Germany’s Wirecard announced it was filing for insolvency, a week after revealing that €1.9 billion ($2.1bn) of its cash was missing. Its collapse will test whether fast-growing and lightly regulated payments firms can fail without damaging customers or dragging down other institutions. For regulators, it’s an overdue wakeup call.
The company, once worth more than €20 billion, is the first member of Germany’s blue-chip DAX Index to file for bankruptcy. For regulators, customers and rivals, however, the real question is what happens next. Though Wirecard has a regulated German banking unit, the country’s main financial watchdog, BaFin, does not directly supervise the parent company. Other payments subsidiaries include a UK unit, licensed by the UK Financial Conduct Authority, and operations in countries including Brazil, Turkey and the Philippines.
Regulators are catching up, however. Adyen, the €39 billion Dutch payments firm, has been regulated as a bank since 2017. The Bank of England’s “Future of Finance” report last year flagged the lack of clear supervision for payments firms, and the need for changes in regulation. Wirecard’s collapse gives those reforms a new urgency.