Watchdog still has concerns about Wirecard's UK business

Oscar Williams-Grut
·Senior City Correspondent, Yahoo Finance UK
·4 min read
Wirecard
The FCA froze Wirecard's UK business on Friday (26 June). Photo: Sven Hoppe/Picture Alliance via Getty Images)

The UK’s financial watchdog said on Monday it won’t relax strict restrictions on Wirecard’s UK business as it is still concerned about the safety of client money.

The Financial Conduct Authority (FCA) said in a brief update that while “good progress” had been made with Wirecard Card Solutions Limited over the weekend, the regulator doesn’t feel comfortable lifting restrictions.

“We are maintaining pressure on the firm to resolve these issues which would allow it to operate under certain conditions,” the regulator said.

“However, we cannot lift the restrictions without reassuring ourselves that the firm has been able to satisfy all our concerns, for example, that all clients' money is safe. We hope to be able to issue an update soon.”

READ MORE: Customer cash frozen as Wirecard's UK business ordered to stop operating

The FCA unexpectedly froze Wirecard’s UK business on Friday, ordering it to stop all regulated activity and freezing client cash. It came after the collapse of the business’ German parent company, which discovered a €1.9bn (£1.7bn, $2.1bn) hole in its balance sheet. Wirecard’s former chief executive has been arrested in connection with the case.

The FCA’s actions threw many UK fintech businesses into crisis on Friday (26 June). Several companies use Wirecard to run their card network and payments. None were aware the FCA was planning to impose restrictions.

“Without this suspension being removed rapidly, we believe there will be significant and lasting damage to individuals, companies and the UK’s current and future prospects as leaders in fintech,” Tony Craddock, the director general of the Emerging Payments Association, said in an open letter sent to the FCA on Monday.

Craddock said many of the fintechs that rely on Wirecard are specifically targeted at low income people and Friday was payday.

“A few will be merely inconvenienced, but many will suffer and some will become emotionally distressed and traumatised, with unknown consequences to their wellbeing and health,” Craddock said.

U Account, a money management account for low income customers, said wages and benefits paid to its 18,000 customers would bounce back as a result of the freeze. The company said on its website that customers had “expressed understandable anger in direct contact with us or on social media.”

READ MORE: Wirecard CEO quits after billions go missing from balance sheets

“We understand the frustration and distress that the requirements imposed on Wirecard UK by the FCA are causing our customers,” said Paul Smith, the chief executive of doorstep lender Morses Club, which owns the U Account.

“We are in regular contact with the FCA and Wirecard UK to understand the situation and find a swift resolution for our U Account customers. While our customers' money is not at risk, we understand the difficulty this temporary suspension is causing our customers and we are working tirelessly to find a solution.”

Pockit, another money management app for people with low income, said it was working “around the clock” to find a way around the freeze.

“We appreciate the disruption and distress this is causing to you,” the company wrote in a blog post. “We are doing everything we can to solve this as quickly as possible.”

READ MORE: Central bank says Wirecard's missing funds didn't enter Philippines

ANNA Money, a current account for freelancers with 20,000 customers, said in a blog on Monday: “We expect the suspension to be lifted, and we are working to restore access to your card and account as soon as possible.”

The company said it would also use its own funds to backstop customer cash if needed, although it said this would take up to two weeks to put in place.

“We’re acting as quickly as possible to take steps to guarantee customers’ funds, keep them informed and get back up and running again so they can access their accounts,” ANNA Money’s co-founders Boris Dyankonov and Eduard Panteleev said in a joint statement emailed to press.

Curve, a startup that lets people combine all their cards in one, was also hit by the freeze on Friday. It told customers in an email on Monday that cards would be reactivated after the business spent the weekend migrating onto new systems.