On June 25, 2020, Wirecard AG filed for insolvency but only a few days later, the FCA, Financial Conduct Authority froze the Wirecard Company’s activities in order to review all the financial activities. This event caused panic not only among cards’ holders but in the entire e-commerce.
What was happening exactly in the Wirecard scandal?
To start with, Wirecard is the leading in its field in issuing cards and online transfer. Although much debate was raised about its reliability and credibility, the statistics showed an immense growth of this company. This means that more and more participants are now partners with this successful firm despite all rumors.
Last week, the subsidiary Wirecard Bank AG in Germany lived a tragic catastrophe with the discovery of 1.9 billion in cash missing. The rest of the story was a criminal investigation, the arrest of the CEO and review of all accounts to inspect the cause of the corruption. However, it was the intervention of the FCA in UK who caused the panic. As a result of what happened in Germany, the FCA froze all transactions using cards owned by Wirecard in order to protect the costumer’s and to audit the subsidiary. In other words, your Master card or Visa Card is worthless until other notice.
How does the Wirecard hurt business?
In fact, the expansive growth of wirecard has led to a market where the company has so many partners all over the world including virtual banks, airways, insurance etc … These partners were extremely hurt where their costumers couldn’t use their prepaid card to make payments which in return was extremely harmful for their revenues as well as for their reputation. Another important factor is that the internet today is based on electronic commerce where you have just to pay using your card. So you can expect what will be the feelings of many online stores managers, freelancers or even gamers or collaborators when they discover that they can’t pay or receive their revenues.
For how long will the card freeze last?
While no one providing accurate date. It seems that this action taken by the FCA will not last for so long. However, According to Deban Christopher, the previous financial adviser in the EU committee, this action is meant only to protect the cardholders. Deban explained that although the action is rare in its nature, it makes a sense that the FCA has such decision. The real problem is on whether the FCA will discover the same problem in the UK. Otherwise, it will take only a short period to manage this issue, at least for costumers.