The news that German payments and digital banking firm Wirecard was insolvent sent shockwaves through much of the industry but, as with any corporate scandal, the contours of this one are already quite well known.
Compared to entities like Enron and Worldcom, it would seem that Wirecard had engaged in fraudulent activities that really had nothing to do with its core business of digital banking and digital payments processing. Though many in the media have latched on to the specific niche occupied by Wirecard, the salaciousness of the story is vastly undercut by the fact that, at the end of the day, it seems like Wirecard is pulling an accounting scam both familiar and applicable to any industry.
What happened exactly? To put it simply, close to $2 billion that the company said it held in reserve were reported that actually didn’t exist. Upon discovery by regulatory officials and accountants, this revelation not only undermined Wirecard as a going concern but pretty much signaled the end of the company. Given its prevalence in many industries, there was some worry about the disruption this would cause in payments processing. But the industry is not only resilient but robust. Wirecard is a blip on the radar when it comes to the broader digital banking industry and, since its problems are quite well known and nothing new, most business analysts see the forward march of this niche proceeding without missing a beat.
The history behind.
Founded in 1999, Wirecard is considered a pioneer in the digital banking industry. With over 6000 employees and operations in 24 countries around the world, the company not only provided payment services but also other key analytical and financial services to companies. And, though the scandal has erupted just in the past several months, the collapse actually began with a report published in The Financial Times last year that alleged Wirecard had created back-dated, fraudulent transactions to bolster its balance sheet. From that point on, it was just a matter of time before the house of cards holding the accounting together began to collapse. No Netflix filming or production rights here. It was all facts which later on were backed by the relevant German regulatory authorities.
In an official statement to the press, Wirecard announced that it would begin pursuing insolvency proceedings for the company to end it as a going concern. The company is looking into whether or not these proceedings should extend to the company’s subsidiaries according to a report from Business Insider.
While the brunt of the fallout will impact Wirecard and its employees, the ex-CEO, Markus Braun, looks like he will have to face the music for his participation in the fraud. Braun, who is largely credited with taking Wirecard from nothing to the apex of the industry, is accused of fraud and of artificially inflating Wirecard’s numbers to make it more appealing to investors. The missing money was a shock in and of itself, but when you take into account that it was one-quarter of the firm’s total assets, and that the money may have never existed in the first place, it’s easy to see that Wirecard does fall in line with the accounting scandals that followed the dotcom bust.
Monneo is Diversifying Your Business Risk.
Diversifying risk is extremely important in business. This is not a secret at all. Yet many forget to stay focused on that and seem to often “go with the flow” as the saying quotes. On the contrary of all sated so far, how Monneo’s product and digital payments solutions developed throughout the years reflected on the number of clients we currently serve which benefit from exactly this fundamental business development factor: financial risk diversification.
Monneo’s approach toward the risk diversification is clearly defined and set into practices because we work with a network of banks. From this position we can swiftly act as per the client’s particular needs and if something goes not he very right way we can switch existing accounts to alternative banking institutions. In that context, if you are using the services of Monneo, a scenario like the one of Wirecard cannot happen.
If you would like to know more about that or how Monneo’s services stand out from the crowd and how we can help you advance forward with your digital banking solutions contact us now or directly apply for your virtual IBAN on our website.