7 ms·

Wirecard is 'beyond salvageable,' according to analyst

63 points by finphil 6y ago

empath75 6y ago
Somehow bitfinex keeps chugging along, though.
- quickthrowman 6y ago
  It’s almost as if cryptocurrencies have no intrinsic value, only extrinsic/speculative value. Due diligence doesn’t matter to the people that expect a 10x or 50x gain.
  - bootcampwhere 6y ago
    It's almost as if f HN doesn't understand cryptocurrency and you are just angry about it.
- SideburnsOfDoom 6y ago
  You could have said the same about Wirecard a couple of months ago. Unsustainable things can go on for a surprisingly long time, until suddenly they don't.
rafaelturk 6y ago
The most important asset of any financial institution is trust. Banks, fintechs need utmost trust from customers in order to run their business their business. Imagine Wirecard customers debating if they will continue to use Wirecard as payments as processor considering that they can't manage neither account for their own money.
- gizmo 6y ago
  > fintechs need utmost trust from customers in order to run their business Wirecard has been repeatedly and very credibly accused of fraud and of cooking their books for the past decade. Clearly customers don't care otherwise they wouldn't have had any. Wells Fargo fraudulently created millions of fake checking and savings accounts. Did it break the "utmost trust" you assert is required? No. RBS was found insolvent after the 2008 financial crisis. Surely insolvency violates this "utmost trust" benchmark? Haha. No. Barclays was found guilty of fixing interbank interest rates (Libor). Massive scandal that was all over the newspapers. And yet, same question, same answer.
  - duxup 6y ago
    >Clearly customers don't care otherwise they wouldn't have had any. Or they don't know.
  - JumpCrisscross 6y ago
    In none of the cases of Wells Fargo, RBS or Barclays did institutional clients lose money. Wirecard May cause that. That’s the difference. Scandalous banks that keep my money aren’t great, but I’m not going to rush to stop banking with them.
    - SideburnsOfDoom 6y ago
      In the case of RBS, the UK government stepped in, in November 2008, and "became the majority shareholder". That protected the institutional clients by keeping RBS in business. I recall someone saying a couple of years later that RBS was a Bank, in the same sense that the Heritage Railway Association was a Train Operating Company. Harsh and funny, but with some truth to it.
  - StupidPeople 6y ago
    Wells Fargo fraud only impacted foolish people who don't check their bank statements. If you did, you complain and the accounts go away. Many banks were insolvent after 2008. The government fixed that. Libor fixing us too complicated for most to understand and it mostly hurt you if you didn't ship around. I'm fine with fraud as long as it mostly hurts those who can't be bothered. Still a happy client of Wells Fargo. Wirecard has the problem of impacting diligent people who will actually take action against them.
    - lazylizard 6y ago
      I'd really prefer a bank i don't have to check and complain about. And maybe not just my bank.
- rini17 6y ago
  There were numerous reports of PayPal withholding funds for unknown reasons and ruining people and businesses. Did these dent the trust? Seems not at all.
  - close04 6y ago
    I'm not sure if this is a matter of trust or lack of choice in this case. There simply aren't too many options to achieve the same results as with PayPal. Every site I go to gives me several payment options but the only ones present across every one are PayPal and card payment. So if that's what the buyer uses, the seller doesn't get much of a choice either.
    - A4ET8a8uTh0 6y ago
      This. Based on the offerings I saw, Paypal is noticably cheaper than other options for basic small business use case ( minor ebay shop, small online store ). The charges are straighforward and easy to predict. Compare that to most other providers and you find yourself digging through reams for legalese with fees calculations that are ridiculously complex and, seemingly, designed to deceive. I am not a big fan of Paypal and heavens know it has some major issues to address, but the entire field kinda sucks in its own unique way.
      - cptaj 6y ago
        I think the biggest issue with the entire field is not respecting the users. They're treated as potential criminals, their livelihoods and money are not respected at all, they have no recourse to protest administrative action, etc. Its a terrible experience overall. It has gotten better but still leaves a lot to be desired
        PeterisP 6y ago
        Just like there's no way around the fact that a large portion of email is spam, there's no way around the fact that in the field of receiving money on internet, a substantial niche of potential users actually are criminals. Their volume of transactions is quite large, they are sophisticated and eager to try out new services, and they can rapidly direct the flow of (many) fraudulent payments to a new payment service provider or scale the exploitation of some cash-out system to thousands of accounts managed dozens of actual people (generally 'money mules' who get scammed themselves). So if your service is friendly to that group of customers, no matter if accidentally through some process flaw or intentionally (because you're not treating criminals creating accounts as potential criminals), then you can (and will) suddenly get a lot of criminal activity. For a small service, as soon as organized criminals notice that your policies allow them to use you for making fraudulent transactions, they can quickly bring in much more transactions that any of your marketing activities. The general result of doing what you propose is that it works until criminals notice a particular vulnerability in your processes/policies caused by excessive trust in users, and then suddenly you get a LOT of fraudulent activity which makes all your operations unviable. I've seen small merchants get a tenfold increase in transactions over a single week, with all of that increase being fraud, enabled by some weakness that is massively exploited until they close the weakness. Or close their business - for a small business, a single major fraud campaign can easily be enough to bankrupt them.
