Mapping Visa’s progress in the euro-zone

Date: 02/07/1998

By Chris Johnstone

CREDIT card company Visa has produced an interesting map of Europe which at first glance looks like a mixture of Andy Warhol and thermic cartography.

In fact, it shows where the company expects to install one of three types of electronic payment terminals in shops once the single currency is launched but before banknotes and coins are introduced.

One type of terminal will carry on as before, with transactions in the local currency, another will allow payments in national currency with its euro equivalent on the bill, and the third, more sophisticated version will allow cardholders to pay either in local currency or euro.

The bank-owned card company will offer all three permutations from 1 January next year and believes it has an important role in building public familiarity with and acceptance of the euro.

On Visa's map of euro-use, the whole of Spain stands out as a dual payment zone where the peseta and euro will share the favours of spenders.

The same goes for much of the French coastline, apart from Brittany, as well as Lille, Lyon and Paris, the western half of Belgium, the Dutch coastal belt, and a T-shaped area of Italy connecting Turin, Milan, Verona and Florence.

“Tourist areas are the most likely to have a dual currency,” says Johannes van der Velde, president of Visa's EU operations, which alone account for one-third of its world-wide turnover. He points out that being able to use the euro will allow 200 million Europeans to holiday abroad and still use their home currency.

Popular holiday destinations outside the euro-zone such as Turkey are also showing an interest in terminals which will accept both local currency and euro payments. “Turkey is avid for information about the euro,” declares Van Der Velde.

By offering euro payments from January, the card companies are stealing a march on their biggest rivals - cash and coin - which will not make their debut until 2002.

Rivals Visa and Europay have cooperated in preparing for the euro both on the card permutations which will be offered to retailers and on an industry standard for the rounding of conversions between currencies. “We did not think it was in either of our interests to compete on these areas,” explains Van Der Velde.

“We expect people will use their cards in the euro countries a lot more than before. We are already seeing growth of 25&percent; a year and we are doubling our size every three years,” he adds.

Visa's studies assume a trickle-down effect in euro-use with the more mobile and affluent sections of the population taking it up first and the rest following later.

In fact, the firm's figures show that, overall, the euro will have less effect than might be expected for Visa as “more than 90&percent; of transactions are domestic”, says Van Der Velde.

Resetting software to deal with what is essentially another foreign currency has not been a demanding technical or financial burden for the card company in comparison with the problems suffered by its owners, the banks.

For its own internal accounting purposes, the Visa board has already dropped cross-border currency charges between the company and banks. Trying to differentiate charges between 'in' countries, 'pre-in' countries and those which are likely to stay out would have been too complicated.

In line with European Commission instructions, no exchange charges will be levied on transactions in and out of euro currencies from January.

However, the introduction of the euro has not been all plain sailing for the card companies. Visa and its rivals have been unable to settle their differences and work out a new standard for electronic payment cards. But they need to, says Van Der Velde.

“It would be crazy in 2002 for notes and coins to be easier to use than a card,” he insists.

In recent years, several different types of payment cards have evolved in Europe, backed by different bank groupings. Visa Cash belongs to Visa, Mondex was developed by British banks but is now owned by Van Der Velde's rival Mastercard, and Europay has launched its own card which is currently only available in the Czech Republic.

On the long-running Commission investigation into whether or not shops should be free to charge their customers for handling credit card payments, abolishing the non-discrimination rule which applies in many EU countries, Van Der Velde plainly feels that all the card companies have been taught a lesson by the retailers.

Nonetheless, he reckons it would be unfair for the Commission to force a change in the current status quo on charges, enabling one of the three parties involved (consumers, banks and shops) to pass on their costs and thus avoid making any contribution to a very sophisticated payments system.