July 04, 2020

Pine Labs eyes Asia operations of sinking WireCard

Economic Times

Pine Labs has held initial discussions to buy out the Asian business of beleaguered German payments company Wirecard, according to three people aware of the talks.

Wirecard is a German payment and risk management service provider that filed for bankruptcy last month after it was revealed that $2 billion from its balance sheet had gone missing over an alleged accounting fraud.

“Multiple other players have also expressed interest in the company’s assets in the region,” said a person aware of the conversations. “The legality of the matter still has to be seen,” he said.

The scandal led to the resignation and subsequent arrest of Wirecard CEO Markus Braun in an accounting-fraud probe. He has since been released on bail, Bloomberg reported.

Sources close to the matter said that enquiries about the sale have been made by at least four major payment deployers including Hitachi Payments and Atos-backed Wordline Technology. It’s been reported by the Financial Times that Wirecard’s various businesses globally are up for sale including its America business.

Headquartered in Singapore, Wirecard’s Asia business services about 20000 merchants in India, Singapore, Indonesia, Hong Kong, Australia, and Malaysia markets among others, as per disclosures made by the company to media outlets earlier this year.

However, the ongoing litigation could see the Germany-based Wirecard lose several merchants especially in India before a buyout is finalised with a local player as uncertainty clouds the immediate future of such partnerships, said sources. Hence, they said, that the prospective companies would only advance talks when more details emerge from the various ongoing regulatory proceedings initiated against the company.

"The discussion is still in very early stages and it's obviously challenging as there is an ongoing litigation against the company," said one of the sources cited above. "There is also concern that Wirecard may lose its customers during any process of migration due to these proceedings."

The German-based payment company came under the scanner of regulatory authorities across the globe including German, Singapore and Philippines central banks, after it came to light that the company had been artificially inflating its balances. Previously, Wirecard in 2015 had paid an estimated $300 million to acquire the payment business of Indian ecommerce player Great India Retail, as reported by the Financial Times.

“Pine Labs is a leading payment and instalment provider in India and South East Asia. We continue to expand our footprints. We wouldn’t like to comment on this topic,” Amrish Rau, CEO, Pine Labs said in a statement.

"We wish to inform you that there has been no such discussion and there is no basis to this news. Any information that you may have to the contrary is totally baseless," said a Hitachi Payments responding to ET's queries on the matter.

Wirecard AG is not making any statements at this time. Worldine too didn't immediately respond to ET's mailed queries. We will update the story as they respond.

Mastercard-backed Pine Labs has had partnerships with Wirecard for its India business, as per sources. Apart from its payment deployment business in India, Pine Labs also has a strong presence in the merchant payment space in Malaysia and Singapore.

The partnership could help the Mastercard backed company expand its foray into the rapidly digitising South Asian payments market where Wirecard has banking tie-ups and requisite regulatory permissions to ply business, as per industry observers that ET spoke with.

The interest also comes at a time when several leading Indian companies with global backers such as Facebook, Walmart and Alibaba among others have turned the needle on acquiring small businesses onto their payment platform to provide value-added services such as invoice management, digital accounting and access to quick credit.

Pine Labs, in that regard, has over 1.5 lakh merchant tie ups in India at 370 Indian cities and processes leading retailers and processes close to $30 billion worth of payments at 4.5 lakh retail points, according to the company.

Last week, Southeast Asian ride-hailing and payments company Grab said it had put a partnership with Wirecard on hold. The two companies had struck a payments agreement in March under which Wirecard was to process transactions made via the GrabPay e-wallet, starting with markets in Malaysia, Philippines, and Singapore.