Thousands of UK consumers have been unable to access their cash, as financial apps relying on Wirecard technology were frozen after the German payments firm filed for insolvency last week.
Wirecard’s UK subsidiary, Wirecard Card Solutions (WCS), said it was “working hard” to restore operations after the Financial Conduct Authority (FCA) on Friday ordered the firm to freeze regulated activities.
It comes after Wirecard last week filed for insolvency following the discovery of a €1.9m (£1.7m) accounting black hole by its auditors, which triggered the brief arrest of former chief executive Markus Braun on suspicion of false accounting and market manipulation. Braun has been released on a €5m bail.
The company’s UK arm has appointed turnaround firm Alvarez & Marsal in a last-ditch rescue attempt, but will be forced to enter administration if it cannot convince the FCA to lift the suspension.
The bulk of WCS customers are based in the UK, via companies such as Pockit, Curve and Anna, which use Wirecard products as part of their digital payments services. Curve, which has more than 1.3m accounts, has been seriously affected by the suspension. Pockit, which offers accounts to customers unable to access mainstream banks, has around 500,000 customers who depend on the app for wages, benefits and direct debits.
The Department for Work and Pensions has set up a temporary team to help Pockit customers unable to receive essential benefits payments that were due to be paid into people’s accounts today.
Tony Craddock, director-general of the Emerging Payments Association trade group wrote an open letter urging the FCA to unfreeze WCS as soon as possible. “Without this suspension being removed rapidly, we believe there will be significant and lasting damage to individuals, companies and the UK’s current and future prospects as leaders in fintech,” wrote Craddock.
The FCA has advised that “customers who are in financial distress as a result of the payment freeze may be eligible for a hardship payment from their local authority”.
Read more: How do you solve a problem like Wirecard?
It comes as EY today said it is preparing for backlash over its audit of the German payments firm, after it failed to check if a Singapore bank held billions in cash on Wirecard’s behalf.
EY said: “We’ve established that third parties, with a deliberate aim to deceive, provided EY with false documentation in connection with its 2019 Wirecard audit. The extent and sophistication of these suggest a large-scale international fraud at Wirecard.”
Germany yesterday announced it will overhaul its accounting industry in an attempt to soften national embarrassment over the Wirecard collapse. Jorg Kukies, Germany’s deputy finance minister, told the FT that the Wirecard affair showed “self-regulation by the auditors doesn’t work properly”.
Shares in Wirecard skyrocketed today after dropping from €104.50 the day before the accounting scandal to just €1.28 on Friday. Shares closed up 154.5 per cent to €3.26 today.