Railsbank frontrunner to purchase Wirecard Card Solutions

Railsbank has emerged as the frontrunner to acquire the UK operations of discredited German payments group Wirecard.

Railsbank has confirmed its interest in WCS

According to Sifted sources Railsbank will pick up all the remaining assets of Wirecard Card Solutions (WCS). This includes employees, clients and real estate. The purchase will be finalised in November.

WCS is part of a fire-sale occurring at Wirecard after the company imploded into bankruptcy earlier this year.

In an emailed statement, a Wirecard spokesperson says that the deal is by no means a sure thing.

“We are aware of recent press coverage around a potential transaction with Railsbank Technology,” they write.

“We are continuing our discussions with Railsbank, but no final transaction documents have yet been agreed.”

The company says it expects to be able to comment further “in due course”. In the meantime, the company is processing card transactions “as usual”.

The Wirecard saga began when the firm reported a $2 billion hole in its books. German authorities arrested CEO Markus Braun in the days prior to the firm filing for insolvency.

Braun would be arrested again in July on suspicion of leading a multi-year accounting fraud operation at his firm.

The collapse has created waves in the German regulatory space. BaFin, the country’s primary financial watchdog, has faced mounting pressure and calls for reform after failing to spot the issues at Wirecard.

Shutdowns

In the UK, WCS provided payments settlement for several fintech companies. WCS experienced a four-day shutdown in June. The Financial Conduct Authority (FCA) suspended the firm’s services in response to its parent company slipping into insolvency.

The FCA lifted the suspensions after a four days, but major issues for a number of UK-based fintech companies had already occurred.

Curve, ANNA, Pockit, Dozens, Soldo and Revolut all had to scramble to deal with their settlement service suddenly being disrupted.

The shutdown led to sharp criticism from the Emerging Payments Association (EPA). It charged the FCA with lacking understanding of the UK payments market.

German administrators placed WCS up for acquisition in a fire-sale initiated to balance Wirecard’s books. More than 140 companies have stepped forward to take a piece of the ailing firm.

Insolvency administrator Michael Jaffé told the Wall Street Journal last month that investors from across the globe had been in touch with interest.

Red flags

WCS isn’t an innocent bystander in the destabilisation of its parent firm. FinTech Futures learned that WCS had filed its 2018 financials a whole two years late.

“If people were doing their due diligence, that would have been raised as a red flag,” an industry source said.

Another told FinTech Futures that firms had already started to get “weary” of Wirecard in the UK.

In July 2019, Revolut blamed WCS for a technical issue which saw customers charged twice for transactions. The fintech still used WCS as its primary acquiring bank, despite dropping it from card issuing.

Railsbank

Railsbank describes itself as an API platform that “allows any company to become a fintech”. Clients can transact, issue cards and manage credit processing through its systems.

Founded in 2016, the firm has raised a total of $14.4 million across six funding rounds. Its investors include Visa, Moneta VC, and Global Brain Corporation.

The firm has expanded in South East Asia and the US in recent months.

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