For super funds and their advisers

Administrators look to sell failed fintech’s Australasian assets

For sale

by David Chaplin

Fintech enthusiasts have until this week to lob in an offer for the Australian and New Zealand arms of collapsed German online payments firm Wirecard. The company has been labelled the biggest failure for investors’ due diligence in recent memory, according to global due diligence specialist Castle Hall. It has the dubious distinction of being the only DAX 30 German-listed company in history to go into liquidation.

Auckland-based insolvency firm McGrath Nicol has opened up bidding for the Australasian assets of the “innovative, bank grade, consumer electronic payment solution provider”. Auckland is its main office in the region. The offer extends to the three “core software platforms” featuring alternative spelling – Cadencie, Simfonie and FINsim – that service “a global footprint from Auckland”, according to the for-sale advertisement.

Wirecard NZ, a subsidiary of the now-defunct German parent company, owns the Australian operation, which last week laid off nine staff as administrators there “scrambled to pinpoint the revenue streams”, ‘Banking Day’ reported. The Australian Wirecard clients included Bendigo Bank, ME Bank (owned by some industry superannuation funds) and a few credit unions, the media report says. ‘Banking Day’ cited a Wirecard Australia employee as saying: “All future development of both the Cadencie and Finsim platforms has ceased.” NZ staff face a statutory termination period that ends on October 12, which was extended from the original date of July 27.

Since Wirecard Germany bought out the GFG Group (a company formed in 1991 as Green Fleming Goldfinch Partners) in 2014, the NZ business has racked up considerable losses. The most recent Wirecard NZ accounts, for the 2018 calendar year, show the firm lost over NZ$8 million (A$7.4 million) in the period on revenue of NZ$11.8 million compared to a NZ$1.8 million loss on NZ$13.2 million income in the previous annual period.

According to the Wirecard NZ accounts, the company had accrued losses of over NZ$17 million and negative equity of almost NZ$3.6 million as at the end of 2018. The NZ operation was shored up during the year with a NZ$2.5 million loan – topped up in 2019 with a further $1.8 million borrowing – from an associated offshore entity (Wirecard Technologies GmbH) and a letter of credit from the parent firm. NZ staff face a statutory termination period that ends on October 12, which was a €10 million (A$16.5 million) letter of support for five years from April 3, 2019,” the report says. “The parent company has sufficient resources to provide this level of financial support.” On June 25, the once high-flying German fintech filed for insolvency after a €1.9 billion hole appeared in its accounts. Former Wirecard chief, Markus Braun, along with other senior executives, have since been arrested on fraud charges.

Wirecard NZ booked revenue for software licensing and other related services from several jurisdictions including the Philippines (about $3.2 million), Australia ($3.1 million) and Asia ($2.6 million).

The accounts note Wirecard NZ acquired the credit card acceptances business of Citibank NZ in 2018 as part of a global deal carried out by the German parent. At the end of 2018, Wirecard NZ reported share capital of almost $13 million.

While the impact in Australia and NZ may be relatively minor, the collapse of Wirecard has sent a shudder through the fintech world, highlighting risks in the increasingly inter-connected ‘ecosystem’. Forbes, for example, reported clients of at least a dozen UK fintech payment services faced access problems after the financial regulator put a stop on Wirecard operations in the country.

“The UK’s Financial Conduct Authority on Friday suspended Wirecard’s UK subsidiary Wirecard Card Solutions (WCS) Ltd, seemingly with little or no notice to many of the banking services that relied on it,” the Forbes report says. Interested parties have until August 5 (this Wednesday) to lodge offers with McGrath Nicol for the Wirecard Australasian assets, which include the card services software, Cadencie; mobile payments platform, Simfonie; and, anti-money laundering software, FINsim.

Aside from accounting fraud charges, the Wirecard parent is facing multiple money-laundering allegations involving gambling and pornography. In July, Money Laundering Watch reported: “Despite the current lack of details regarding these various money laundering probes, Wirecard is likely to remain in the news – and a thorn in Germany’s side – for months to come.”

– Investment News NZ

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