Article

The euro effect

The euro is largely a non-issue in the ATM industry. But others see a potential for profit in the new currency. by Ann All, editor

March 11, 2002

The age of the euro, Europe's first single currency since the fall of Rome in 476 A.D., began Jan. 1 when the European Commission set fixed exchange rates for the 11 participating countries. While euro bills and coins won't be issued until January 2002, electronic transactions are already being made in euros.

The euro is seen as a key to opening up financial markets in Europe, and eventually, leading to more political cohesion across the continent. But what kind of impact will it have on ATMs? Not much of an impact at all, according to industry insiders.

Minimal impact on ATMs

Catherine Vincent, a spokesperson for French ATM manufacturer Bull, said that ATM software and cassettes will require modification in the 11 participating countries: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Portugal and Spain. But those changes won't be drastic; in fact, she predicts most banks will schedule them as part of their regular ATM maintenance.

Euro coins and bills will be issued on Jan. 1, 2002, but local currencies will remain in circulation through July 1, 2002 when they will be completely replaced by the euro. Some ATMs may dispense local currencies and the euro during that transition period, but most ATMs in Europe are already equipped to handle multiple currencies.

"Companies such as Bull, we can sell our machines in Italy or France. They have to hold the different currencies," Vincent said.

Pamela Small, investor relations manager for Euronet Services Inc., which operates an independent ATM network in Europe and has ATMs in two euro countries, agreed with Vincent. She said that, unlike the U.S., it's fairly common for European countries to make changes to their currencies, including the size.

Euronet has more than 500 ATMs in Hungary (a non-euro country), where a change in the size of banknotes is currently under way. "We've already adapted all of our systems there," Small said. "It's just a matter of changing cassette sizes."

Vincent said European banks have agreed that ATMs will be the primary means of distributing new euro banknotes, beginning on Jan. 1, 2002. Ideally, banks hope to complete the conversion to the euro in six weeks, well before the official July 1 deadline.

Vincent pointed out that most Europeans are frequent ATM users. "We all go to ATMs. Very few people go to banks for money. Even at the banks, instead of queuing at the counter we go to the ATM inside."

Although at least one pundit has predicted the euro could lead to "new European civil wars," Vincent is more blasé about the new currency's effect on European life. "Instead of thinking in francs and using francs, we'll think in euros and use euros," she said.

GE Capital and Mondex: It's in the cards

Several companies see the euro as a means of generating new business in Europe.

GE Capital just launched a euro-denominated corporate credit card program designed to appeal to multi-national clients. Users of the new corporate cards can charge purchases in any currency and receive billing statements in euros. Purchases made in the 11 euro countries will not incur an exchange fee; previously, all foreign transactions were subject to such fees.

GE Capital is issuing the cards in France, Germany, Ireland, Italy and the Netherlands. In April, the card will be rolled out in Belgium and Spain.

Jeffery R. Dye, senior vice president of GE Capital Corporate Expense Management Services, a unit of GE Capital Card Services, said the program helps his company's customers benefit from the euro because it "streamlines the accounts payable process and maximizes other administrative efficiencies."

Mondex International, a subsidiary of MasterCard International, earlier this month demonstrated a smart card capable of carrying multiple currencies, including the euro. Mondex distributed cards pre-loaded with euros, dollars, Deutschemarks, francs and pounds to delegates at the Omnicard conference in Germany.

Hugo Godschalk, CEO of German smart card consultancy Paysys, believes the new Mondex card is the first real electronic cash denominated in euro. "Euro is critical for electronic cash because if we wait until 2002, physical money will win, not least because it works cross-border," he said.

ARKSYS: Software does the math

Tom Kleinsorge, marketing manager for ARKSYS, said currency conversion is old hat for his Little Rock, Ark.-based company. ARKSYS developed its Integrated Transaction Management (ITM) software for a Caribbean financial institution in 1992. "Once we started getting into the international market in 1990, the need for multi-currency support within the software became critical," he explained.

Calculating an amount from one national currency to another generally requires triangulation. This necessitates determining the value of the first currency in euros, then converting it to the second. ITM can handle triangulation or automated base currency conversion processes, as well as multiple currency storage and auditing functions.

Kleinsorge said ARKSYS is well positioned to profit from the conversion to euro, noting that financial applications other than ATMs will require modification. "We can't just limit it to ATMs. Banks have a lot of other applications, like Internet banking and POS, that are going to have to be euro compatible. Our advantage is that we offer all those different retail payment options in one system."

Kleinsorge added, "It's all euro ready, it's all Y2K ready, and it supports all the different devices that a bank's customer comes into contact with."

Cash Technologies: Turning pesetas into profit

Approximately 70 billion local coins will be redeemed in Europe before the full implementation of the euro in July 2002. Los Angeles-based Cash Technologies Inc. is marketing its CoinBank self-service coin deposit machines to European banks and other businesses to help them deal with the crush of coins.

Cash Technologies chairman and CEO Bruce Korman noted that banks using labor intensive, manual methods incur "extraordinary costs" dealing with all that change. "It costs banks 12 to 14 percent of a coin's face value to accept it."

Cash Technologies has Austrian and German subsidiaries and a distributor in the U.K. The Austrian subsidiary, CoinBank Automation Handels GmbH, just announced an agreement with Creditanstalt AG, a Bank Austria subsidiary, to install the machines on a trial basis.

Cash Technologies owns and operates the machines and doesn't charge banks to deploy them. When consumers deposit loose change, the machine sorts and counts it, then dispenses either a credit via ATM card or a receipt that can be redeemed for cash. The company charges customers a fee for the service, typically seven percent, and splits it with the bank.

Korman thinks the conversion will provide "enormous opportunities" for businesses like his. "I think this is the right time to be in the market. Every bank, every armored carrier, every cash-oriented business in Europe must replace or upgrade its equipment," he said. "As they get closer to implementation, real panic will set in."

The CoinBank machine is software driven; it can be programmed to accept coins from any country now and euro coins later. It supports up to two dozen currencies at a time, an advantage in Europe where coins carry more value and are a larger part of the money flow than in the U.S. A new model, expected to be rolled out in time for the euro, also will accept banknotes.

Electronic coin-counting devices have been popular in Europe for years, but Korman believes his company's product is superior in several respects. He pointed out its ability to separate debris from coins, and unlike other machines, return it to the user.

"You walk away from our machine with a receipt for the money it accepted and everything else in your hand," he said. "That might not seem like a big deal, until you realize you've gotten a diamond earring mixed into that loose change off the top of your dresser."

Cash Technologies is also piloting new features, such as offering prepaid phone cards to consumers as a payment option.