The Euro and it's impact on us all
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19 June 2012Gareth Lodge
One of the things that I realised early on in my career is that a significant proportion of my friends or people I meet socially really don’t understand what I do for a job. After many differing attempts to explain it in different ways, I still invariably get asked what the best balance transfer rate on credit cards is or where would be the best place to buy their holiday currency. Or both. Currently, I’m getting asked about the Greeks and the Euro. Even then I have to be careful to understand the actual question, after the Greeks improbably got through to the next round of Euro 2012. I may have (personal) opinions of the likely outcome (of both the Euro and the Euros!), I must stress that there are better placed people in both Celent and in our parent company, Oliver Wyman, to answer that question. But equally, we shouldn’t assume that it doesn’t impact what I or you do. A country changing currency is a very big deal. Banking is about the movement of money, and the movement of money usually involves a payment somewhere along the process. But equally, just about every transaction also involves a payment. Each and every point of contact will need to be converted. So, from the counting mechanisms inside every ATM to every parking meter. The new currency needs to swapped in, requiring first its production (rumours abound about the rfi’s for printing new banknotes are circulating the industry, with at least one country allegedly already building stocks of the new currency), then its distribution, and then finally the secure disposal of the returned currency. That’s just the physical side. The electronic side is as complicated if not more so. If it were only as simple as changing a line of code! The introduction of SEPA has proven that complexity. Whilst the SEPA project is a much broader project, with, in some cases, different information flowing in different directions to different participants, the preparation has proven how deeply intertwined payment systems are into other areas of the bank, and how that makes everything so much more complicated. Even if it were just a line of code to tweak, the testing of that change would easily run into weeks or work and millions of Euros (or should that be millions of New Currency?). And then of course, all those parts of the business that link to payments, from FX to correspondent banking and, of course, the clients. Which broadens of these changes the impact not just the country concerned but to anyone who deals with Europe. Whatever happens to the Euro then, it isn’t just a European issue. It has significant impact on us all, whichever part of the bank or part of the world we sit in. It may be minor – but equally, it may not be If you haven’t already started, I would advise at least brainstorming the possible impacts as soon as possible. Election results in Greece may suggest that we may have receded back to DEFCON 3, but recent experience has shown us to expect the unexpected!
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