Wirecard is no longer just a household name in the fintech scene. We wanted to know how a startup with teething problems in 1999 became a success story over time—and how the Munich-based company itself supports fintech startups today.
How did Wirecard manage to become a global corporation with billions in revenue? Is it enough to simply believe in a good business idea? Persevere even when things aren't going well?
At the beginning of the Munich-based company, which is now one of the most successful fintechs on the market, there were only a handful of people who believed in the idea of such a startup. Let's suffice it to say: Wirecard was founded in 1999, when the internet was still truly new territory for many and online services, in particular, were only just beginning to develop.
The lean period. Or: Ahead of the market with the idea
Back then, the idea arose that perhaps there should be a way to pay online, too. Ideally, it should be simple and secure. That was far-reaching in 1999. There wasn't yet a real need, and use cases were few and far between. The technology had been developed, but the market reacted slowly and needed the solution much later than expected.
And startups know this all too well. After all, it often happens that the founder has a brilliant idea and is firmly convinced of it. But then it takes a little longer for that idea to actually be accepted. That's exactly what happened to Wirecard. For three tough years, not much really happened.
Stumbling blocks on the way
“The biggest stumbling block can be that you have a solution for which the market is not yet ready, where there is no demand. Anyone who doesn’t have investors who continue to believe in the company will have a difficult time,”
Our interview partner Thorsten Holten is responsible for the Treasury department at Wirecard.
says our interviewee Thorsten Holten, responsible for Treasury at Wirecard and today Executive Vice President Sales Financial Institution and FinTech Europe.
Fortunately, Wirecard had not only a sound business plan but also solid financing at the time – thanks to committed investors who continued to believe in the company and its employees, as well as in the business idea and the evolving demand.
When the knot bursts
And rightly so, as it turned out. Suddenly, things happened one after the other. Around 2002, demand for online payment methods grew rapidly. The company began to generate profits. At that time, Markus Braun, the current CEO, joined the company. At that time, the company, which now has over 4,000 employees, employed around 100 people. In 2016, Wirecard's revenue was €1,028.4 million, representing growth of €331,000 compared to the previous year.
What happened shortly after the turn of the millennium? Tour operators and airlines began offering their tickets directly, which customers also had to pay for online. These well-known companies created Consumer trust, who until now only knew how to pay in advance, cash on delivery or by invoice.
Thorsten Holten on this:
"After that, things moved relatively quickly because more and more product providers were demanding solutions. The hurdle had been broken. We were among the first on the market, and so more and more providers came along who wanted our solution. This allowed us to grow very quickly."
However, rapid growth can also be a disaster for a startup. What factors were important for Wirecard on its path to success?
Success factor 1: Independence
Initially, Wirecard cooperated through licensing models with existing banks that were reluctant to enter this field themselves. According to Holten “The economic question then arose as to the value chain.” And so, in 2006, the Munich-based company acquired its own bank. This step, in particular, gave the company a high degree of independence and enabled it to transform from a startup into a full-service provider for payment processing, including its own risk management. Furthermore, Wirecard is now the only IT technology company with its own bank within the group.
And certainly the reversed IPO in 2005 and the Inclusion in the TecDAX An important step for the company. The free float now exceeds 931,000 shares. Although Wirecard has been hit several times by massive price manipulation, the Munich-based company has repeatedly recovered.
Success factor 2: Internationalization from the Munich hub
Of course, Wirecard’s location also played a crucial role in its success.
"We have a strong European presence. As a German company founded in Munich, we set out from here on our path to internationalization,"
says Thorsten Holten. The Munich-based company has begun to leave its global footprint, particularly through acquisitions.
This global orientation has led to a worldwide presence with over ten acquisitions. Recently, the Munich-based company strengthened its presence in several countries in the Asia-Pacific region through the takeover of Citigroup's acquiring client portfolio. Further acquisitions—including in the US, India, and Brazil—enabled entry into these markets. Gradually, the locally operating Munich-based company became a global player.
