September 25, 2020

Wirecard: Lessons for Nigerian Fintechs and Regulators

Late last month, in a flurry of surprises for the UK Fintech sector, Wirecard AG, a German electronic payments processor company, publicly listed on the Frankfurt Stock Exchange, DAX –with its subsidiary in the United Kingdom, Wirecard Card Solutions Limited (Wirecard UK) – failed in the public markets after an accounting fraud, to the tune of about €1.9 billion was uncovered in the parent company.



2011-2014:                  Wirecard AG Raises $500m and Acquired Certain Payment Processing Companies Forming Part of its Subsidiary Companies.

April 28, 2020:          KPMG Submits an Audit Report Which Questions the Authenticity of Wirecard’s Financial Statements.

June 5, 2020:             German Police Raids Wirecard’s Office in Germany.

June 18, 2020:            Wirecard is Expected to Publish its Audited Accounts Report, Instead Reports That About €1.9b is Missing.

June 19, 2020:            The CEO Resigns

June 22, 2020:            Wirecard Acknowledges Possibility of Account Fraud

June 25, 2020:            Wirecard Discloses the Possibility of Filing for Insolvency

June 26, 2020:            The Operations of Wirecard UK are Temporarily Shutdown by FCA & United Kingdom

June 29, 2020:            FCA Permits Resumption of Wirecard UK Operations.

Source: 11:FS


The timeline above gives a background analysis of the events that led to an ugly experience for certain Fintech companies in the UK between June 25 and 29.

From findings, certain Nigerian users of the Payoneer card were also affected by the decision as the card is issued by Wirecard UK.


Curve is a UK Fintech company that was also affected by the Wirecard UK shutdown


In retrospect, while the long term consequences of the incident are yet to be measured, the Wirecard UK shutdown may have created a dent in the public’s confidence in the Fintech sector. Some affected companies reported having challenges with managing consumer expectations after the impromptu suspension of Wirecard UK by the Financial Conduct Authority.

On social media, consumers complained of not being able to access or receive funds from their accounts. The event brings up questions on how prepared Fintech operators are for such architectural risks and how they can manage blowbacks under similar circumstances. It is also a lesson to Fintech operators in other jurisdictions on things they need to put in place to manage such risks.

Without a doubt, infrastructure providers such as payment processors are vital to the seamless operation of Fintech companies in Nigeria. Personal finance service providers like Piggyvest, Cowrywise, SwipeNG, etc. rely on the architecture created by other Fintechs such as Interswitch, Paystack, Flutterwave, etc. This is because infrastructure providers create solutions such as payments processing, card issuance and management, and general technical integrations upon which the consumer-faced applications can build on to provide their innovative solutions to the end users.

A key learning from the Wirecard crisis is how imperative it is for consumer-facing Fintech companies in Nigeria to consider the risk implications where their infrastructure providers face such shutdowns. Under those circumstances, what happens to the Fintech companies who rely on the infrastructure providers? What are the options available to a Piggyvest if a regulator decides to shut down the operations of Flutterwave or Paystack? Nigerian fintechs are already operating with a low trust consumer base may have a harder time convincing users if such an incident occurs.


Thankfully, some Fintech companies affected by the Wirecard shutdown in the UK shared their stories and here are some takeaways their peers in Nigeria can use to prepare for such possibilities, if they occur in the future:

  1. Recognize that there is a trust problem: Fintech companies in many cases face the problem of trust. In some cases, traditional banks even fare better on the trust scale than Fintech companies. Most Fintechs, unlike traditional banks and financial institutions, operate with little to no physical structure and only on digital platforms. Most consumers trust traditional banks more, compared to neobanks, with some asserting this is due to the presence of local, walk-in branches, in the case of traditional institutions. Fintech companies need to understand that they are under more scrutiny compared to the traditional banks who have built decades of relationship with these users and therefore, need to do more than necessary to retain the trust of their users.
  2. Communication is key: Many of the Fintech companies affected by the Wirecard UK shutdown noted that communication with the consumer is most crucial under such scenarios. In many cases, employees of the affected companies had to take up customer support roles in addition to their prior existing departmental functions during the incident period to get their operations running again.
  3. Internal organization is important: In facing such high-pressure challenges, a problem-solving approach has a positive effect in assuaging customer reactions and public agitations. Decisive leadership and clear communication by the leadership of Fintechs therefore plays a vital role.
  4. Agility is key: Some of the affected companies report their engineering teams having to work for days in order to get back to functionality. Therefore, teams need the engineering agility to prepare for occasions where they may have to migrate onto another platform in a matter of days, if not hours. Fintechs may have to consider options like partial suspension or throttling of some features, and these options should be clearly communicated to the users at inception for a scenario as this.


There is certainly a lesson for the regulators too. Regulators need to understand the nature of the Fintech sector and the immediacy in service delivery expected of them by their  users, compared with their traditional counterparts.They need to run a risk readiness exercise with these players at intervals to ascertain their readiness in cases as this.

The Financial Conduct Authority tried to justify its decisions to temporarily shutdown Wirecard UK, arguing that “our primary objective has always been to protect the interests and money of consumers who use Wirecard”. While the FCA asserts that it was able to provide relief to affected consumers through the Department of Work and Pensions (DWP), Her Majesty’s Treasury (HMT) and the Home Office; the processes leading to its decision to suspend Wirecard UK was considered by many as inadequate and abrupt.

However,  despite providing these thoughtful palliatives and explanations, customers’ and investors’ confidence have been eroded with loss in stock value  of these affected companies.

Tooni Ajiboye
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