Late on Monday night, the Financial Conduct Authority (FCA) revealed it had worked with Wirecard Card Solutions to lift its restrictions from this morning, once again allowing customers to access their accounts. On Friday, around 500,000 people in the UK, many of who rely on banking apps and pre-paid cards such as Curve, Pockit and ANNA Money, found themselves unable to use their cash due to a severe restriction imposed by the financial regulator.
The FCA had released the full extent of its regulatory powers to suspend operations at Wirecard Card Solutions, based in Newcastle upon Tyne. The shock move came after its German parent company, Wirecard, filed for insolvency last week after admitting that €1.9bn (£1.7bn) is currently missing from its accounts. Despite releasing a statement on Monday morning that it was “continuing to work towards lifting the restrictions” the announcement later that night to lift them in their entirety was unpredicted.
Indeed, while there were some whispers that restrictions may be lifted in the short-term, Money Saving Expert’s Martin Lewis believed that it could come as early as later this week, it will be a welcome surprise for customers this morning. Meanwhile, Wirecard customer Curve announced that it now has all of its services back online by severing its contact with the company thanks to a huge in-house effort (as a Principal Member of Mastercard) and a new superfast collaboration with Checkout.com.
Many banking fintechs had been reliant on Wirecard’s systems but the freeze on all transactions meant that customers had been unable to withdraw or send cash, some who have told The Fintech Times that they have no other source of income and had found the lack of communication incredibly frustrating.
The FCA continued to say on Monday that it was working with Wirecard, although the general consensus was that this was not good enough for customers, highlighted by the opening of a change.org petition to gain access to Wirecard accounts.
The quick turnaround to lift the restrictions later that night will be incredibly welcome however, many will continue to will ask just why the regulator imposed such drastic measures in the first place. Wirecard itself is authorised under the Electronic Money Regulations 2011, this requires customer money to be ringfenced and stored in a separate account, acting as a safeguard so that the funds cannot be used as assets in the event of an insolvency. As long as Wirecard followed the correct procedures, customer money should have never been at risk.
Although the company is not covered by the Financial Services Compensation Scheme (which guarantees to replace funds up to £85,000 if firms fail), this isn’t unusual as Wirecard keeps customer funds separate, unlike a traditional bank that makes use of them and ultimately needs an insurance policy.
The suspension was a big hit for an industry that’s been busy taking small strides in gaining mainstream adoption; mainly through utilising initiatives that help customers budget, spend and save money. While fintech has an ability to move fast in such a situation, certainly quicker than traditional banking methods, the vertical as a whole will bear the brunt of the fallout as customer confidence suffers from being unable to access their cash.
Meanwhile, the pre-paid app Pockit, depended on by many low-income families, has been called out by customers on Twitter for its shocking customer service. With anecdotes of callers on hold for hours and live chats closed before any questions can be asked.
Customer Wayne McDaid from Wallasey had his wages paid into the app on Friday but has been unable to access them ever since, he said, “The service by Pockit over the weekend is disgusting, I’ve had no food since Friday and people simply don’t believe that I can’t access my money.”
Others such as Jamie Wilson from Nottingham have been left unable to pay their rent and bills. He said, “I’ve just moved into my flat and I’m hungry and cold with no source of heating. We are all left in limbo wondering if we have money or not, being told to go to food banks but they are already overwhelmed because of COVID-19. I’m scared for my welfare.”
Jamie blames the FCA for his predicament and has been a happy Pockit customer for the past few years. He intends to stick with them now that the restrictions have been lifted.
It seems that customers of Curve, which allows you to link to other debit or credit services through a single card and app, received better treatment as the platform managed in just 60 hours to bring forward a long-running strategy to move all cards and e-money issuing services in-house. It also transitioned to Checkout.com, which processes payments, at a record pace over the weekend – thus severing all ties with Wirecard. This allowed the FCA to unfreeze customer funds in full by Monday morning. Despite the initial hold-up, Curve customers are now able to spend with their physical cards as well as via Google Pay, Apple Pay and Samsung Pay as of Monday night.
Charles Kerr from Essex has been a Curve customer for the last 18-months and has been pleased with their response so far. He said, “I was definitely concerned at first, especially as some companies (such as mobile business account ANNA Money) were telling their customers to go and withdraw their cash from ATMs but the communication, transparency and turnaround from Curve on getting things back online has been second to none.”
Still, the fintech industry has been shaken by the sudden move of the FCA, as regulation continues to stall and risk-appetite in the wake of COVID-19 diminishes. Mike Hampson CEO of Bishopsgate Financial, commented that operational resilience needs to become a board-level fintech focus. He added, “All banks need to understand how their services are provided and what their back up plan is should a key provider fail spectacularly. This case shows that just because a provider is regulated, or even listed as one of the biggest finance companies in Europe’s biggest economy, you can take nothing for granted.”
It was certainly bleak for hundreds of thousands of customers over the weekend as they struggled without access to their accounts. A small light at the end of the tunnel came from financial expert Martin Lewis, who has offered consumer advice to the hundreds of thousands caught up in the FCA’s decision. Reading between the lines of the FCA’s statement on Monday, he speculated that the cash could be freed up for customers by the middle of the week. In reality, the news came even quicker, with customers told that they will be able to use their finances as normal from 00.01 hours on Tuesday 30th June.
The FCA’s latest statement said:
“The primary objective of these requirements was to protect the electronic money funds of consumers in safeguarded accounts. It also had the effect of preventing consumers from withdrawing and making payments with those funds. The FCA’s consent means that Wirecard can now resume electronic money and payment services to its customers and customers can now, or very shortly, use their cards as usual.”
Meanwhile, Wirecard’s UK division has hired insolvency specialist Alvarez & Marsal to explore its options, so we may not have seen the end of this saga just yet.