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The financial segment has had its good shares of ups and downs during the course of the year, and the most recent event that surprised the payments industry is the Wirecard scandal. If you’re thinking 2020 couldn’t get any worse, we have got some news for you. As we are observing how the whole story will evolve, let’s see if we can learn a lesson from what has turned into one of the biggest financial crimes of the era “Wirecard Fraud”.
What Happened with Wirecard Fraud?
It was no trip in the park when German payment service provider Wirecard’s CEO and COO, alongside other high-ranking officials, were detained over billions of disappeared dollars. Certainly, the business, which offers e- payment transaction services, as well as tangible and virtual cards, is now suspected of large-scale accounting fraud.
Because of internal misconduct within the company, firms that had been using Wirecard’s platform to process their payments had their accounts frozen. This was no small hassle. Retailers, merchants, fintechs, and even customers were unable to gain access to their payments, as they had been banned without notice.
Prior to Kapital’s inception in 2010, key staff members experienced Wirecard’s services while operating a prominent online casino from 1999 to 2007. As a result of new online gambling laws and regulations in the United States, we have since terminated that collaboration. We came to discover that Wirecard represented a huge risk to our operations because they were trying to run miscoded (uncoded) transactions to circumvent the US laws and misrepresent the nature of the funds to the card-issuing banks. They even offered to issue credit cards to fake names so that our company would be able to charge and offset any high chargebacks. Given the illegality of these actions, we declined the proposal of their management and severed ties.
How could this have been avoided?
If there is one rule we accept at Kapital Solutions, it is that payment processing must be smooth, steady, and uninterrupted. And if there’s one thing that the Wirecard scandal has taught us, it is the crucial importance of backups and alternatives. This is especially true in this day and age where revenue forecasts are hard to calculate and economic uncertainty is omnipresent.
Relying on multiple banks, as opposed to a single one, is the way to go. This, combined with choosing the right partners and offering alternative payment methods to customers, is how we avoid escalating a problematic situation. Having multiple failovers will allow you to guarantee constant protection to those who depend on your services.
What does this mean for the future?
Service providers must have internal and external strategies and solutions in place to ensure financial stability for the future. Clients and customers want to be served by highly experienced and professional entities who can guarantee a smooth functioning payments ecosystem, no matter how rocky and volatile the market gets.
As they strive for stability persists, we can predict that stricter regulations will be put in place regarding the requirement for fintech companies to have backups and failovers, so that we don’t re-create the conditions that led to the chaotic 2020 Wirecard Fraud.
What are the next steps?
At Kapital Solutions, we take electronic payment processing seriously. Operational continuity is at the heart of our priorities, and our team of dedicated professionals is committed to providing you with service 24/7. Our solutions are tailored according to your needs and industry climate. With our decades of experience, we’ve pioneered redundancy and contingency planning in payment processing.
If you’re looking for comprehensive online payment solutions, contact Kapital today!
P.S.: As of today, Wirecard’s COO Jan Marsalek is on Interpol’s most-wanted list as his whereabouts remain unknown to international law enforcement. If you have any information that could lead to his arrest or localization, please report it to your local or national police.
FILE PHOTO: The logo of Wirecard AG, an independent provider of outsourcing and white label solutions for electronic payment transactions, is pictured at its headquarters in Aschheim, near Munich, Germany, on July 1, 2020. REUTERS/Andreas Gebert