Wirecard’s operations in Australia are extensive
- UPDATED at 1.40pm to remove inaccuracies re Cuscal.
The accounting scandal engulfing controversial German payments provider Wirecard AG could have wide-ranging impacts on Australian banks, merchants and retail customers.
Australian consumers are at risk of losing access to redemptions on prepaid cards issued by the German company.
Westpac, Cuscal and Bendigo Bank could suffer fallout from Wirecard’s troubles, along with thousands of merchants, including travel operator, STA Travel.
Germany’s largest fintech is facing financial collapse after the company’s auditor Ernst & Young last week revealed that it could not account for cash items worth 1.9 billion Euros.
The missing cash, which represents about one quarter of the company’s asset base, was included in an annual balance sheet prepared by the Wirecard’s senior management.
After E&Y signalled last week that it could not verify the accounts, Wirecard’s chief executive Markus Braun announced his resignation.
Wirecard’s share price has since crashed by more than 85 per cent. Its credit rating was slashed on Friday by Moody’s to junk status.
In an embarrassing development on Monday evening, the company’s board conceded that the “missing cash” probably never existed.
“The Management Board of Wirecard assesses on the basis of further examination that there is a prevailing likelihood that the bank trust account balances in the amount of 1.9 billion EUR do not exist,” the board said in a statement.
Wirecard’s future is now out of its control and firmly in the hands of a consortium of 15 bank lenders, which is owed 1.75 billion Euros on a revolving debt facility.
If the consortium, which includes Commerzbank AG and ABN Amro, decides to terminate the credit line it would likely trigger the company’s collapse and a wave of disruption throughout the international payments system.
Wirecard’s operations in Australia are more extensive than is generally appreciated, with the company’s activities including merchant servicing and acquiring, payments processing and the issuing of prepaid cards through the Visa and Mastercard schemes.
It employs at least 45 people at its Australian headquarters in Melbourne where the local merchant acquiring and card issuing operations are managed.
A big concern for ASIC will be whether holders of prepaid Mastercard and Visa cards will be in a position to redeem value they placed on the cards.
Wirecard issues prepaid cards through a raft of Australian retailers and service providers, especially in the travel industry.
One of its biggest local clients is STA Travel, which markets a prepaid Visa card to customers.
All currency value loaded onto these cards is required to be held in trust accounts at an authorised deposit taking institution.
Banking Day understands that Wirecard uses Bendigo and Adelaide Bank to manage the trustee accounts.
One of Wirecard’s clients in the United States is the Australian-owned blood products company CSL.
Since April 2017 Wirecard has managed a cashback rewards scheme on behalf of CSL aimed at building loyalty among American blood donors.
At least six Australian deposit taking institutions - Cuscal, Bendigo and Adelaide Bank, Westpac and three mutual deposit takers – are connected in some manner to Wirecard.
In 2016, Cuscal announced a strategic partnership with Wirecard.
A Cuscal spokesperson confirmed to Banking Day it had been the acquiring institution on payments accepted through the fintech’s 3500 Australian merchant terminals.
However, the Cuscal spokesperson confirmed that Cuscal ceased to be the legal acquirer of those transactions “some months ago”.
“Wirecard is a third party provider to Cuscal, through their ownership of the Cadencie credit card management software, and we utilise the services of Wirecard for card transaction processing on behalf of three Cuscal clients,” the spokesperson said.
“We are actively monitoring the situation regarding Wirecard and engaging with regional Wirecard management and our clients on this matter.”
Wirecard also has a longstanding strategic arrangement with Bendigo Bank.
According to information published on the Wirecard website, Bendigo has relied on the German company’s technology to acquire and process transactions that go through its merchant network across Australia.
A strategic deal was struck with Bendigo in 2003.
A Westpac spokesperson declined to comment on the extent of the bank’s commercial ties with Wirecard.
ANZ, NAB and CBA said they had no relationships with embattled company.