A payment processor is a system that enables financial transactions, commonly employed by a merchant , to handle transactions with customers from various channels such as credit cards and debit cards or bank accounts. They are usually broken down into two types: front-end and back-end.
62-738: Wirecard AG is an insolvent German payment processor and financial services provider whose former CEO , COO , two board members , and other executives have been arrested or otherwise implicated in criminal proceedings. In June 2020, the company announced that €1.9 billion in cash was missing. It owed €3.2 billion in debt. In November 2020, the company was dismantled after it sold the assets of its main business unit to Santander Group for €100 million. Other assets, including its North American, UK and Brazilian units had been previously sold at nondisclosed prices. The company offered electronic payment transaction services and risk management , and issued and processed physical and virtual cards . As of 2017,
124-732: A capital increase against investment in kind on 1 January 2005, and to rename InfoGenie to Wire Card. Thus, Wire Card became a stock corporation listed in the Prime Standard stock market segment through a reverse IPO . In 2006, Wirecard was included in the TecDAX and in September 2018 in the DAX . Wirecard Asia Pacific was founded in Singapore in 2007. In 2008, Wirecard introduced virtual prepaid credit cards for online payments and in
186-446: A criminal investigation into potentially misleading statements to investors by CEO Markus Braun and three other board members regarding the audit. The company then reported on 18 June 2020 that €1.9 billion was missing in cash from the company's accounts, this following an audit by Ernst & Young . Braun resigned as CEO the following day, to be replaced by James Freis . Over two days, the company's stock fell 72%. On 22 June 2020, Braun
248-540: A disastrous effect on the growth upon which the offering is predicated, and may even nullify it. In addition, during the many months it takes to put an IPO together, market conditions can deteriorate, making the completion of an IPO unfavorable. By contrast, a reverse takeover can be completed in as little as thirty days. A 2013 study by Charles Lee of Stanford University found that: "Chinese reverse mergers performed much better than their reputation" and had performed better than other similar sized publicly traded companies in
310-424: A few seconds, the payment processor will both check the details received by forwarding them to the respective card's issuing bank or card association for verification, and also carry out a series of anti-fraud measures against the transaction. Additional parameters, including the card's country of issue and its previous payment history, are also used to gauge the probability of the transaction being approved. Once
372-627: A focus on SMEs and virtual marketplaces. Wirecard also supports high-street retail with digitisation ; an example of this is the collaborative project with T-Systems . In 2016, together with the WMF Group , Wirecard developed a mobile app which connects store purchases with online sales. Wirecard has been collaborating with Alipay since 2015, to offer Chinese tourists a familiar payment method during their travels in Europe. As part of this, Wirecard has integrated this alternative payment method into
434-715: A lawsuit against the Financial Times for "unethical reporting" and a lawsuit for market manipulation . The public prosecutor's office Munich I in February 2019 launched criminal investigations against Financial Times journalist Dan McCrum because of alleged violations of the German Securities Trading Act ( Wertpapierhandelsgesetz , WpHG ). The German Federal Financial Supervisory Authority BaFin banned short selling Wirecard shares on 18 February 2019 until 18 April 2019. According to BaFin,
496-506: A lengthy article about Wirecard in which it alleged misleading reporting practices. On 30 January 2019, Wirecard shares plunged after the Financial Times reported that a senior executive was suspected of "falsification of accounts" and "money laundering" and round-tripping in the company's Asia-Pacific operations. Wirecard issued a statement calling the report "false, inaccurate, misleading and defamatory". Wirecard also announced
558-519: A list of some Wirecard subsidiaries (Partial list): Payment processor Front-end processors have connections to various card associations and supply authorization and settlement services to the merchant banks' merchants. Back-end processors accept settlements from front-end processors and, via the Federal Reserve Bank for example, move the money from the issuing bank to the merchant bank. In an operation that will usually take
620-401: A mobile card reader as a white label programme for the acceptance of card payments via smartphones or tablets. In terms of acquiring , one focus is travel and transport. Already in 2007, Wirecard took over payments and credit control for the tour operator TUI , and in 2014 for KLM Royal Dutch Airlines . The product Supplier and Commission Payments (SCP) by Wirecard is also made to measure
