Millions of banking and payment card customers will once again get access to their money this morning, after the U.K.’s Financial Conduct Authority (FCA) lifted its suspension on a Wirecard subsidiary. The question now is whether there will be an almighty rush to withdraw money from the fintech firms who were affected.
An estimated five million customers were left without money or the ability to spend on their payment cards over the weekend, after the FCA suspended Wirecard’s U.K. subsidiary Wirecard Card Solutions (WCS) Limited on Friday. The suspension crippled banking services such as Pockit, Anna Money and many others, which are often used by more vulnerable customers who can’t get accounts with mainstream banks, or small businesses.
In a statement issued late on Monday, the FCA said it was allowing WCS to resume operations, meaning customers of the affected services should today be given access to their money.
“The FCA has been working closely with Wirecard and other authorities to ensure that the firm was able to meet the conditions required to lift certain requirements that we imposed on it,” the FCA’s statement reads.
“We know that some customers have faced difficulties over the weekend but the steps we took were the right ones to protect everyone’s money. Our primary objective has always been to protect the interests and money of consumers who use Wirecard.
“We are now in a position to allow Wirecard to resume regulated activity and on 29 June 2020, the FCA provided written consent to Wirecard to resume issuing e-money and providing payment services,” the statement adds.
“We continue to monitor Wirecard’s activities closely and certain requirements continue to remain in force. These should not, however, affect the services Wirecard provides to its customers. This means customers can now or very shortly use their cards as necessary.”
Has the trust gone?
The big question now facing the banking apps that rely on Wirecard is whether customer trust in their services has been destroyed? Many of the banking services faced an angry backlash from customers over the weekend, who demanded to know when they would get access to their money.
The co-founders of Anna Money held an open Q&A on YouTube on Sunday afternoon, in which customers threatened to call in the police and others accused the firm of endangering the future of their small businesses.
Yesterday, Neil Harris, chairperson of The Inclusion Foundation, warned that the call centre of one of the banking apps that had a high proportion of financially-excluded customers had “been overloaded with desperate cases”.
“Some were even threatening suicide because they have no money at all. These cards are their only form of spending, encouraged by fintech and accelerated by Covid-19,” he added.
Those customers now face a tricky dilemma over whether to leave their money in such services or move it elsewhere. The Emerging Payments Association, which includes some of the affected services among its members, warned yesterday that the suspension had caused “significant and irreparable damage to the U.K.’s reputation for having a thriving, balanced fintech industry supported by an understanding and enabling regulator”.
Lack of regulation
The relaxed regulation around some of these banking services will surely now come under renewed scrutiny following this episode. As the FCA pointed out on Friday, customers who had money stored in these fintech services were not protected by the Financial Services Compensation Scheme, which reimburses customers when financial services companies go bust.
Although many of the companies affected by the Wirecard suspension offer banking services that are almost identical to those of established banks, they are not actually banks nor subject to the much stricter regulations that govern the banking sector.