Grab puts partnership with scandal-hit Wirecard on hold

Ride-hailing firm latest to distance itself from German company over $3b financial hole

Singapore ride-hailing and payments company Grab said it has put a partnership with scandal-hit Wirecard on hold, days after the German payments firm disclosed a €1.9 billion (S$3 billion) financial hole that threatens its future.

"We have not begun business integration work on the Wirecard partnership and we are pausing the partnership till further notice," a spokesman for Grab told Reuters yesterday in response to a query about the status of the partnership.

The two companies had struck a payments agreement in March under which Wirecard was to process transactions made via the GrabPay e-wallet, starting with markets in Malaysia, the Philippines and Singapore.

Wirecard had not begun processing payments or signing up merchants on behalf of Grab, whose e-wallet is accepted by more than 600,000 merchants and small businesses in the region.

Responding to a query, the Monetary Authority of Singapore said on Tuesday that it had asked Wirecard to ensure that it keeps customer funds from its local activities in the country's banks.

This week, Wirecard's former chief executive Markus Braun was arrested on suspicion of falsifying its accounts, after the payments firm disclosed the financial hole and questioned whether trustees had actually held money on its behalf.

Mr Braun's lawyer yesterday said he had been released from custody. German news agency dpa had earlier cited a spokesman for a Munich court as saying that Mr Braun had been released after paying bail of €5 million on Tuesday.

Germany's financial regulator also filed a fresh complaint against Wirecard with the prosecutor, saying the firm's belated admission that billions were missing showed it had mis-stated its financial position between 2016 and 2018.

The company is now in discussions with creditors and considering a full-scale restructuring.

Grab is among businesses distancing themselves from Wirecard, making it harder for the payments company to recover from a scandal that has caused its shares to collapse. The company has more than 313,000 corporate customers, according to its website. It says it offers a range of services for digital payments in 26 countries.

French telecoms carrier Orange will soon put a new payments partner in place for its Orange Bank unit, according to a person familiar with the situation. While its issues with Wirecard are mostly technological, the debacle at the company is accelerating a change to a new provider, the person said.

The Dutch arm of airline Air France-KLM is assessing the situation, according to a spokesman. London-based digital bank Revolut has decided to shift customers to alternative payment providers to avoid any service disruption

The customer concern highlights the urgency for interim CEO James Freis to reassure Wirecard's business partners.

It has licences with Mastercard, Visa and JCB International, through which its banking arm issues its credit cards. If Wirecard is unable to find its missing cash, the card companies may have cause to revoke the licences.

"The big question is whether they retain the Visa and Mastercard licences," said analyst Neil Campling at Mirabaud. "Without those they have no business."

A Mastercard spokesman said it is following the developments at Wirecard but does not want to comment on specific customer conversations or situations.

A spokesman for Visa said the company continues to monitor developments and assess new information as it becomes available.

REUTERS, BLOOMBERG


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A version of this article appeared in the print edition of The Straits Times on June 25, 2020, with the headline Grab puts partnership with scandal-hit Wirecard on hold. Subscribe