682-481: A reverse takeover, a company can go public without raising additional capital. Separating these two functions greatly simplifies the process. In addition, a reverse takeover is less susceptible to market conditions. Conventional IPOs are subject to risk of poor timing: if the market for a given security is "soft", the underwriter may pull the offering. If a company in registration participates in an industry that's making unfavorable headlines, investors may shy away from
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#1732772464441744-504: A series of fraudulent reverse mergers between private Chinese companies and U.S. publicly traded firms, with the acquiring companies often operating as a front for non-existent business activity and defrauding US investors in the process. A large part of these scams was played through small US banks willing to ignore clear warning signs when promoting these newly merged companies to the public market. Reverse mergers may have other drawbacks. Private-company CEOs may be naïve and inexperienced in
806-471: A trustee of Wirecard tried to "deceive the auditor", resulting in the bank processor being unable to release the share results for 2019. In a statement, Wirecard announced that it was "working intensively together with the auditor towards a clarification of the situation". In June 2020, it was revealed that €1.9 billion was "missing". As a result, Wirecard's share value decreased by over 72%, and its CEO, Markus Braun, resigned. Wirecard appointed James Freis to
868-555: A website he developed called NetMarket . The first online payment processing company was founded in 1998, first under the name Confinity, which was later changed to X.com, changing again to its current name, PayPal , in 2001. The market continued to expand over the following two decades, branching out into a full payment processing ecosystem that includes card companies, digital wallets and apps, cryptocurrencies, payments software platforms and gateways, eCommerce partnerships, and peer-to-peer payments. Other technologies that are vital to
930-401: Is a chain of service providers, each providing unique value to the payment transaction, and each adding cost to the transaction: merchant, point-of-sale (PoS) software as a service (SaaS), aggregator, credit card network, and bank. The merchant can be a brick-and-mortar outlet or an online outlet. The PoS SaaS provider is usually a smaller company that provides customer support to the merchant and
992-421: Is attributed to an algorithm developed by David Chaum in 1983. Although modern folklore suggests the possibility of early internet purchases – specifically, online marijuana sales between MIT and Stanford students in 1971 and 1972, a 1974 pizza order by Donald Sherman, and a 1984 grocery purchase by Jane Snowball – the first legitimately recognized online purchase was most likely a CD sold by Dan Kohn in 1994 using
1054-808: Is currently available in Germany, Austria, Belgium, the Netherlands, Spain and Ireland. In addition, Boon can be used via Apple Pay in France, Great Britain, Switzerland, Spain, Italy, Ireland and Germany. Google Pay supports Boon in France. Boon offers contactless payments via smartphone and tablet through NFC as well as online payments and peer-to-peer transactions . In the mobile payments sector, Wirecard negotiated several contracts with telecommunications providers for technical services with regard to mobile smartphone payments based on near-field communication (NFC) . The payment processor offers its partners
1116-411: Is filed immediately upon completion of the reverse merger transaction. Going public through a reverse takeover allows a privately held company to become publicly held at a lesser cost, and with less stock dilution , when compared with an initial public offering (IPO). While the process of going public and raising capital is combined in an IPO, in a reverse takeover, these two functions are separate. In
1178-469: Is the receiver of the merchant's transactions. The PoS provider represents the aggregator to merchants. The PoS provider transaction volumes are small compared to the aggregator transaction volumes, so a direct connection to the major credit card networks is not warranted, because of the low traffic. Additionally, the merchant does not handle enough traffic to warrant a direct connection to the aggregator. In this way, scope and responsibilities are divided among
1240-602: The shares became penny stocks following price losses, the stock exchange operator Deutsche Börse wanted to exclude InfoGenie from the Neuer Markt , which was prohibited by court in April 2002. In mid-December 2004, an extraordinary general meeting of InfoGenie decided to transfer the non-listed Wirecard, whose core business was real-time payment processing on the Internet including risk assessment, to InfoGenie AG by way of
