Payments: EMU: More Card Options

The contentious establishment of the European Monetary Union (EMU) and the significant challenges of converting to a single currency could present the European banking industry with new credit, debit and smart card opportunities,

according to research findings of Datamonitor, a New York-based management consulting firm.

The research report, called "The Effect of EMU on the European Banking Industry," suggests that the EMU will present banks with more market opportunities in electronic purses and smart cards, but that a wider payment cards market, in general, will mean some additional costs for participating financial institutions.

After conducting research with 25 European banks, Datamonitor analysts concluded that the EMU conversion could prompt people to use payment cards- credit, debit and even smart card products-in other European countries far more than they do at present. This could spur demand for new products such as electronic purses that operate in the Euro, according to Datamonitor's Kartik Natarajan, senior business analyst. Until now, only national electronic purse schemes are operational, but these purses could be made interoperable across Europe. The greatest opportunity at present is for stored-value payment cards charged in euros. "There is a six-month changeover period in 2002. The basic perception is that, within that six- month period, it's going to be easiest for consumers to use credit or any type of payment card for transactions because of the confusion arising from using two parallel currencies," he says. This is because shopkeepers will have to keep the euro and local currencies in the register.

Natarajan says that some European banking associations and governments are providing financial assistance to merchants that need to replace existing terminals to accept smart cards.

-sraeel tfn.com