- needusername 6y ago
  As a merchant you chose Wirecard because no other acquirer wants you business, see FriendFinder.
lifeisstillgood 6y ago
Slate Money podcast was surprisingly good on Wirecard this week. Three things popped out - that this had been widely claimed as a fraud (millions in business going through offices that were just postal drops etc) but the German "establishment" supported them because they had no native german payment processor otherwise (and once you were in the Dax 30 it's a big deal to declare fraud). Also the failings of shorting a business - it's not enough to know they will collapse sometime, but you cannot keep covering your short for five years without wondering if the bet is worth it. But really this is just yet another example of regulatory failure and it's hard to see how we fix it without destroying the culture of entrepreneurship
- barney54 6y ago
  The regulators need to do a real investigation and not attack shorts and journalists. It's not easy to do real investigations, but not attacking investors and journalists is not hard.
- ChuckNorris89 6y ago
  How does investigating fraud destroy entrepreneurship culture? Should we just turn a blind eye to every dodgy business practice to ensure some entrepreneur gets rich? Oh, wait...
  - mratsim 6y ago
    At this point, if a company raised an SIO (Softbank Initial Offering) and starts with a W like WeWork and Wirecard, I'm going to look into it at least a hundred times or avoid it like the plague.
- hef19898 6y ago
  Agree, with the exception of the last paragraph. SOX didn't kill NASDAQ or the Dow. And if an entrepreneur is only successful because regulations are lax, not enforced and his business is ignoring corporate governance, that business doesn't seem to have any justification to exist in the first place.
SideburnsOfDoom 6y ago
FYI, many prepaid cards in the UK are inoperable this weekend due to the failure of Wirecard, which they depended upon: https://www.moneysavingexpert.com/news/2020/06/pockit--curve-and-other-prepaid-card-customers-see-accounts-froz/ https://www.moneysavingexpert.com/news/2020/06/pockit--curve... No clear answer of when these cards will be working again. This will hurt disadvantaged people the most, who are more likely to depend on a prepaid card, just have the one card, or to find £100 being temporarily out of reach as more than an inconvenience.
- bserge 6y ago
  Interesting, I have a Pockit account and haven't heard anything from them. Maybe because it's the weekend, but they usually send notification emails when their services go down sometimes for maintenance (card withdrawals were usually unaffected though)..
  - SideburnsOfDoom 6y ago
    There are notification emails to affected customers this weekend, or at least, I have received 2 so far, so I assume that all affected customers got them. I'm not sure if all Pockit accounts are with Wirecard. You can see more at the links that they give: https://twitter.com/PockitUK https://twitter.com/PockitUK https://blog.pockit.com/important-update-pockit-accounts-temporarily-inaccessible-4b038228cc93 https://blog.pockit.com/important-update-pockit-accounts-tem... I am thankfully, not substantially unconvinced by this account being frozen. But I am sure that it's not good for many Pockit customers or for Pockit's business.
    - bserge 6y ago
      My card says Wirecard, and the last email from Pockit was on the 20th ("Summer of cashback"). Strange. But I'm not using it much, it's just a card for safe online purchases. Saved me twice, it's a good thing to have.
      - SideburnsOfDoom 6y ago
deleted 6y ago
[deleted]
the_mitsuhiko 6y ago
I keep hearing this “not salvageable” but this seems odd to me. Wirecard has been issuing physical cards for many companies and runs the payment systems for many large companies. The cost of switching off that infrastructure is high. Why wouldn’t someone want to acquire a miniature wirecard after the bankruptcy is through?
- Tenoke 6y ago
  Because the cost of pretending to be a way more profitable company is that you end up with a lot more expenses and debt than you would otherwise.
- WJW 6y ago
  The cost of switching off that infrastructure may be high, but it's not borne by the creditors. In any case, the article states that Visa and Mastercard will likely revoke the Wirecard license on their respective platforms and most if not all customers will seek an alternative payment provider long before the bankruptcy is through. Presumably most of the employees will have sought greener pastures by then as well. What is left is a company shell with (maybe) some source code but no customers, no license, no employees and the name of Wirecard haunting it. Possibly also some leftover liabilities. Might as well start a brand new company at that point, if you want to enter the payment processing industry.
gip 6y ago
I worked for a fintech company until 2018 and learned a lot about the payment ecosystem. At an industry event in 2017 (or maybe early 2018) I discussed with an industry veteran about a bunch of things and he mentioned wirecard, saying that nobody believed they had a profitable business and advised to stay away from them. I didn’t pay too much attention.. until last week!
f6v 6y ago
Payoneer customers have been hit hard by this. And judging by the past, there's a slim chance of recovering their funds.
rwmj 6y ago
Short video from the FT reporter who was investigated by German authorities and followed by people working for Wirecard: https://www.youtube.com/watch?v=u-8-QbDpqqw https://www.youtube.com/watch?v=u-8-QbDpqqw
dang 6y ago
The Wirecard stack so far: https://news.ycombinator.com/item?id=23662704 https://news.ycombinator.com/item?id=23662704 https://news.ycombinator.com/item?id=23638624 https://news.ycombinator.com/item?id=23638624 https://news.ycombinator.com/item?id=23611347 https://news.ycombinator.com/item?id=23611347 https://news.ycombinator.com/item?id=23573386 https://news.ycombinator.com/item?id=23573386 https://news.ycombinator.com/item?id=23598824 https://news.ycombinator.com/item?id=23598824 https://news.ycombinator.com/item?id=23438323 https://news.ycombinator.com/item?id=23438323 This, from a year ago, reads interestingly now: https://news.ycombinator.com/item?id=19737344 https://news.ycombinator.com/item?id=19737344

