Wirecard: A cautionary tale for fintech

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Two years on the fintech industry needs to make sure the correct lessons have been learned from the collapse of Wirecard.

Wirecard: A cautionary tale for fintech

Image source: Markus Braun

With job losses mounting in the fintech space and pressure on venture capital volumes and company valuations, it is understandable to see the present time as fintech’s toughest moment. It could have easily been far worse.

On the 22nd of June, it will be exactly two years since Wirecard said that that €1.9bn of cash that it had previously booked into its accounts was missing and presumed to never to have existed at all.

The collapse of Wirecard, and the arrest of its CEO Markus Braun (pictured), followed shortly after. Only now are those involved beginning to face lawsuits and in some cases criminal charges. Braun was indicted in March of 2022 and faces up to 15 years in prison, where he currently resides, if found guilty.

Fintech is in a very place compared to June 2020 but the lessons learned from the Wirecard debacle are more now important than ever. 

Imagine an alternate history where the €1.9bn Wirecard fraud had not yet come to light.

Worse still, imagine it was waiting in the wings and poised to take centre stage during the current market conditions. It would have been far more catastrophic for the fintech industry if the fraud had spiralled further only to emerge in today’s market downturn. 

This is one of the principal questions that arise from reading Money Men, a book chronicling the Wirecard collapse. Written by Dan McCrum, a Financial Times journalist at the centre of the action and who helped expose one of the biggest corporate financial frauds in history, the book outlines some jaw-dropping moments but the truly scary notion is what might have happened if Wirecard’s fraud had not come to light two years ago. 

When the Wirecard implosion began, it quickly spread beyond the company to those fintechs it serviced either as a card issuer or payments platform. 

For the likes of Curve, Soldo, Anna, Payhawk or Tymit this meant immediate disruption but ultimately those fintech companies affected bounced back. 

Customers’ trust in these brands or the wider fintech space didn’t go down materially. However, the Wirecard house of cards could have been much, much larger.

One of the most bizarre stories in the book involves another German financial behemoth and points to how Wirecard contagion could have escalated.

There was, according to the book, a plot orchestrated by Wirecard bosses aiming for a €50bn merger with Deutsche Bank, ostensibly to hide the former’s missing cash in the latter’s deep coffers.

I won’t speculate on how likely this would have been to come off but one thing seems clear. A fraudulent company is unlikely to turn over a new leaf just because it has acquired another bigger company. 

Had the deal come off, or happened but with a different bank, the events that led to the collapse of Wirecard seem highly likely to have occurred at some point in the future. It seems likely it would have coincided with 2022’s tumultuous markets, given the broader sell-off in tech stocks.

The fall out for the fintech sector, perhaps the whole financial system, would have meant much wider, and financially ruinous reverberations.

So what are the most important lessons for the fintech industry and those who regulate it two years on?

There are some obvious ones. Absurdly complicated corporate structures can be a red flag. Be sceptical of numbers that look too good to be true. 

Short sellers can sometimes be on to something. If a company or individual is threatening critical journalists the implications are not good.


Read AltFi reporter Amelia Isaacs’ review of Money Men here.

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