SINGAPORE (The Straits Times/ANN): German digital payment firm Wirecard was once a huge fintech giant, providing cashless payment services to big international brands such as Samsung, Google and Apple.
In Singapore, it had major clients like taxi firm ComfortDelGro, convenience chain Cheers and telco Singtel for its mobile wallet Dash, and was also being used for everyday purposes such as at Electronic Road Pricing gantries and for consumers to top up their ez-link cards on their mobile phones.
It also supported a large network of retailers and other businesses.
But in June, the firm collapsed in dramatic fashion, owing creditors almost US$4 billion (S$5.5 billion) after disclosing a hole in its books.
It admitted that €1.9 billion (S$3 billion) of cash, supposed to be in bank accounts in the Philippines, did not exist - in what was described as the largest auditing scandal since US energy company Enron's demise in 2001.
Wirecard's fall from grace will certainly have some impact on consumer confidence and the merchants that it assisted, even if the merchants have a range of other payment options available to them, experts told The Straits Times.
Corporate governance advocate and National University of Singapore (NUS) Business School associate professor Mak Yuen Teen said: "This case shows the risks outside the traditional financial sector, including in payments processing companies like Wirecard, fintechs and digital banks."
He added that it could also have an impact on regulations, especially since new rules for payment services were introduced this year.
"This episode may prompt regulators to have a closer look at the corporate governance requirements for companies in the e-payments ecosystem outside of the banking sector, and exercise greater vigilance over the filing and audit of financial statements of these companies."
Wirecard's unravelling took a significant turn early last year, when the Financial Times published reports about alleged wrongdoing at its Singapore office that sent shares in Germany tumbling. Following the reports, the Singapore police raided the Wirecard office in Pasir Panjang in February last year.
The suspicions regarding Wirecard's accounting practices persisted, with chairman Wulf Matthias resigning in January following months of controversy.
Markus Braun, its chief executive, resigned in June after auditor EY refused to sign off on the firm's 2019 accounts, declaring that some €1.9 billion had gone missing. EY also said there were clear indications Wirecard was involved in a fraud with multiple parties around the world in different institutions.
The Singapore police and the Monetary Authority of Singapore then launched an investigation into several local companies in relation to the Wirecard scandal. In August, Singaporean R. Shanmugaratnam, director of Citadelle Corporate Services, was charged with falsifying accounts.
Given that Wirecard is unlikely to revive its fortunes, retailers in Singapore will have to turn to other forms of e-payment such as Nets.
"Since Wirecard has quite a significant presence here, there is likely to be some disruption. Customers who have Wirecard pre-paid cards will also be affected," said Prof Mak.
Choo Wan Sim, United Overseas Bank's (UOB) head of cards and payments, Singapore, said many merchants have sought the bank's guidance in the last two months on how to create more certainty around their payment processing options, or to become part of UOB's merchant network.
"We also advise them on payment acceptance options such as using unified point-of-sale terminals which enable them to accept a wide range of payment schemes through a single terminal as well as how they can accept new payment schemes such as Alipay and WeChat Pay," she said.
She added that these merchants come from a range of sectors, including retail, e-commerce, supermarket, food and beverage, and insurance.
Associate Professor Lawrence Loh, also from NUS Business School and who is director of the Centre for Governance, Institutions and Organisations, said that while merchants may currently find it inconvenient to switch to another system, it will at most be a one-off event. He also observed that the issue is due more to corporate fraud than to any inherent problems in digital payments.
"It will take more than a Wirecard incident for consumer confidence in e-payments to be really rocked." - The Straits Times/Asia News Network