63 points by finphil 6y ago

empath75 6y ago

Somehow bitfinex keeps chugging along, though.

quickthrowman 6y ago
It’s almost as if cryptocurrencies have no intrinsic value, only extrinsic/speculative value. Due diligence doesn’t matter to the people that expect a 10x or 50x gain.
- bootcampwhere 6y ago
  It's almost as if f HN doesn't understand cryptocurrency and you are just angry about it.
SideburnsOfDoom 6y ago
You could have said the same about Wirecard a couple of months ago. Unsustainable things can go on for a surprisingly long time, until suddenly they don't.

rafaelturk 6y ago

The most important asset of any financial institution is trust. Banks, fintechs need utmost trust from customers in order to run their business their business. Imagine Wirecard customers debating if they will continue to use Wirecard as payments as processor considering that they can't manage neither account for their own money.

gizmo 6y ago
> fintechs need utmost trust from customers in order to run their business Wirecard has been repeatedly and very credibly accused of fraud and of cooking their books for the past decade. Clearly customers don't care otherwise they wouldn't have had any. Wells Fargo fraudulently created millions of fake checking and savings accounts. Did it break the "utmost trust" you assert is required? No. RBS was found insolvent after the 2008 financial crisis. Surely insolvency violates this "utmost trust" benchmark? Haha. No. Barclays was found guilty of fixing interbank interest rates (Libor). Massive scandal that was all over the newspapers. And yet, same question, same answer.
- duxup 6y ago
  >Clearly customers don't care otherwise they wouldn't have had any. Or they don't know.
- JumpCrisscross 6y ago
  In none of the cases of Wells Fargo, RBS or Barclays did institutional clients lose money. Wirecard May cause that. That’s the difference. Scandalous banks that keep my money aren’t great, but I’m not going to rush to stop banking with them.
  - SideburnsOfDoom 6y ago
    In the case of RBS, the UK government stepped in, in November 2008, and "became the majority shareholder". That protected the institutional clients by keeping RBS in business. I recall someone saying a couple of years later that RBS was a Bank, in the same sense that the Heritage Railway Association was a Train Operating Company. Harsh and funny, but with some truth to it.
- StupidPeople 6y ago
  Wells Fargo fraud only impacted foolish people who don't check their bank statements. If you did, you complain and the accounts go away. Many banks were insolvent after 2008. The government fixed that. Libor fixing us too complicated for most to understand and it mostly hurt you if you didn't ship around. I'm fine with fraud as long as it mostly hurts those who can't be bothered. Still a happy client of Wells Fargo. Wirecard has the problem of impacting diligent people who will actually take action against them.
  - lazylizard 6y ago
    I'd really prefer a bank i don't have to check and complain about. And maybe not just my bank.
rini17 6y ago
There were numerous reports of PayPal withholding funds for unknown reasons and ruining people and businesses. Did these dent the trust? Seems not at all.
- close04 6y ago
  I'm not sure if this is a matter of trust or lack of choice in this case. There simply aren't too many options to achieve the same results as with PayPal. Every site I go to gives me several payment options but the only ones present across every one are PayPal and card payment. So if that's what the buyer uses, the seller doesn't get much of a choice either.
  - A4ET8a8uTh0 6y ago
    This. Based on the offerings I saw, Paypal is noticably cheaper than other options for basic small business use case ( minor ebay shop, small online store ). The charges are straighforward and easy to predict. Compare that to most other providers and you find yourself digging through reams for legalese with fees calculations that are ridiculously complex and, seemingly, designed to deceive. I am not a big fan of Paypal and heavens know it has some major issues to address, but the entire field kinda sucks in its own unique way.
