Will customers ever get their money back?

As the list of banking services that have been frozen due to the Wirecard collapse grows longer, millions of customers begin to wonder: is my account money safe? The troubling news is that even financial authorities do not seem certain that it is.

Remember:

• On Thursday, Wirecard filed for insolvency after it became known that there was actually almost $ 2 billion in cash on the company’s books.
• On Friday, the UK Financial Conduct Authority suddenly ordered the suspension of Wirecard Card Solutions Limited (WCS), a UK subsidiary of Wirecard that handled payment processing and issued cards for a number of UK banking services. and throughout Europe
• Millions of customers of those banking and payment services have had their accounts and bank cards suspended, leaving them unable to withdraw money or access the wages paid on those accounts in some cases.
• Banking apps and payment services affected include Pockit, Curve, CardOneMoney, Payoneer and many others. Click here for details on affected banking services.

The immediate suspension of WCS on Friday has already caused enormous difficulties for some clients who have contacted me.

A Pockit customer wrote to me on Friday, saying he has autism and trusts Pockit as his only bank card. When he went to pay for gas using his card on Friday afternoon, the card was rejected and the police were called because the client had no alternative means to pay. “The police still think that they did not intend to pay as [the card] He kept saying he wasn’t authorized and in his book that means I don’t have it, ”wrote the Pockit client. “I had no idea until I read your story.”

Meanwhile, a CardOneMoney customer reported that his “card was rejected multiple times yesterday” before receiving an email from the company saying his card had been suspended. “I don’t have another bank account, so I had to transfer money to a friend.”

With financial anxiety already heightened by the coronavirus crisis, customers are increasingly concerned that they will never see money trapped in their frozen accounts again.

What happened to the money?

The suspension of WCS by the Financial Conduct Authority on Friday seemed to surprise many of the banking services, with some privately claiming that they had been given assurances that they would be allowed to continue operating.

Since then, many of the affected banking applications and payment services have struggled to emphasize that customer funds are held securely in a separate bank account.

In a statement sent to the press, Pockit said his clients’ money was “protected in a designated client account with Barclays.” U Account made a similar statement, saying to clients that: “We would like to reiterate to all clients that their money is safe and secure in a secure Barclays Bank account.”

However, a Q&A issued by Anna Money, which also insisted that the money kept in customers’ accounts was securely stored in a separate account, raised some questions about whether banking services still have visibility of those funds.

“It is a requirement of the FCA that the funds be stored in a protected account and that the FCA complete periodic audits to ensure that the funds are stored properly,” says Anna Money Q&A. “All funds in the Barclays account belong to Anna’s clients and cannot be used for any other purpose. Although the account was officially attributed to Wirecard Card Solutions, Anna had visibility into the Barclays account prior to the FCA suspension, and we did not see any unusual activity. “Be aware of past usage.

Anna’s co-founders held a live YouTube Q&A this afternoon, admitting that they now had only partial visibility into the delimited funds, but Boris Dyakonov said, “We sincerely believe the money is in place and protected”. .

Virraj Jatania, CEO of Pockit, told me that his company no longer has visibility into those protected accounts, which are now being managed by the FCA. However, he said that customers should not worry about reports of money being withdrawn from those accounts. “I think there are a lot of rumors right now,” he said. “In some cases, money needs to come out of those accounts, for example, to settle the transactions that took place on MasterCard or in the compensation schemes for faster payments and BACS.” He added that these were the only reasons that funds should be drawn from protected accounts.

The funds are “not protected”

More troubling to clients is that the funds held in their accounts are not protected by the Financial Services Compensation Scheme, which is designed to reimburse clients when financial institutions fail.

In a Q&A released by the Financial Conduct Authority on Friday, the FCA specifically stated that “the Financial Services Compensation Scheme (FSCS) only applies to certain types of activities that do not include the issuance of electronic money or payment services” .

The FCA’s questions and answers continue to refer to the protected accounts that Pockit, Anna and others mentioned above. “Effective safeguard agreements are critical in helping to ensure that clients’ money is protected and returned if a business fails,” states the FCA. “Adequate safeguards agreements that meet regulatory requirements are a condition of Wirecard’s continued FCA authorization.”

Since Wirecard collapsed in the first place because the money it claimed to be in accounts simply didn’t exist, I asked the FCA if it can guarantee that clients’ money is still in those protected accounts, but a spokesperson said the FCA was not offering comments. beyond what was issued in the statement on Friday. He added that: “Customers who are in financial distress as a result of the payment freeze may be eligible for a distress payment from their local authority [in the U.K.]. Details can be found on our website. “

The Pockit CEO says it is within the FCA’s power to end financial uncertainty for its clients. “The quickest way for clients to access their funds is if the FCA supports Wirecard now to process transactions and then an orderly transition can be made to new providers,” he told me.

Anna’s co-founders said this afternoon that if the money in Wirecard’s accounts had disappeared, they would try to reimburse customers for the company’s own funds. They said the process could take up to two weeks, but that it also depended on FCA approval.

Wirecard Card Solutions Limited has not returned a request for comment.