1302-679: The "dump" after the takeover is consummated is by requiring a lockup on the shares owned by the group from which they are purchasing the public shell. Other shareholders that have held stock as investors in the company being acquired pose no threat in a dump scenario because the number of shares they hold is not significant. On June 9, 2011, the United States Securities and Exchange Commission issued an investor bulletin cautioning investors about investing in reverse mergers, stating that they may be prone to fraud and other abuses. The 2017 documentary film The China Hustle lays out
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#17327724644411364-767: The Asia-Pacific region, the Middle East and Africa since 2014. In August 2020, it was announced that Railsbank, a start-up sponsored by Visa , is set to buy the Wirecard's UK-based businesses. No financial information was disclosed and the deal is set to be finished in November 2020. Additionally, the Brazilian business of the company was sold to PagSeguro Digital, a firm based in New York City. See below
1426-787: The Tang dynasty (around the 10th century AD) and was later introduced to the West in the 17th century. Also in the 17th century, people began to use checks as a payment method, which grew in popularity from the 1800s to the early 1900s. To help streamline and centralize the multiple types of currency, the U.S. Congress passed the Federal Reserve Act in 1913 . The first payment card was created in 1950 by Ralph Schneider and Frank McNamara to allow members to use charge cards at their Diners’ Club, and consumers were required to pay their bill in full each month. In 1959, American Express created
1488-537: The U.S. market in 2017 following completion of the takeover of Citi Prepaid Card Services, indicating that the business would increase fiscal-year EBITA by $ 20 million. Wirecard took over the Brazilian company MOIP in 2016. The previous year, in 2015, it entered the Indian market with the acquisition of the Great Indian Retail Group's payment business. Wirecard has been strengthening its operations in
1550-532: The acquiring company. In a reverse takeover, shareholders of the private company purchase control of the public shell company / SPAC and then merge it with the private company. The publicly traded corporation is called a "shell" since all that exists of the original company is its organizational structure. The private company shareholders receive a substantial majority of the shares of the public company and control of its board of directors . The transaction can be accomplished within weeks. The transaction involves
1612-501: The acquisition of AllScore Payment Services from Beijing , Wirecard also began to be represented in China as of November 2019. Beginning in April 2015, the Financial Times blog FT Alphaville wrote a series of blog posts that questioned Wirecard's business model and criticised the company's accounting practices. In February 2016, the 101-page "Zatarra Report" appeared, documenting alleged fraud and money laundering at Wirecard. It
1674-537: The company and focused the business model on providing internet payment services , initially mainly to porn and gambling websites. The predecessor company of Wirecard regarding the IPO was InfoGenie AG based in Berlin , whose shares had been listed in the Neuer Markt stock market segment since October 2000. This company was active as an information service provider offering telephone advice hotlines on various topics. When
1736-642: The company was listed on the Frankfurt Stock Exchange , and was a part of the DAX stock index from September 2018 to August 2020. The company is at the center of an international financial scandal . Allegations of accounting malpractices had trailed the company since the early days of its incorporation, reaching a peak in 2019 after the Financial Times published a series of investigations along with whistleblower complaints and internal documents. On 25 June 2020, Wirecard filed for insolvency following revelations that an amount of €1.9 billion
1798-588: The company's insolvent business and inability to continue providing payment services in Singapore. A report published in June 2020 by the interdisciplinary journalism laboratory Citizen Lab at the University of Toronto stated that persons and organisations publicly critical of Wirecard had been the target of sustained hacking and phishing attempts by a hackers-for-hire group dubbed Dark Basin . According to
1860-494: The deal. In a reverse takeover, since the deal rests solely between those controlling the public and private companies, market conditions have little bearing on the situation. The process for a conventional IPO can last for a year or more. When a company transitions from an entrepreneurial venture to a public company fit for outside ownership, how time is spent by strategic managers can be beneficial or detrimental. Time spent in meetings and drafting sessions related to an IPO can have