    - cptaj 6y ago
      I think the biggest issue with the entire field is not respecting the users. They're treated as potential criminals, their livelihoods and money are not respected at all, they have no recourse to protest administrative action, etc. Its a terrible experience overall. It has gotten better but still leaves a lot to be desired
      - PeterisP 6y ago
        Just like there's no way around the fact that a large portion of email is spam, there's no way around the fact that in the field of receiving money on internet, a substantial niche of potential users actually are criminals. Their volume of transactions is quite large, they are sophisticated and eager to try out new services, and they can rapidly direct the flow of (many) fraudulent payments to a new payment service provider or scale the exploitation of some cash-out system to thousands of accounts managed dozens of actual people (generally 'money mules' who get scammed themselves). So if your service is friendly to that group of customers, no matter if accidentally through some process flaw or intentionally (because you're not treating criminals creating accounts as potential criminals), then you can (and will) suddenly get a lot of criminal activity. For a small service, as soon as organized criminals notice that your policies allow them to use you for making fraudulent transactions, they can quickly bring in much more transactions that any of your marketing activities. The general result of doing what you propose is that it works until criminals notice a particular vulnerability in your processes/policies caused by excessive trust in users, and then suddenly you get a LOT of fraudulent activity which makes all your operations unviable. I've seen small merchants get a tenfold increase in transactions over a single week, with all of that increase being fraud, enabled by some weakness that is massively exploited until they close the weakness. Or close their business - for a small business, a single major fraud campaign can easily be enough to bankrupt them.
needusername 6y ago
As a merchant you chose Wirecard because no other acquirer wants you business, see FriendFinder.

lifeisstillgood 6y ago

Slate Money podcast was surprisingly good on Wirecard this week. Three things popped out - that this had been widely claimed as a fraud (millions in business going through offices that were just postal drops etc) but the German "establishment" supported them because they had no native german payment processor otherwise (and once you were in the Dax 30 it's a big deal to declare fraud). Also the failings of shorting a business - it's not enough to know they will collapse sometime, but you cannot keep covering your short for five years without wondering if the bet is worth it. But really this is just yet another example of regulatory failure and it's hard to see how we fix it without destroying the culture of entrepreneurship

barney54 6y ago
The regulators need to do a real investigation and not attack shorts and journalists. It's not easy to do real investigations, but not attacking investors and journalists is not hard.
ChuckNorris89 6y ago
How does investigating fraud destroy entrepreneurship culture? Should we just turn a blind eye to every dodgy business practice to ensure some entrepreneur gets rich? Oh, wait...
- mratsim 6y ago
  At this point, if a company raised an SIO (Softbank Initial Offering) and starts with a W like WeWork and Wirecard, I'm going to look into it at least a hundred times or avoid it like the plague.
hef19898 6y ago
Agree, with the exception of the last paragraph. SOX didn't kill NASDAQ or the Dow. And if an entrepreneur is only successful because regulations are lax, not enforced and his business is ignoring corporate governance, that business doesn't seem to have any justification to exist in the first place.

