Visa and Mastercard are reportedly mulling to terminate their relationsship with German payment processing firm Wirecard, which is grappling with a billion-dollar balance sheet scandal.
The payment giants are planning to bar Wirecard from processing payments on their networks, Bloomberg reported citing people familiar with the matter.
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They have already started contacting some of the company’s clients to ready them for the possibility.
In a statement, Visa said: “We continue to closely monitor developments and assess new information as it becomes available. Our priority is, and will always be, maintaining the integrity of the Visa payments system and protecting the interests of consumers, merchants and our clients.”
Mastercard said: “Mastercard is aware of the news regarding Wirecard and is monitoring the situation closely. Our priority is ensuring people are able to continue to use their cards. We will continue to work with all parties and stand ready to take any necessary action.”
Wirecard scandal
Wirecard recently admitted that €1.9bn ($2.1bn) had gone missing from its books.
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By GlobalDataErnst & Young (EY) auditors found that Wirecard’s escrow account confirmations were falsified. Hence, they refused to certify Wirecard’s financial reports.
As a result, the company was unable to submit a certified balance sheet for the previous year.
The scandal led to the arrest of Wirecard’s CEO and the firm is unable to find the missing $2.1bn.
Acknowledging its current situation, Wirecard has filed for bankruptcy seeking protection under the German insolvency law.
Visa and Mastercard’s licenses are held at Wirecard Bank, which is not a part of the insolvency proceedings.
In a statement, Wirecard said: “In future, the release processes for all payments of the bank will be located exclusively within the bank and no longer at group level.”
The Federal Financial Supervisory Authority (BaFin) – Germany’s financial regulator – has appointed a representative for Wirecard’s banking arm, who is yet to make a statement.
