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What Should UK Regulation Look Like in the Wake of Wirecard?

The cautionary tale of Wirecard is still circling the fintech world, with questions for both industry leaders and the Financial Conduct Authority (FCA) still to be answered. When the German-based Wirecard filed for insolvency, it started a cascade that affected thousands in the UK, as the FCA quickly suspended its local transactions. Understandably, the industry wants to hear from the regulator on just how it plans on improving safeguarding regulations for e-money institutions – and what’s more, some fintechs have their own ideas.

Currently, the FCA is consulting on payment firms safeguarding and has confirmed in its latest business plan that making payments safe and accessible is one of its top priorities. An FCA spokesperson told The Fintech Times that “The FCA will continue to proactively supervise firms in this sector and will act swiftly where firms fail to meet safeguarding and other regulatory requirements.”

However, for some fintechs the FCA isn’t moving fast enough, especially when examples of best practice exist in other countries around the world.

Nigel Verdon, co-founder and CEO of Railsbank, has called on the UK industry and regulators to join forces to upgrade existing client money safeguarding regulations in the fintech sector and introduce new provisions for material outsourcers such as card issuing platforms, following the example set by the Monetary Authority of Singapore (MAS). “I believe fundamental changes could and should be made in the industry to ensure healthy market growth and stability – something that the Wirecard scandal brought to light,” said Nigel.

“MAS put in place regulation for material outsources to give the industry comfort on matters like orderly shutdown, service levels and step-in rights. Railsbank conforms with those rules to support its customers like Singlife in the region and endorses MAS’ approach.

“eMoney safeguarding regulations in the UK should sit under trust law very much like the FCA’s existing and well-regarded Client Assets Sourcebook (CASS) client money regime. That way we will avoid a similar crisis occurring in the future, where there is conflict between safeguarding in the Financial Services and Markets Act and company liquidation law under the Companies Act where the liquidator on behalf of creditors under certain circumstances can claim client money.”

Still, Nigel believes that in the wake of Wirecard it is more important than ever to work with the regulator, but the team at Railsbank believes that this will only come with clarity.

It’s something that Joanna Jenkins, Global Compliance Director at Railsbank, agrees with.

She said, “The current position creates ambiguity when interpreting existing rules and, in turn, legal uncertainty. Railsbank and the industry want to do the right thing by our customers, and that requires clarity. We need a fundamental overhaul to bring it in line with the much better CASS regime and more solid arrangements for customer funds safeguarding. The FCA should continue engaging with the industry to ensure that much-needed change happens.”

Nigel added, “Change is possible. But for that to happen, the industry must unite and work together with all key stakeholders, including the Financial Conduct Authority.”

The key question now is whether other industry leaders are in agreement? The Fintech Times spoke to Rapyd, Paynetics and BlueSnap to find out more.

Rapyd is a platform that makes it simple to integrate local fintech and payment capabilities into any application. CEO, Arik Shtilman, believes that closer collaboration across borders is needed.

He said, “Fintechs like Rapyd play an ever-increasing role in global financial markets and should all meet the same regulatory requirements to maintain a level playing field. Any financial technology company that is involved in moving funds should be regulated by the local authorities where it does business. Wirecard’s collapse does require a pause and a reassessment of existing regulatory practices. All ideas for new approaches should be considered including closer collaboration across borders. The FCA, BaFin, and other oversight bodies should have been collaborating and sharing data more closely with each other. Each individual regulatory body had a single puzzle piece view of Wirecard and not the full picture creating the gaps where the Wirecard fraud perpetuated.”

Meanwhile, Ivo Gueorguiev, CEO of Paynetics, a payment solution in card acquiring and issuing, believes that auditors need to up their game. A business builder rooted in financial services, he is currently on a mission to redefine payments, including enabling 35 million financially underserved (micro) merchants across the EU to accept card payments on their phones through the first ever purely software POS solution. 

He said, “When it comes to regulation and governance, the Wirecard affair represents the perfect storm that has been brewing in the finance industry and shines a light on the dichotomy of fintechs versus regulated businesses. Payments are sensitive and oversight is key. Whereas fintechs often offer glossy concepts and good customer experience, they can lack the proper plumbing behind their operations. These fundamentals are crucial to the viability and longevity of financial services businesses, and cutting corners on these always catches up with you.

The role of local regulators should be mostly oversight and control. Whilst they have to build relationships with businesses, openly protecting and shielding local players may lead them down a dangerous path, as we have seen. We have witnessed the failure of basic controls: auditors need to step up their game.

A new breed of fintechs are appearing, bridging the gap between runaway, disruptive ideas and down to earth, complex, regulatory frameworks. I call these “regulated fintechs”. They have a big part to play in this process as they are driven by innovation but at the same are fully regulated; they essentially bring the best of both worlds.”

Nikhita Hyett is MD, Europe at global payment technology company BlueSnap. A platform with access to over 30 global banks and 100 payment types.

She added that “Whilst Wirecard’s downfall seems like a unique set of circumstances, it has implications from a governance and risk perspective for many businesses who are reliant on one bank for all of their payments. A major learning from the outages caused by the Wirecard scandal is the requirement to have a failover. Businesses exclusively using only one acquiring bank need to rethink their strategy, branch out and adopt a failover.

“Instead of single-bank providers, businesses should opt for working with a truly global banking network. Multiple banks allow for multiple failovers, which essentially means multiple payment options and constant protection and access to money. And nowadays, by working with the right platform, payments can be redirected from one bank to another with minimal effort. Multi acquiring is no longer the arduous, manual task reserved exclusively for large businesses.

“In terms of industry governance, we expect regulators all over the world to double down on the existing requirements. There is no room for error and, as we learned from the Wirecard situation, regulators cannot afford to let standard requirements slide – regardless of how much they want to promote a local fintech.”




  • Gina is a fintech journalist (BA, MA) who works across broadcast and print. She has written for most national newspapers and started her career in BBC local radio.

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