Wirecard’s Philadelphia-area tech firm is up for sale as its German boss gets out on bail

A Conshohocken business that pioneered disposable cash cards and smartphone-based accounts that replaced paper checks is up for sale as its latest owner, Germany-based Wirecard AG, suffers financial collapse from the scandalous disappearances of a top executive and $2 billion in funds.

Wirecard North America Inc., founded as Ecount in a Radnor garage 21 years ago, “is seeking acquisition,” the company said in a statement that sought to distance the American company from its beleaguered German owner.

Wirecard AG’s stock value has tumbled from more than $20 billion last summer to less than $1 billion last Thursday when it filed for legal protection from creditors that it owes $4 billion. The parent company, like U.S.-based American Express or Discover Card, operates both a MasterCard-style payment network, and a bank that makes loans directly to customers.

After auditors couldn’t find $2 billion that company leaders said they had sent banks in the Philippines, regulators temporarily froze payments to Wirecard users in Europe and Asia.

Its much ballyhooed chief executive, Markus Braun, was deposed and arrested in Germany a week ago. He was held overnight on suspicion of accounting fraud and market manipulation, and then released on $5 million bail. Former chief operating officer Jan Marsalek is a fugitive sought by German police. Authorities in Germany, Britain, the Philippines and Singapore are investigating.

Wirecard North America, the company’s statement stressed, is “a separate legal entity” that issues large numbers of pre-paid debit cards and electronic accounts to employees and customers of corporations and government agencies. Clients’ funds are deposited not at Wirecard AG’s bank, but at Truist Bank and other U.S. and Canadian lenders, the company said.

The alleged fraud at the parent company “is so big, it’s hard to believe,” said Jim Shanahan, managing director at PayGility Advisors, a New York payments consulting firm.

But the North American business, which is separate, “has matured. They have pretty consistent cash flows. It’s a solid business and it’s big,” Shanahan added.

So-called open loop debit cards usable at any store and accounts that can be used on all the major card networks will attract $380 billion in U.S. spending this year. Wirecard North America and rivals such as Delaware-based Bancorp Bank and MetaBank of South Dakota will split an estimated $10 billion to $12 billion in industry fees, Shanahan said.

Founded by brothers Matt and Steve Gillin and partner Paul Raden at the Gillins’ parents’ home, the business they called Ecount developed rapidly.

“We invented virtual payments at Ecount. We got a patent for the stored-value card, and we were the first to issue an electronic ‘card’ account not associated with a piece of plastic, and the first to do electronic payments person-to-person,” said Matt Gillin, now CEO at Relay Network in Radnor. Relay, a 50-member firm, sends text messages to customers and employees of Comcast, Verizon, the Blue Cross insurers and many other large companies.

Ecount was purchased in 2006 for $200 million by Citigroup, in a deal that enriched Radnor-based NewSpring Capital and other area investors. “It was a very good investment for us,” said NewSpring partner Glenn Rieger. “They were the first to deliver prepaid debit cards to a mass market.”

Citigroup, then the largest U.S. bank, continued to grow the business as Citi Prepaid Card Services before selling it to Germany’s Wirecard in 2016, along with Citi payments businesses across Asia. That raised Wirecard AG’s profile and boosted its stock as Europe’s top fintech company.

Wirecard put Citi veteran Seth Brennan in charge of the Conshohocken operation. On Tuesday, Brennan promised “no interruption in our day-to-day processes.”

Staff in Conshohocken found it challenging to stay innovative as part of a large multinational organization, said a past executive of the local affiliate, who spoke on condition his name not be used because he still has business ties to the group. He predicted that interested buyers will include large U.S. banks, payments companies and private-equity-backed firms.

Ecount veterans have gone on to head a number of fintech enterprises. Among others, Jason Tiede is now head of innovation for JP Morgan’s Treasury Services group; Brad Garfield heads commercial and prepaid cards at Bank of America; and Morgan Salmon is boss of bank partnerships at Amazon Business Payments.

Other former Ecount people are among the leaders of Philadelphia’s modest software investment sector, including Kevin O’Nell at Osage Venture Partners, and Andy Newcomb at MissionOG. And some are themselves start-up founders: Mahe Bayireddi runs Ambler-based hiring-software platform PhenomPeople, and Sam Whitaker cofounded Wayne-based Greenphire, which automates clinical testing payments

And some stayed put: Early Ecount employees Heather Peterman and Kelly Facemyer are now among the managers running Wirecard North America.