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German digital payments company Wirecard was once a huge financial technology giant, providing cashless payment services to big international brands like Samsung, Google, and Apple.
In Singapore, it had major clients such as taxi company ComfortDelGro, convenience chain Cheers, and telecommunications company Singtel for its Dash mobile wallet, and it was also used for day-to-day purposes such as Electronic Road Pricing gateways and for consumers to recharge. your ez-link cards. on their mobile phones.
It also supported a large network of retailers and other businesses.
But in June, the company collapsed dramatically, owing creditors nearly US $ 4 billion (S $ 5.5 billion) after revealing a hole in its books.
It admitted that 1.9 billion euros (S $ 3 billion) in cash, allegedly in bank accounts in the Philippines, did not exist, in what was described as the biggest audit scandal since the disappearance of the US energy company Enron in 2001.
Wirecard’s fall from grace will certainly have some impact on consumer confidence and the merchants it helped, even if merchants have a variety of other payment options available to them, experts told The Straits Times.
Corporate governance advocate and associate professor at the National University of Singapore (NUS) Business School, Mak Yuen Teen, said: “This case shows the risks outside the traditional financial sector, including payment processing companies like Wirecard , fintechs and digital banks “.
It added that it could have an impact on regulations as well, especially since new rules for payment services were introduced this year.
“This episode may lead regulators to take a closer look at corporate governance requirements for companies in the electronic payments ecosystem outside of the banking sector, and to exercise greater vigilance over the presentation and audit of financial statements of these companies.”
Wirecard’s collapse took a significant turn early last year, when the Financial Times published reports of alleged wrongdoing in its Singapore office that caused stocks in Germany to plummet. Following the reports, Singapore police raided Wirecard’s office in Pasir Panjang in February last year.
Suspicions about Wirecard’s accounting practices persisted, and President Wulf Matthias resigned in January after months of controversy.
Markus Braun, its chief executive, resigned in June after auditor EY refused to approve the company’s accounts in 2019, stating that some 1.9 billion euros had been lost. EY also said that there were clear indications that Wirecard was involved in a multi-party fraud around the world at different institutions.
Singapore police and the Monetary Authority of Singapore launched an investigation into several local businesses in connection with the Wirecard scandal. In August, Singaporean R. Shanmugaratnam, director of Citadelle Corporate Services, was charged with falsifying accounts.
Since Wirecard is unlikely to revive its fortune, Singaporean retailers will have to turn to other forms of electronic payment such as Nets.
“Since Wirecard has a fairly significant presence here, there is likely to be some disruption. Customers who have Wirecard prepaid cards will also be affected,” said Professor Mak.
Ms Choo Wan Sim, Director of Cards and Payments at United Overseas Bank (UOB), Singapore, said that many merchants have sought the bank’s guidance in the past two months on how to create more certainty around their credit processing options. payments or become part of the UOB. commercial network.
“We also advise them on payment acceptance options, such as the use of unified point of sale terminals that allow them to accept a wide range of payment schemes through a single terminal, as well as how they can accept new payment schemes. like Alipay and WeChat Pay, “she said.
He added that these merchants come from a variety of sectors, including retail, e-commerce, supermarkets, food and beverage, and insurance.
Associate Professor Lawrence Loh, also from NUS Business School and director of the Center for Governance, Institutions and Organizations, said that while it may be inconvenient for traders to switch to another system, at best it will be a one-time event. He also noted that the problem is due more to corporate fraud than inherent problems with digital payments.
“It will take more than a Wirecard incident for consumer confidence in electronic payments to really be shaken.”
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