Just last week I talked about how the banking industry should learn from past mistakes, like the UK’s infamous PPI debacle, and adopt a customer-first-product-second mindset – with KPIs to match. While writing that post, the collapse of Wirecard was well underway but little did I know how on-topic that scandal would be. To clarify: it’s not the disgraced fintech darling that I think banks should be looking at for corporate governance practices. It’s some of Wirecard’s clients. Here’s why.
As always, let’s start with a quick recap, shall we? On 25 June, celebrated German payment processor Wirecard filed for insolvency following a shocking revelation that its auditors at EY could not locate a whopping €1.9 billion of cash in its accounts at two Philippine banks. The mystery was soon solved when the banks confirmed that the funds had never even entered the Philippines and the company admitted that they had probably never existed. Not a great note to end an audit on.
The scandal has sent shockwaves through the fintech industry and, unfortunately, it didn’t take long for end users to be affected. On Friday 26 June, thousands of British cardholders found themselves unable to access their cash or make payments after the FCA had ordered Wirecard’s UK operations to cease regulated activities. Having relied on Wirecard’s technology to process payments, fintech apps like Curve, Anna, Pockit and U Account were forced to freeze their accounts following the financial watchdog’s decision.
By Monday, however, Curve cards were back in business. That’s remarkable for a number of reasons but what struck me the most was Curve’s gut reaction to resolve customer concerns by any means necessary. In this case, it meant they had to open settlement and safeguarding accounts and become an e-money issuer, plus find a new payment processor, sign a contract and integrate them – all that in one weekend! And so they did. “This isn’t the first challenge we’ve faced, and it won’t be the last. We intend to respond, as always, with the conviction and resilience that Curve was built around,” reads the company’s blog update of 27 June.
Now, for full disclosure: Curve had begun transitioning away from Wirecard months before the accounting scandal unfolded. Yet, seeing through a migration of this magnitude in such a short period of time is no small feat to say the very least. And yes, it has a lot to do with technology but to my mind, it has a lot more to do with corporate governance and culture. Identifying a customer need on a Friday morning and resolving it by Monday is not something we see very often in incumbent environments, even on a much smaller scale. Because first processes have to be observed, approvals must be obtained, responsibilities need to be sorted out and budgets have to be redrawn.
Banks will look and feel a whole lot more like tech companies.McKinsey
“Financial institutions need to do big picture, board-level thinking about how to prepare for the revolutionary impact digital technology will have on banking operations,” says McKinsey. In 10 years, the management consulting giant predicts, banks will look starkly different than they do now. With more transactional operations and strategic activities getting automated, operations staff will be using “technology to advise clients on the best financial options and products, do creative problem solving, and develop new products and services to enhance the customer experience. Banks, in other words, will look and feel a whole lot more like tech companies.”
That certainly sounds like a welcome change. The question for me is: will they think like one?