1922-454: The first credit card that allowed users to carry a balance from month to month. The ATM emerged in the 1960s and 1970s as part of the growing movement toward “self-service” technology. ATMs provided the first technology-enabled banking option that allowed consumers to conveniently deposit and withdraw cash, without being restricted to a particular bank location or business hours. In 1972, the first Automated Clearinghouse (ACH) association
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1984-538: The following year a fraud prevention suite for fraud detection. In 2014, Wirecard expanded to New Zealand, Australia, South Africa and Turkey. With the purchase of Prepaid Card Services from Citigroup , Wirecard also began to be represented in the United States in 2016. In the same year, the company acquired a South American Internet payment service provider in Brazil. In 2019, SoftBank invested in Wirecard. With
2046-597: The government failed to prevent the corporate fraud. The UK Financial Conduct Authority froze the activities of Wirecard's British subsidiary, Wirecard Card Solutions Limited, between 26 June 2020 and 30 June 2020, after which Wirecard UK operations were allowed to resume, albeit with restrictions. Singapore's central bank, the Monetary Authority of Singapore (MAS) , announced in September 2020 that it has directed Wirecard's Singapore branch to stop their payment services there, and return all funds owed, in light of
2108-575: The hacker-for-hire allegations. Wirecard denied any wrongdoing. On 20 May 2021, Pav Gill , Wirecard's senior legal counsel based in Singapore who looked after all legal aspects of Wirecard's business and operations in the Asia-Pacific region, revealed himself to be the whistleblower who provided the material exposing the fraud to the Financial Times . During June 2023, Singapore's State Court sentenced James Wardhana, Wirecard's international finance manager to 21 months and Chai Ai Lim, Wirecard Asia's Head of Finance, to 10 months of imprisonment. Wirecard
2170-403: The many regulatory requirements levied on businesses, the modern payment processor is usually partnered with merchants through a concept known as software-as-a-service (SaaS). SaaS payment processors offer a single, regulatory-compliant electronic portal that enables a merchant to scan checks (often called remote deposit capture or RDC), process single and recurring credit card payments (without
2232-429: The measure was not meant to take sides in the controversy between Wirecard and the Financial Times . On 15 October 2019, the Financial Times published documents which it claimed to be Wirecard's internal accounting spreadsheets. In 2019, the accounting firm KPMG was hired by Wirecard for an independent audit to address the mentioned allegations. In March 2020, Wirecard claimed that KPMG concluded that no discrepancy
2294-415: The merchant and maintain safe and secure the payment information, passing back to the merchant a payment "token" or unique placeholder for the card data. Through Tokenization , merchants are able to use this token to process charges, perform refunds, or void transactions without ever storing the payment card data, which can help to make the merchant system PCI-compliant . Tokenization can be either local (on
2356-512: The merchant storing the card data at the merchant site), process single and recurring ACH and cash transactions, process remittances and Web payments. These cloud-based features occur regardless of origination through the payment processor's integrated receivables management platform. This results in cost reductions, accelerated time-to-market, and improved transaction processing quality. Electronic payments are highly susceptible to fraud and abuse. Liability for misuse of credit card data can expose
2418-420: The merchant to significant financial loss if they were to attempt to manage such risks on their own. One way to lower this cost and liability exposure is to segment the transaction of the sale from the payment of the amount due. Many merchants offer subscription services, which require payment from a customer every month. SaaS payment processors relieve the responsibility of the management of recurring payments from
2480-585: The merchant's system) or remote (on the service provider's system); the latter provides a higher level of security against a breach. Another method of protecting payment card data is Point to Point Encryption , which encrypts cardholder data so that clear text payment information is not accessible within the merchant's system in the event of a data breach. Some payment processors also specialize in high-risk processing for industries that are subject to frequent chargebacks, such as adult video distribution. The typical network architecture for modern online payment systems
2542-516: The ongoing business and create a basis for its continuation." The statement mentioned how "far-reaching cuts are therefore necessary in order to make any kind of continuation possible" and announced the impending layoff of around 730 employees, in addition to all members of the management board. In March 2022, Munich public prosecutors charged former CEO, Markus Braun, with fraud, breach of trust and accounting manipulation. If found guilty on all these charges, he could face up to 15 years in prison. Braun
