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Call in the payments cavalry: When ATMs came charging in to Cyprus’ rescue

November 1, 2013 by Bernardo Batiz-Lazo — Professor of Business History, Bangor University

The events of the banking bailout in Cyprus immediately generated global media attention. They certainly didn’t go unnoticed by ATM and payment industry specialists.

Recent research by Cypriot academics, Leonidas Efthymiou and Sophia Michael (both at Intercollege Larnaca) makes you realize how long and painful the crisis really was and how its ramifications touched all aspects of life. It also questions how banks will regain the trust of customers.

Indeed, it seems that Cyprus had a banking crisis eons ago. In addition — and totally lost in time — are similar episodes in Argentina (2002) and the U.S. (1933). But the recent research by Efthymiou and Michael brings them all back to life … and in excruciating detail.

For most people around the world, the use of ATMs is a common element of everyday life. For the people of Cyprus, the events that took place between March 15 and March 28 resulted in ATMs evolving into the lifeline to survival, as they became the only way to access a means of payment.

During that period, negotiations with supranational bodies that resulted in a flat levy on all accounts also brought about long queues outside ATMs like never before, and people who did not have an ATM card wished they did.

With an entire nation on borderline bankruptcy and its entire banking system shut for a fortnight, ATMs played a central role in the everyday life of the average Joe (or Giorgios, rather), ensuring that life could continue almost as normal while all electronic transactions, money transfers, cheque payments, deposits, and bank transfers were postponed or suspended.

Efthymiou and Michael do a wonderful job in communicating this in their paper. In addition, they point to ATMs playing a new, pre-arranged role in controlling the flow of cash with restrictions and enabling state control over transactions until the final levy decision was taken by the Cypriot Government, IMF and the Eurogroup — and until the banks reopened.

Apart from the unique role of ATMs and credit cards, the analysis by Efthymiou and Michael brings into play the most recent technological developments, such as the decentralized digital currency Bitcoin and online barter, to answer the question: Will the current and subsequent crisis lead people to adopt non-traditional banking, informal economy and virtual currencies?

The full research paper by Leonidas Efthymiou and Sophia Michael is available for free download.

About Bernardo Batiz-Lazo

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