Cash-free

Wirecard is transforming Germany, one mobile payment at a time

Chrome Pennies.  (Photo by Yale Joel//Ti
From the old school to a new school. Source: Getty

A mobile payment provider active around the world is finally trying to crack one of the toughest nuts of all: its home market.

Munich’s Wirecard is dragging its countryfolk into the modern era. Germans are famously fond of cash, preferring fiddly coins and grubby notes as the rest of the world moves to mobile payment systems.

Wirecard is the motor behind millions of those cashless payments. It’s not a classic bank, but it does have a license. It makes technology that drives mobile payments with software that processes card payments and purchases online. That means companies can accept payments from all sales channels, whether buyers swipe their plastic at a till, tap details into a computer for an online payment, or wave their phone at a terminal. Wirecard bounces the payment information between bank and retailer, keeping those details secret; the company also sells encryption and fraud-prevention products.

Online porn and gambling

In its early years, Wirecard’s services were mainly used by online gamblers and porn sites. It took time, communication and patience for the company to shake its sleazy image.

The effort has paid off. Wirecard now works with 200 payment networks and has 35 million private customers. Half of Wirecard’s sales are in Asia, where mobile payment is almost ubiquitous; even some beggars accept cash-free payments. Wirecard cooperates with Alipay and WeChatpay of China, for example, enabling Chinese shoppers to pay for goods in Germany by waving their smartphones. Wirecard entered the US market after taking on Citi Prepaid Services last year. Even some Germans use Wirecard, unknowingly, if they make transfers using Google Pay via Boon.

Boon is Wirecard’s spearhead product, an app based on a digital prepaid Mastercard issued by Wirecard. Markus Braun, Wirecard’s boss, wants to expand the app to a smartphone account which customers can use to make payments, borrow money and buy insurance policies. He wants the ecosystem to challenge banks for their retail customers.

G S1 Wirecard-01 (002)

Mr. Braun hopes Boon will help him with another major goal, to quadruple the value of Wirecard. The fintech might have only just joined the DAX, but that’s just the start. Over the past five years, the company’s share price has increased sevenfold (see graphic above). “We definitely have the potential to raise our stock value to more than €100 billion ($115 billion),” Mr. Braun said. The company is currently worth €23 billion.

These valuations are what have attracted notice in Germany, and the fact that Wirecard recently knocked Commerzbank, the country’s second-largest listed bank, out of the DAX. There was also a fillip of attention when Wirecard came to be valued at more than Deutsche Bank, Germany’s largest lender.

In recent weeks, though, the upward trend came to a screeching halt. Wirecard lost almost 10 percent of its market capitalization in a single day last month due to short sellers, or investors betting on the derivatives market that the price would fall. However, Mr. Braun was chilled, telling Handelsblatt that he doesn’t worry about short-term changes, and has no doubt that the company’s long-term success will be reflected in its share price.

The best could be yet to come

Mobile payments aren’t yet popular in Germany; even debit- and credit-card use in the country lags behind the European average. In Germany, people pay cash for three-quarters of their daily purchases; measured in terms of the value of what they buy, it’s almost half. That is partly because of worries about data security and an aversion to debt. Mr. Braun, an Austrian, says he understands people’s fears but he hasn’t spent much time worrying about this. “We think of ourselves as a global company, not solely a German one,” he said.

Mr. Braun joined Wirecard in 2002. He is now the company’s biggest shareholder, with a 7 percent holding, larger than that of BlackRock. With a doctorate in social and economic sciences, he wasn’t an obvious fintech billionaire. Now, though, Wirecard is Germany’s proudest startup after Zalando, the Berlin-based online fashion retailer. And Mr. Braun believes the best is yet to come. He’s certainly working hard: 16-hour days are the norm for this fan of sports and opera. “The beauty of life is in its intensity,” he says.

Wirecard is busy hiring and as it expands, the company will soon grow out of its Munich headquarters. It may take longer for the upstart fintech to work its way beyond the engine room to Germany’s smartphone screens.

G SXX ECB-01 (002)

Peter Brors is Handelsblatt’s deputy editor-in-chief. Daniel Schäfer leads Handelsblatt’s finance coverage. Christian Schnell writes about markets, shares, and stock-market launches. Allison Williams, Handelsblatt Global’s deputy editor, adapted this article into English. To contact the authors: brors@handelsblatt.com, d.schaefer@handelsblatt.com, and schnell@handelsblatt.com

We hope you enjoyed this article

Make sure to sign up for our free newsletters too!