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2604-470: The payment ecosystem are data security systems and processes, automated functionality, and customer engagement tools. The future of the payment processing industry is being driven by an increase in vertical-specific processors, the accelerated adoption of contactless payment methods (in response to COVID-19 -related limitations on contact and in-person interactions), and the trend toward customer choice and autonomy, particularly in western cultures. Due to
2666-474: The payment processor has received confirmation that the credit card details have been verified, the information is relayed back via the payment gateway to the merchant, who will then complete the payment transaction. If verification is denied by the card association, the payment processor will relay the information to the merchant, who will then decline the transaction. After centuries of using metal coins, paper currency made its first appearance in China during
2728-580: The position on an interim basis. Freis had only joined the company the evening before. A few days later, the management board stated that the €1.9 billion amount likely did not exist. Two banks in the Philippines who were allegedly holding the money said that they did not have the sum and never did. The firm's Moodys credit rating was demoted to B3 on 19 June 2020, before this rating was removed entirely 3 days later. A criminal investigation began on 22 June 2020; Wirecard's recently resigned CEO, Markus Braun,
2790-680: The previous years might be incorrect. According to a report by the Süddeutsche Zeitung , the public prosecutor's office assumes that the company has manipulated balance sheets since 2014. By 2017, Wirecard was a global company, with major presence on all continents. Wirecard Card Solutions Ltd. (WDCS) was a wholly owned subsidiary headquartered in Newcastle upon Tyne , UK, with an e-money licence that allows it to issue virtual cards. It provided numerous mobile payment applications and Wirecard's own mobile payment app, Boon. It entered
2852-486: The private and shell company exchanging information on each other, negotiating the merger terms, and signing a share exchange agreement. At the closing, the shell company issues a substantial majority of its shares and board control to the shareholders of the private company. The private company's shareholders pay for the shell company by contributing their shares in the private company to the shell company that they now control. This share exchange and change of control completes
2914-479: The private company does not go through an expensive and time-consuming review with state and federal regulators because this process was completed beforehand with the public company. However, a comprehensive disclosure document containing audited financial statements and significant legal disclosures is required by the Securities and Exchange Commission for reporting issuers. The disclosure is filed on Form 8-K and
2976-543: The report, some of the critical entities, which included hedge funds, short sellers, investigators, and journalists, were "targeted almost daily for months, and continued to receive messages for years". The report linked the attacks "with high confidence" to the Indian company BellTroX InfoTech which has a history of other hacking-for-hire operations. U.S. prosecutors in New York and the FBI reportedly started an investigation into
3038-399: The reverse takeover, transforming the formerly privately held company into a publicly held company. Depending on the underwriters ' agreements and other forward purchase agreements, the size of the company taken public in a reverse merger can exceed the market capitalization of the shell company/SPAC by a considerable amount. In the United States, if the shell is an SEC -registered company,
3100-425: The same industrial sector. Reverse takeovers always come with some history and some shareholders. Sometimes this history can be bad and manifest itself in the form of currently sloppy records, pending lawsuits and other unforeseen liabilities. Additionally, these shell companies could have existing shareholders who could be anxious to sell their stock. One way the acquiring or surviving company can safeguard against
3162-589: The till systems of retailers such as Printemps , The Body Shop and The National Bank of Greece. The payment procedure has also been integrated with retailers at Munich Airport . Since July 2017, Wirecard has partnered with Tencent to also offer WeChat Pay . Many companies worked with Wirecard to issue their own payment cards of various kinds. Some well-known partnerships include: Curve ; start-up banks such as Atom and money apps including Revolut and Pokit , and spending management apps such as Loot. On June 22, 2020, Wirecard announced that financial data for
