Wirecard break-up begins as it sells off UK and Brazil businesses

The break-up of the collapsed German payments company Wirecard has started after it agreed to sell the remnants of its UK business to Railsbank, a UK start-up backed by Visa, and sold its Brazilian offshoot.

The UK deal, which is expected to be completed in November, would involve Railsbank taking on Wirecard’s UK payment card technology, clients and some staff.

Railsbank declined to comment on the financial terms of the deal. Wirecard would require written consent from the Financial Conduct Authority (FCA) to sell its UK operations. A person close to the regulator said it was not clear whether permission had yet been granted.

Administrators are in the middle of dismantling Wirecard, which was worth as much as €24bn at its height but collapsed into insolvency in June after the revelation of one of postwar Germany’s largest frauds.

On Friday, the administrators said an agreement had been signed for the sale of Wirecard’s Brazilian business to PagSeguro Digital, a New York-listed competitor.

They added that the sales process for Wirecard North America, formerly Citigroup’s Prepaid Card Services business, was “well advanced” adding that “final acquisition offers are expected here shortly”.

Munich-based lawyer Michael Jaffé, the administrator, said he had received indicative offers from “several notable interested parties” for the core Wirecard AG payment processing business based in Aschheim, near Munich.

Wirecard Bank, the group’s Germany-based lender, is not part of the insolvency. Germany’s banking watchdog BaFin ringfenced the bank from the stricken group and installed a special representative to monitor it.

“It is particularly pleasing that the sale of Wirecard Brazil has been the first success with respect to the sale of assets, because the framework conditions of the Wirecard insolvency proceedings have been, and still are, very difficult,” Mr Jaffé said in a statement on Friday.

After persistent reports of accounting irregularities, including by the Financial Times, Wirecard admitted in June that €1.9bn of cash was missing, causing its shares to lose almost all of their value.

Wirecard Card Solutions (WCS), its UK subsidiary, issued prepaid cards and processed payments for other financial start-ups that did not yet have the necessary licences. It was at one time an important part of the UK’s fintech infrastructure, providing early support to online-only banks such as Revolut and Monzo.

Railsbank, however, would inherit a significantly diminished customer base: many of Wirecard’s largest UK clients had already left or made plans to leave after regulators temporarily banned it from operating after the parent company’s administration in June.

Businesses including Morses Club, Curve and Soldo have stopped using WCS, while Anna Money is finalising its move and expects to transfer customers within weeks.

The FCA ordered a temporary freeze on WCS’s activities to protect customer deposits and prevent it from transferring assets to its parent company. The freeze was enacted with little warning, and left hundreds of thousands of customers, including many vulnerable people, unable to access money for several days.

Railsbank was founded in 2016 and is run by co-founder Nigel Verdon. This year it raised an undisclosed sum from Visa to support expansion in south-east Asia. Like WCS, it provides technology for other start-ups to issue cards and transfer customer money.

WCS reported revenues of £62m and a pre-tax profit of £2.5m in 2018, the most recent year for which figures are available. However, it had support from its parent company. “It’s naive to think WCS is a truly profitable business,” Mr Verdon has previously said.

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