all accounts of the app were frozen. Users of other fintechs received no warning. Also, customers of Pockit have had their accounts frozen and cannot access their funds. Some of them cannot access essential benefits payments.

Consequently, millions of digital banking customers, including business owners have been affected and are unable to access their money.

Curve has, however, recently managed to get its cards up and running after staff worked through the weekend to fix the situation. The company has transitioned payment processing from Wirecard to Checkout.com, a rival fintech company based in London. Curve users can now pay with their cards again. However mobile wallets like Google Pay and Apple Pay still aren’t available yet.

Wirecard scandal could affect the U.K.’s fintech sector

Experts say the scandal could lessen the public’s trust in the U.K.’s fintech sector. Britain has one of the world’s top fintech industries, with well-known homegrown start-ups including Revolut, Monzo and TransferWise.

The issue with apps such as Curve and Anna is that they rely on e-money licenses that allow them to handle payments, rather than full banking licenses that would let them hold customers’ funds. Instead, licensed third-party banks holds the money.

Curve has more than 1.3 million accounts on its platform, while Pockit counts more than 500,000 users. Anna has 20,000 business banking clients. Pockit users rely on the app to receive wages and benefits payments.

Are customers’ funds safe?

The FCA stated that the customer’s money was not under the protection of the Financial Services Compensation Scheme (FSCS). However, the Electronic Money Regulations (EMRs) and Payment Services Regulations (PSRs) require that customer’s money is safeguarded in separate bank accounts from Wirecard’s own.

The regulator also said today that its teams have been working with the firm, and other international and UK authorities, over the weekend, and that they have seen good progress by the firm in meeting the conditions the FCA set.

The FCA notes that it is maintaining pressure on the firm to resolve these issues which would allow it to operate under certain conditions. However, the regulator notes that it cannot lift the restrictions without making sure that the firm has been able to satisfy all its concerns (for example, that all client money is safe).

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