SideburnsOfDoom 6y ago

FYI, many prepaid cards in the UK are inoperable this weekend due to the failure of Wirecard, which they depended upon: https://www.moneysavingexpert.com/news/2020/06/pockit--curve-and-other-prepaid-card-customers-see-accounts-froz/ https://www.moneysavingexpert.com/news/2020/06/pockit--curve... No clear answer of when these cards will be working again. This will hurt disadvantaged people the most, who are more likely to depend on a prepaid card, just have the one card, or to find £100 being temporarily out of reach as more than an inconvenience.

bserge 6y ago
Interesting, I have a Pockit account and haven't heard anything from them. Maybe because it's the weekend, but they usually send notification emails when their services go down sometimes for maintenance (card withdrawals were usually unaffected though)..
- SideburnsOfDoom 6y ago
  There are notification emails to affected customers this weekend, or at least, I have received 2 so far, so I assume that all affected customers got them. I'm not sure if all Pockit accounts are with Wirecard. You can see more at the links that they give: https://twitter.com/PockitUK https://twitter.com/PockitUK https://blog.pockit.com/important-update-pockit-accounts-temporarily-inaccessible-4b038228cc93 https://blog.pockit.com/important-update-pockit-accounts-tem... I am thankfully, not substantially unconvinced by this account being frozen. But I am sure that it's not good for many Pockit customers or for Pockit's business.
  - bserge 6y ago
    My card says Wirecard, and the last email from Pockit was on the 20th ("Summer of cashback"). Strange. But I'm not using it much, it's just a card for safe online purchases. Saved me twice, it's a good thing to have.
    - SideburnsOfDoom 6y ago

deleted 6y ago

[deleted]

the_mitsuhiko 6y ago

I keep hearing this “not salvageable” but this seems odd to me. Wirecard has been issuing physical cards for many companies and runs the payment systems for many large companies. The cost of switching off that infrastructure is high. Why wouldn’t someone want to acquire a miniature wirecard after the bankruptcy is through?

Tenoke 6y ago
Because the cost of pretending to be a way more profitable company is that you end up with a lot more expenses and debt than you would otherwise.
WJW 6y ago
The cost of switching off that infrastructure may be high, but it's not borne by the creditors. In any case, the article states that Visa and Mastercard will likely revoke the Wirecard license on their respective platforms and most if not all customers will seek an alternative payment provider long before the bankruptcy is through. Presumably most of the employees will have sought greener pastures by then as well. What is left is a company shell with (maybe) some source code but no customers, no license, no employees and the name of Wirecard haunting it. Possibly also some leftover liabilities. Might as well start a brand new company at that point, if you want to enter the payment processing industry.

gip 6y ago

I worked for a fintech company until 2018 and learned a lot about the payment ecosystem. At an industry event in 2017 (or maybe early 2018) I discussed with an industry veteran about a bunch of things and he mentioned wirecard, saying that nobody believed they had a profitable business and advised to stay away from them. I didn’t pay too much attention.. until last week!

f6v 6y ago

Payoneer customers have been hit hard by this. And judging by the past, there's a slim chance of recovering their funds.

rwmj 6y ago

Short video from the FT reporter who was investigated by German authorities and followed by people working for Wirecard: https://www.youtube.com/watch?v=u-8-QbDpqqw https://www.youtube.com/watch?v=u-8-QbDpqqw

dang 6y ago

The Wirecard stack so far: https://news.ycombinator.com/item?id=23662704 https://news.ycombinator.com/item?id=23662704 https://news.ycombinator.com/item?id=23638624 https://news.ycombinator.com/item?id=23638624 https://news.ycombinator.com/item?id=23611347 https://news.ycombinator.com/item?id=23611347 https://news.ycombinator.com/item?id=23573386 https://news.ycombinator.com/item?id=23573386 https://news.ycombinator.com/item?id=23598824 https://news.ycombinator.com/item?id=23598824 https://news.ycombinator.com/item?id=23438323 https://news.ycombinator.com/item?id=23438323 This, from a year ago, reads interestingly now: https://news.ycombinator.com/item?id=19737344 https://news.ycombinator.com/item?id=19737344