Success factor 3: Focus on the right market – and think ahead
Wirecard also had a rapidly growing market The bet continues to pay off, as the e-commerce sector is still growing on average by 12 % per year. But relying on market growth would be too one-sided.
"We're only where we are today because we thought bigger. If I just come up with some 'me too' products or copy some idea, it will be difficult in the long run."
For this reason, according to Holten, every employee at Wirecard considers what the market of tomorrow needs. Especially the CEO, who has big visions and lives them. Added to this are a great deal of creative freedom, short decision-making processes, and the courage—and thus the opportunity—to try out ideas that aren't immediately profitable.
Success factor 4: The right employees – doers who implement visions
But how does the Munich-based startup ensure that its 4,000 employees share the same vision? By each employee passing on the basic idea of innovation to new colleagues.
To put it another way, and it sounds a bit cliché, what Holten says:
"We need people who are passionate about making a difference. We need people who have visions and then implement them. And it has to feel like one big family."
While we didn't see the almost obligatory foosball table for startups, there are several coffee corners and cozy lounge areas for open discussion within the company. And that leads directly to the next success factor.
Success factor 5: Flat hierarchies. Making (good) decisions.
The startup spirit lives on at the Munich-based company. This means there are flat hierarchies, every employee is welcome to contribute ideas in meetings, and established practices are often challenged.
Precisely because there is an open exchange and many ideas are generated, every decision can no longer be made by the CEO. At Wirecard, an additional management level was established in good time before the company experienced a drastic increase in its workforce.
“The management level below the board is firmly integrated in our company, we have been with the company for many years, we have grown with the company,”
adds Holten.
Development opportunities that retain employees for the long term, while maintaining flat hierarchies – this is clearly another important success factor.
An interim conclusion
In addition to an innovative idea and a suitable business model, you need market demand, customer trust, and committed investors. The foundation, however, is formed by the employees who live the idea and continually shape innovations, supported by open structures.
At Wirecard, everything seems to have come together—and is coming together. But what happens next?
Payment systems of the future, challenges of today
The Munich-based payment service provider currently states: "There are many ideas about how payments will be handled tomorrow or the day after tomorrow. After all, it's not modern that 70% of goods in Germany are still paid for with cash at the point of sale."
"We are convinced that in a few years, cash registers will no longer be needed. Because: Why does the customer still have to stand in line at the checkout when they can pay with their smartphone from anywhere? The networking of individual wallets in real time across borderswill come.”
Actually, Wirecard, at least in Germany, is facing a similar problem to the one it faced shortly after its founding. Brick-and-mortar German retail isn't yet as advanced as technology would allow. The market here doesn't seem to be mature yet. Unlike back then, however, Wirecard is now globally positioned – and can already implement its digital payment solutions in other markets.
Collaboration with startups
Holten says that the Munich-based company largely develops new ideas itself. However, Wirecard works closely with startups.
"We see ourselves as partners of fintech startups. We don't provide equity support, but rather we help with technical know-how regarding payment solutions and with our banking license."
This allows the young companies to focus on marketing their innovative ideas and establishing their business model. Why is the former startup now helping other fintech startups?
"Because we understand how startups work. After all, we were one ourselves. Young companies shouldn't have to deal with bureaucracy, regulations, and requirements."
Wirecard benefits from the cooperation if as many transactions as possible take place. Therefore, it's in everyone's interest for the startup to penetrate the market quickly and intensively. A win-win situation.
Where is Fintech headed?
Finally, we want to know in which direction the fintech scene will go.
"The coming years will show which idea will remain sustainable and profitable. After all, I have to be able to make money with the idea at the end of the day. And that's the difficult part: A great idea alone is useless if I don't also turn it into a profitable business model later on,"
Wirecard has certainly achieved the latter on its journey from startup to established player in today's fintech scene. We're excited to see which other startups with financing solutions will establish themselves further in the market – perhaps even through their sparring partner Wirecard. We're equally curious to see when we'll no longer be stared at in wide-eyed wonder at a German supermarket checkout just because we want to pay with our mobile phone.
