The rise and fall of Wirecard: What can we learn?

Written by: Joanna Jacob and Vedanshi Shah


In the eyes of the public, Wirecard was a great success story — €24 billion high-growth payment processor undertaking global deals and pioneering new technology.

While naysayers criticized its opaque corporate and financial procedures, others applauded its quickness in navigating regulatory hurdles to global expansion. It was a winner in a world of endless growth enterprises. But the reality was much different — its reported business was mostly non-existent resulting in one of the big Accounting scandals in our modern era. How could this happen in our modern, transparent world?

What is Wirecard?

To start, Wirecard AG is a German FinTech company focusing on payment processing and providing financial services. It was an international FinTech company with bases in a lot of countries like North America, the United Kingdom, Brazil amongst others. Headquartered in Aschheim, Bavaria, Germany they offered electronic payment transaction services and risk management.

They also issued and processed physical and virtual cards. Since they have been founded on January 1, 1999, they have been listed on the Frankfurt stock exchange, and have been a part of the DAX stock index. Click here to see more about the developments that led to the collapse of the company, as well as key moments since.

Wirecard's global footprint. Source: Wirecard

What happened?

The scandal began in April 2015 when Financial times started questioning their business model and accounting practices in their FT Alphaville blog. About a year later in February of 2016, a 101 paged Zatarra Report was published, it included a lot of detailed information about the money laundering and fraud that took place in Wirecard. Upon further investigation, it was revealed that €1.9 Billion were missing which led to their share value decreasing over 72%.

The Fall of Wirecard. Source: FT

How did they get away with it for so long?

Wirecard was unable to provide comprehensive records of the executive board meetings leading to there being less accountability and transparency. This affected the regulatory and audit reviews. However, this problem was not noticed by the auditor and thus never addressed by the EY. Upon further investigation into where the $2.1 Billion went, the reports revealed that EY did not independently confirm Wirecard cash balances in Singapore for three years and that they relied heavily on a third-party trustee’s documents and screenshots. Due to the severity of the situation the auditor is facing a lawsuit and various criminal complaints from the shareholders and bondholders to ensure accountability. More information on the regulators here.

What can we learn from it?

Looking at the fallout from the Wirecard scandal, there are many lessons that we can take.

  1. There is a lot more to be done in Europe to monitor and regulate FinTech companies. The implementation of these regulations is vital for the assurance of investors and consumer protection;
  2. Businesses and consumers should not put one egg into a basket. Meaning that amid the £1.7bn (US$2.3bn) alleged accounting fraud at Wirecard and its pending insolvency, those that used their technology to process payments, including a host of UK fintech firms such as Curve and Pockit, saw their payments being frozen. This essentially left a myriad of consumers and businesses without access to cash. This represents the ongoing risks of being reliant on one acquiring bank for all of their payment processing.
  3. The heart and soul of the company start from top-to-bottom. Within auditing, a general framework called the fraud triangle is used to explain the reason behind fraudulent behavior. These are an incentive, opportunity, and rationalization. In the case of Wirecard, the first two are quite clear. The firm, which became public and listed on the DAX index, was under pressure to perform for its shareholders. The opportunity to commit fraud came about due to their peculiar organizational structure, due to their use of payment companies across Asia and the UAE. When it comes to the case of rationalization, much of this can be attributed to a combination of the corporate culture within Wirecard itself, as well as the lax attitude of German regulators towards allegations against the company.
Trust and integrity are essential when you do business together.

Disrupt is a student-led organization that aims to create a community which drives advancement, education, and engagement in FinTech at Northeastern University.