U.K. Consumers Hit By Wirecard Scandal: Forced to Freeze the Account

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Some of the financial technology applications dependent on the scandal-hit payments processor ‘Wirecard’ was recently forced to halt their accounts. Due to this temporary halt, thousands of consumers in the U.K. were unable to access their cash.

The Financial Conduct Authority (FCA) summoned the Wirecard Card Solutions, the German firm’s U.K. unit, to freeze their delimited actions as Wirecard filed for insolvency after revealing the missing of 1.9 billion euros from its account. This governing activity jammed several U.K. online banking apps, such as U Account, Anna, Curve, and Pockit. All these apps relied on Wirecard to process payments.

These financial applications have wide-ranging customers, such as individual users, as well as businesses reliant on fintech services to operate. The curve consists of over 1.3 million accounts on its app, while Anna and Pockit have around 20,000 and 500,000+ users, respectively. The monetary applications like Anna and Curve are reliant on e-cash licenses that let them oversee installments rather than full financial licenses that permit them to hold clients’ assets. Here, the cash is said to be apprehended with authorized third-party panels.

The curve has anyhow managed to get its cards up and functioning after the dedicated staff members worked throughout the weekend to fix the problem. The curve has moved its installment handling activities from Wirecard to Checkout.com, one of the adversary fintech firms in London. Now, curve users can use the card and make payments with it; however, some mobile wallets, including Apple Pay and Google Pay, aren’t still up so far.

Wirecard Card Solutions’ spokesperson tells CNBC that, “We fully understand the inconvenience the temporary suspension of our services has caused for our valued customers. We are in constant dialogue with the FCA and are working hard with them and our advisors to have the steps in place, which will enable the suspension to be lifted so the business can resume.”

The Emerging Payments Association cautioned that there might be major and long-term damage to the U.K.’s fintech segment if this matter isn’t fixed in a little while. Similarly, experts predict that this downfall will most probably diminish the people’s trust in the British fintech sector, which is known for some of the well-known homegrown start-ups such as TransferWise, Revolut, and Monzo.

A 28-year-old independent video producer, Ed Emsley, who has an account with Anna, shares that the blockage of his account has smashed his faith in U.K.’s fintech companies. He told CNBC, “I’ve already begun the process of setting up with HSBC,” while adding that he doesn’t “feel safe with new fintechs anymore.”

Emsley is not the only one rethinking his plan of investment. Sarah Kocianski, head of analysis & research manager at 11:FS, also shares her concern about how this could influence the more extensive fintech portion. She tells CNBC, “Providers that have had to suspend or end operations, through no fault of their own, will be trying to find an alternative provider (and there are many) as quickly as possible. But even if they get up and running again quickly, the damage to customer trust is likely to be irreparable.”