Grab puts partnership with troubled Wirecard on hold; former CEO released from custody

Wirecard has licences with Mastercard, Visa and JCB International, through which its banking arm issues its credit cards. PHOTO: EPA-EFE

SINGAPORE (REUTERS, BLOOMBERG) - Singapore ride-hailing and payments company Grab said it had 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 spokesperson from Grab told Reuters on Wednesday (June 24) 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, Philippines and Singapore.

Wirecard had not begun processing payments or signing up merchants on behalf of Grab, South-east Asia's most valuable start-up, 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 CEO 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.

On Wednesday, Braun's lawyer said he had been released from custody. German news agency dpa had earlier cited a spokeswoman at a Munich court as saying that Braun had been released after paying his bail of €5 million on Tuesday.

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

Grab is among businesses distancing themselves from Wirecard, making it harder for the German 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 around the world.

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 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 Neil Campling, analyst at Mirabaud. "Without those they have no business."

A Mastercard spokesman said it is following the developments at Wirecard but did 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.


Other clients are monitoring the chaos at Wirecard after the payments company said the €1.9 billion it had reported as assets probably didn't exist and it pulled recent financial results. The company is now in discussions with creditors and considering a full-scale restructuring.

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. A spokesman for Orange, which has had a partnership with Wirecard since at least 2013, declined to comment.

Braun, who had been CEO for almost 20 years, has been accused of inflating the volume of sales at Wirecard, according to the Munich prosecutor's office. He had been the company's biggest shareholder, and had to unwind his 7 per cent holding he had purchased through a €150 million margin loan secured by the value of the stock.

Wirecard, once praised as an example of Germany's ability to produce successful technology companies, is now a national embarrassment that is jeopardising the country's image. Finance Minister Peter Altmaier said "we cannot allow individual companies to destroy the reputation of an entire industry and thus damage the country".

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