Eurocheque, a 31-year-old payment service that foreshadowed the debit card and the unified European currency, is falling victim to both.
Europay International, the MasterCard-affiliated bank card association that administers Eurocheque, has scheduled a two-and-a-half-year phaseout for what was historically hailed as a prime example of banking industry cooperation and innovation.
As of Jan. 1, 2002-as euro coins and currency are going into circulation-Europay and its member banks will discontinue their Eurocheque guarantee service, devoting those energies instead to the increasingly popular Maestro debit card.
The decision "was widely recognized within the banking sector as the best way to address the decrease in Eurocheque usage," said a statement issued June 15 from Europay headquarters in Waterloo, Belgium.
Eurocheque volumes have been falling by double-digit annual percentages in recent years. Those statistics, combined with escalating costs of paper processing, created "an unsustainable situation," Europay said.
It did not make the hard decision without paying homage to "a pioneer in debit services and a European payment institution for over 30 years," said Europay board chairman Kurt Richolt. "The visionary product concept and subsequent popularity of Eurocheque have laid the foundations for the development of our globally accepted Maestro electronic debit service."
In the late 1960s, as bankers in the United States were nursing credit cards through early growing pains, bankers from 15 European countries came together to solve a problem unique to their frequent-traveler populations. They wanted to enable customers to draw on their bank funds while away from their home countries.
The solution was a bank-issued guarantee card-a predecessor of the automated teller machine card-that accompanied checks that eventually became negotiable throughout Europe, in the local currencies.
"Eurocheque became the first usable European bank note long before there was talk of a single currency," Europay secretary general Mark Van Wauwe wrote in a 1994 article in the German newspaper Frankfurter Allgemeine.
Mr. Van Wauwe said Europay was ahead of its time. Today, consumers routinely choose between credit and debit cards at points of sale. "Eurocheque recognized this difference 25 years ago," Mr. Van Wauwe wrote in that article. It was "the original European debit card."
Through the 1980s and into the 1990s, Eurocheque remained a pillar of the European consumer banking market. In 1992, Eurocheque International, which Mr. Van Wauwe headed since 1978, was an equal partner in the merger with Eurocard International that resulted in the formation of Europay.
But issuance of cross-border Eurocheques has declined throughout the 1990s. The trend accelerated as banks increased their promotions-and consumers their acceptance-of on-line debit services.
Europay disclosed in its annual report for 1997 that "the growing maturity of the ATM network in Europe and the considerable increase in Maestro acceptance" contributed to a 19% decline in Eurocheque transactions and a 22% falloff in their value.
Europay this month said that in 1989, cross-border Eurocheques outnumbered the region's comparable ATM cash withdrawals by 42.1 million to 1.1 million. By 1998, the ATM total was 60.2 million, and Eurocheques had declined to 14.2 million.
From 1993 to 1998, the Eurocheque figure fell by about 20 million. Electronic debits, virtually nonexistent in 1993, climbed to 4.5 million in 1998 as the MasterCard-Europay Maestro effort moved into high gear.
Europay said it aims for a "smooth and controlled transition," suggesting that banks actively communicate with cardholders and consider placing Eurocheque logos on Maestro cards. They total 132 million in Europe and outnumber credit cards.
Europay wants to be in the rare position of eliminating the costs associated with an obsolescent payment system, but it may never be entirely rid of the checks. Some are sure to remain in circulation after 2001 and could be used for person-to-person payments, but they will no longer be guaranteed by any bank, even when presented with a card.
"It should be absolutely clear that the paper Eurocheque will not disappear overnight," Mr. Richolt said. And the cards "will continue to exist and act as an effective platform for banks to build competitive, international debit programs."
Europay International said it has opened a regional office in Hungary as part of an effort to stay close to fast-growing emerging markets.
The Budapest office, Belgium-based Europay's ninth, covers Croatia, Hungary, and Romania and is headed by area manager Razvan Munteanu.
Europay said cards with its Eurocard-MasterCard and Maestro brands in Hungary have doubled since 1997, when they passed the million mark. But Mr. Munteanu said the opening in Budapest has as much to do with "opportunities that lie ahead," including electronic commerce and smart cards.