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#17327724644413224-445: The travel sector. It is based on the automatic output of virtual credit cards and enables electronic payments to partners and suppliers, for instance for commission payments. In this way international payments can be made via electronic transfer of virtual credit card numbers . Since 2014, Wirecard has offered its Checkout Portal – a fully automated application for easily connecting different payment methods in online shops , with
3286-516: The various business partners to easily manage the technical issues that arise. Reverse takeover A reverse takeover ( RTO ), reverse merger , or reverse IPO is the acquisition of a public company by a private company so that the private company can bypass the lengthy and complex process of going public. Sometimes, conversely, the public company is bought by the private company through an asset swap and share issue. The transaction typically requires reorganization of capitalization of
3348-518: Was "missing". Long-time CEO Markus Braun subsequently resigned and was later arrested. Former COO Jan Marsalek disappeared, after being fired from his position and board seat, and remains a fugitive wanted by the German police. He has been on Europe's Most Wanted list since 2020. On 25 August 2020, the court-appointed insolvency administrator issued a statement that "under the preliminary insolvency administration, it has since been possible to stabilize
3410-456: Was US$ 125 billion and in the first half of 2019 the transaction volume grew by 37.5 per cent to EUR 77.3 billion. Starting in 2015, Wirecard offered consumers the fully digitalised, mobile payment-app Boon, which works independently of banks or network operators . Boon is based on a virtual Mastercard and runs on mobile devices with the Android or iOS operating systems. The Android version
3472-597: Was an international supplier of electronic payment and risk management services. Wirecard offered products and services in the areas of mobile payments , e-commerce , digitisation and finance technology. This comprised the integration of payment methods, payment transactions via e-commerce as well as payment transactions at the stationary checkout ( POS ). In these areas, Wirecard claimed working in cooperation with 280,000 companies (as of December 2018), including Allianz , KLM , Qatar Airways , Rakuten.com and Transport for London , among others. The transaction volume in 2018
3534-572: Was arrested by German police under accusations of "inflating Wirecard AG's sales volume with fake income". On 11 September 2020, Freis announced in an email that he had stepped down from the CEO position, after 85 days, with immediate effect. In January 2020, Wirecard announced that a contract extension would be offered to chief executive Markus Braun. At the same time, its long-time chairman stepped aside. In April, an auditor found questionable accounting practices. According to auditing firm Ernst & Young ,
3596-459: Was arrested the same day. On 25 June, Wirecard filed for bankruptcy, citing "over-indebtedness". On 25 August 2020, the firm's administration axed the contracts of its chief executive manager as well as two additional managers. Furthermore, 730 company staff were also cut. In September 2020, the German parliament announced that it would organize an inquiry in order to fully investigate the reasons why
3658-560: Was co-written by British short sellers Fraser Perring of Viceroy Research and Matthew Earl of ShadowFall , who sent the report to the German financial agency BaFin . On the urging of Wirecard, BaFin and Bavarian prosecutors then initiated criminal investigations against Perring and other short sellers for market manipulation . The cases were dropped in March 2020. In February 2017, the German Manager Magazin published
3720-411: Was determined during the audit. However, on 28 April 2020 the auditor KPMG announced that it had not received sufficient documentation to address all allegations of accounting irregularities, with Wirecard shares tumbling 26%. London Based Hedge-Fund TCI and others shortsellers like Armin S. filed criminal complaints against Wirecard. On 5 June, Wirecard's headquarters were searched by police as part of
3782-486: Was formed in California in response to bank industry concerns that widespread check usage would outpace the technology needed to process them. ACH became the primary method of electronic funds transfer (EFT) for agencies, businesses, and individuals to pay or collect money online, and is still commonly used today. Over the following decades, the evolution of payment technology accelerated. The first digital currency
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#17327724644413844-545: Was held in the Stadelheim prison as a pre-trial custody until the trial began. Wirecard was founded in 1999 and took care of the technical processing of credit card payments for online vendors. According to the Spiegel, it initially "consisted primarily of porno and gambling sites". In 2002, when it was close to folding at the end of the dot-com bubble , Markus Braun injected capital and joined as CEO. He consolidated
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