On June 26th, at least at European level, one of the most shocking financial news in recent years was announced. Wirecard Bank and payment company, who even managed to join the selected club of the German DAX index, went bankrupt after auditing firm EY discovered a nearly € 1,900 million hole in its accounting accounts. Considering From ID Finance, they shared their vision with Cointelegraph en Español on how this case could change regulation in fintech matters.
“It was the chronicle of an announced death, at least for the company’s top executives, who more than five years ago began to grow the company’s revenue with false earnings that were theoretically deposited in a fictional company in the Philippines. The aim was to improve the company’s image in order to attract potential investors and customers, ”said ID Finance.
Given the global impact of the news, many users were concerned about whether their money had a connection to Wirecard, as most of them probably didn’t even know about it. However, Millions of application clients as popular as Curve, Pockit or Anna Money, all of them Wirecard customers, have suffered from the effects of this bankruptcy, to see her money freeze and her bank cards no longer working.
The scheme behind Wirecard
“”When Wirecard became insolvent, voices spreading in the financial world called for greater regulation and control of the financial markets”They explained from ID Finance
“”One of the main problems was that the supervisory authorities did not classify Wirecard as a financial holding and therefore did not subject this company to any banking control standards.”They added later
Indeed, Wirecard is a fintech This uses new technology to provide higher quality payment infrastructure to its customers and this has been key for some fintechs like Revolut, among others, to grow and consolidate in the market. This feature makes them outside of traditional financial regulation, as they are not subject to the same rules or controls as other companies at European level.
“A regulatory loophole that has put the need for auditing and control of this type of company on the table and has even somewhat undermined Germany’s credibility as a financial center at European level,” they said of ID Finance.
“With ALL, Wirecard’s bankruptcy appears to be less a regulatory failure than a consequence of widespread misconduct that has left a gap in the bank’s accounting accounts that is difficult for regulators to detect. The good functioning of the company did not give us a clue of what was to come, but it at least opens the debate so that these types of banks and companies with a strong technological base can be compared to the rest of the banks on a regulatory level. As the Latvian Vice-President of the European Commission, Valdis Dombrovskis, said in statements to the Financial Times, formulas are already being sought to strengthen the system and prevent this type of situation from occurring again, ”they added.
What should consumers look for when choosing their financial services provider?
Wirecard’s bankruptcy highlighted the need to analyze where users deposited their funds. One way to find out which companies are regulated is to check those that have a banking license. This is a legal obligation for companies and banks to conduct their activities with funds from third parties.
However, this does not mean that companies who do not have a banking license are not safe. Fintech companies can complement their money deposit and custody services with other complementary products and services that use our banking information. In addition, according to ID Finance, the recent PSD2 regulation at the European level and others like the future law on the digital transformation of the financial sector, which we are already working on, will improve security and open bank APIs to third parties so that they can develop new applications enables the exchange of customer data and puts the user at the center of the banking business. ”
“”And most importantly, they were the key stimulus that fintech companies needed to bring new applications and solutions to market that are tailored to the needs of each user.”They confirmed.
Thanks to their broad technological base, fintech companies can adapt to changes in this industry with greater agility and also complement banks and offer more innovative financial services.
Alexander Dunaev, COO and co-founder of ID Finance, spoke in this context:
“We strive for an open ecosystem in which fintech, banks and supervisory authorities have to go hand in hand. If all actors involved can work together, this new paradigm will only benefit all parties. “
You might be interested in: