New FinTech companies were meant to disrupt the banking market – their plans, announced a few years ago, sounded so grand and promised so much to consumers!
… and digital solutions for payments and banking services have been disrupting the financial markets, and that is proving to be very true, but perhaps for the wrong reasons.
But these FinTech companies have not been alone in disrupting the financial markets.
The banks themselves have also been pretty active at disrupting the same financial markets. It is just 10 years since the financial crisis. That was a financial crisis caused by the banks themselves. Big banks grew bigger by consolidation, and started selling bad housing loans and speculating in equity and derivative markets. Their reach, like octopus tentacles, covered the globe and dragged smaller banks and other financial players into the crisis. Their fall was catastrophic and taxpayers bore the costs and economic damage for the next 10 years.
When that was over the same banks, and a few others including the big Nordic banks, were caught doing some very profitable money laundering for oligarchs, gangsters and criminals in the Baltics and elsewhere. They have been found guilty and now have to pay huge fines that the customers again are covering. The banks still went on paying their bosses and traders huge bonuses, so high was their contrition!
Now banks have closed down branches, forcing us to wait for a couple of weeks for an appointment. They have forced customers to do all the work of payments and tried to stop us using coins and notes. Digital solutions may be fine but when the cost is excessive then why should we be forced to accept them? More money has been stolen by hackers than all the world’s simple bank robbers!
We have been forced to use cards and the internet which saves the banks money, but not us, the customers. Banking has become a work-house for clients with less and less service and ever increasing fees.
At the same time banks have stopped helping exporters and small companies – and that is hurting growth. That business does not bring in the large fees that simple housing loans and derivatives bring. It is all about fees and avoidance of any kind of risks. Banks only talk and think profits, profits, profits…
Now we have seen how Wirecard, a big FinTech company, has defrauded shareholders and customers. The regulators in Germany and Wirecard’s auditors failed to see the fraud when it was on the front page of the Financial Times for several years!
Regulators, who are meant to supervise Wirecard and the payment companies that use Wirecard’s services failed to do anything. They just say that this was a big professional fraud that nobody saw coming – even though it was on the front page of the Financial Times for several – (repeated deliberately just in case they missed it again)!
A Finnish payment company called Holvi Oy has been a customer of Wirecard and all of their customers have had their cards frozen for a few days… now they are working again…
Hovi stated that the “knew about Wirecard AG’s situation and were following the events closely, but we were repeatedly assured that this would not have any impact on the services of WDCS. Holvi Payment Services Ltd is supervised by the Financial Supervisory Authority of Finland (FIN-FSA) as an Authorised Payment Institution with license to operate in the European Economic Area.”
It appears that the German Banking supervisor (BaFin) and the Finnish Financial Supervisory Authority (FIVA) were doing very little to limit damage even though it was on the front page of the Financial Times for several years…
… and just to rub it in a little more, Wirecard was able to issue bonds for over €1 billion last year at record low interest rates. Crédit Agricole, Deutsche Bank and ING were global coordinators, and CitiBank and Credit Suisse were the bookrunners. Moodys even gave the company an investment grade rating of Baa3, a rating that “reflects its leading position in the payment processing market”, said Moody’s in a press statement in August last year! That should increase your trust in bank… You can probably find these bonds in your pension company’s portfolio so you may be the one paying for this, not the banks or Moodys…
… and of course the auditors, EY, knew nothing about this either – they claim that this was a very “professional fraud”…
How is it possible to have major scandals coming almost every year with the banking industry…
So here we have the banks, the regulators, the auditors all claiming that they do not read the FT – perhaps they should be given a free subscription for Christmas. It would save us taxpayers a pretty penny!
Photo: Wikipedia Commons
