Exploring Future Innovations in the Payments Sector Post Wirecard’s Winding-Up

In September 2020, I predicted that Netflix would commission a documentary about the rise and fall of Wirecard. However, Sky beat them to it with their documentary titled “A Billion Euro Lie,” which premiered a few weeks ago. This documentary lived up to expectations and provided a riveting account of Wirecard’s downfall. The decline of this once highly regarded payment solutions company, which was delisted from the German stock exchange in November 2021, is evident in its almost-vertical fall in market cap from €24bn in 2018 to €12m at closing. The market’s lack of shift can be attributed to the swift implementation of anti-money laundering legislation across Europe and the wider Society for Worldwide Interbank Financial Telecommunication (SWIFT) network. This has made payment processing and receipt increasingly challenging, even in traditionally safe territories. The card payments industry has experienced significant losses, with an explosion of fraudulent claims and chargebacks. The Covid pandemic further exacerbated the situation, as issuers, merchant acquirers, and industry merchants faced immense expenses due to lockdown-induced cancellations. This led to an unprecedented number of chargebacks, as cardholders denied transactions and claimed fraud. The backlog of disputes, coupled with the remote working situation, created an opportunity for criminals to insert fraudulent transactions into the system. Despite reassurances from Visa and MasterCard, the small and middle tier operators and merchants, particularly in the gambling industry, have felt substantial pain. However, amidst this challenging environment, there are signs of hope for the future. The concept of open banking is gradually evolving, with increased investment in this area. Wealth management firms, wholesale banks, credit providers, and digital-native challenger banks have all increased their budgets for open banking initiatives. While open banking providers are gaining prominence, it remains to be seen if offering a comprehensive suite of services will outshine focusing on a specific part of the payment supply chain. Debit and credit cards are also facing challenges to their supremacy as all-in-one payment leaders, with the emergence of efficient Know Your Customer (KYC) processes and payment solutions such as Brazil’s Pix Payment and the UK’s Faster Payments. However, the full adoption and standardization of open banking services, as well as legislative changes, will take time. In the meantime, regional banks may need to step in to support last-mile payments until open banking becomes as widespread as established networks like SWIFT or SEPA. Legacy financial institutions must also consider enhancing their core infrastructure or partnering with disruptive fintech companies to stay competitive. Venture capital funding is anticipated to drive the next revolution in the payments sector, with significant investments focused on disrupting payments through open wallets and crypto-backed payment providers. These developments are expected to revolutionize the way payments are made, making them quicker, cheaper, and more reliable. Already, gaming operators are experiencing a substantial percentage of payment settlements in cryptocurrencies, particularly from Asian and African payment service providers. By investing in tokenized KYC solutions and ensuring compliance, one can address a major headache in the payments industry. This revolution is already underway and will likely impact sportsbooks and other sectors in the near future.