MPs warn fintech mustn’t “go rogue” in report on Wirecard scandal

No, ‘Wirecard: When Fintech Goes Rogue’ is not a Hollywood-esque documentary into the Wirecard scandal that unfolded last June, it’s a report from the All-Party Group on Challenger Banks and Building Societies. 

The report is part-funded by OakNorth Bank among other financial institutions, including the Penrith Building Society, Aldermore, Nottingham Building Society, Saffron Building Society and the Building Societies Association. 

Following the payment processor’s demise in June 2020, the group investigated evidence it was presented and spoke to leading players in the industry and leading fintech journalists—as AltFi wasn’t contacted we can only assume it was an accidental oversight on their part...

The report, which has actually not been approved by either the House or its committees, described Wirecard’s collapse as “one of the worst accounting scandals in post-war German history."

Chair of the committee, Rt. Hon Karen Bradley, paints a picture of institutions turning to “novel providers such as Wirecard” rather than the big players in the space because these “fintech firms provide the services consumers want often at much lower costs than traditional providers.”

However, founded in 1999 and one of the biggest payments providers in the world at the time of its collapse, it’s hard to describe Wirecard as a “novel provider.”

Now, Wirecard is obviously a special case. The payments provider saw €1.9bn ‘go missing’ from its balance sheet and was €3.2bn in debt, but that doesn’t take away from the fact that Wirecard was one of the biggest providers in the sector. 

Bradley also said that, in Wirecard’s case, it couldn’t be trusted to work alongside existing providers.

Rightly so, the report points out that “German regulators seem to have tried to protect Wirecard from scrutiny,” with the German regulator BaFin being accused of turning a blind eye to many red flags that cropped up over the years. 

Accounts from some of those directly affected by the scandal were also included in the report.

Eduard Panteleeve, CEO of ANNA Money and Viraj Jatania, CEO of Pockit, two firms that were forced to halt all transactions because of Wirecard’s collapse, gave evidence.

Nigel Verdon, CEO and founder of Railsbank, which went on to buy Wirecard’s UK operations, also gave evidence to the MPs, pointing at “issues around both regulation of Wirecard and around its auditors” too.

At the end of the day, it’s a step in the right direction that members of government are delving deeper into the fintech sector. The Kalifa Review, which was published in February of this year, is a great example of this. 

However, the report published this week by the committee looks to be painting the whole fintech sector with the same brush, in favour of supporting the existing, and supposedly more trustworthy, providers. 

Fintech, and innovation within the fintech sector, is not something to be shied away from and, in fact, it should be the regulators who should be looking at ways to update their own policies to keep up with the rapid rate of change.