The Curve card and the app are displayed on a smartphone.
Curve
Thousands of British consumers have been unable to access their cash as some financial technology applications that rely on the Wirecard scandal payment processor were forced to freeze their accounts.
On Friday, the Financial Conduct Authority (FCA) ordered the UK unit of the German company, Wirecard Card Solutions, to stop carrying out regulated activities. The revelation follows that 1.9 billion euros ($ 2.1 billion) of cash had disappeared from Wirecard accounts.
That regulatory action impacted several British online banking apps, including Curve, Anna, Pockit and U Account, as they relied on Wirecard’s systems to process payments. The clients of the applications range from individual users to companies that depend on fintech services to operate.
However, Curve recently managed to get its cards up and running after staff worked over the weekend to fix the situation. The company has switched Wirecard payment processing to Checkout.com, a rival London-based financial technology company. Curve users can now pay with their cards again, however mobile wallets like Google Pay and Apple Pay are not yet available.
Experts say the debacle could lower public confidence in the UK fintech sector. Britain has one of the world’s leading financial technology industries, with renowned local companies such as Revolut, Monzo, and TransferWise.
The problem with apps like Curve and Anna is that they rely on e-money licenses that allow them to handle payments, rather than full bank licenses that would allow them to retain customer funds. Instead, the money is held with licensed third-party banks.
Curve has more than 1.3 million accounts on its platform, while Pockit has more than 500,000 users. Anna has 20,000 commercial banking clients. Pockit users trust the app to receive wages and benefit payments.
No ‘Plan B’
Kirstin Pauk, 37, uses the U account as his main bank provider. She told CNBC that she was very disappointed that she was unable to access her money or log in to the app. Pauk said she is a paid user of the service, which provides free basic accounts as well as monthly subscriptions to access additional features.
Leanne Docherty, 40, is an Anna client who started a clothing business three weeks ago. She says she is lucky since the funds in her account were low, but “there are other people who have (high) amounts in their accounts and cannot pay the staff.”
“I think Anna is in an incredibly difficult position,” Docherty, who lives in the city of Peterborough, in eastern England, told CNBC on Friday. “It was great working with them during the creation of my business and they made the process easier.”
But Docherty said he couldn’t understand why there was no “Plan B” in Anna to migrate away from Wirecard. Fraudulent accounting allegations had been made about the company as early as January 2019, while the company admitted last week that the lost cash marked by its auditors probably did not exist.
Wirecard has said it is not commenting further on the matter.
Anna told customers last week that her cards and accounts had been “temporarily suspended” due to the closure of Wirecard’s UK operations by the FCA.
Curve, Pockit, and U Account made similar statements on their websites.
Loss of confidence
The FCA also updated its initial announcement to say it has seen Wirecard “good progress” in meeting a set of requirements it established last week.
But calls to end the suspension of Wirecard activities in the country have been renewed. The Emerging Payments Association, an industry lobbying group that counts Curve as a member, warned in an open letter to the regulator that there could be “significant and lasting damage” to the UK financial technology sector if the problem is not addressed. solve soon.
Ed Emsley, a 28-year-old freelance video producer based in Hertfordshire, England, works with Anna. He says the experience of being locked out of his account has weakened his confidence in financial technology companies.
“I already started the setup process with HSBC,” Emsley told CNBC, adding that he no longer “feels safe with the new fintechs.”
And Emsley is probably not the only Briton to reconsider where he should put his money. Sarah Kocianski, director of analysis and research at fintech consultancy 11: FS, said the problem could affect the broader fintech industry.
“Suppliers who have had to suspend or end operations, for reasons beyond their control, will try to find an alternative supplier (and there are many) as quickly as possible,” he told CNBC. “But even if they get back up and running quickly, the damage to customer confidence is probably irreparable.”
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