Euronet eyes banks’ expansion

Within just a few months, two strong international groups in the electronic transaction management sector have entered the Greek market via acquisitions. They are First Data, from the US, which acquired the information technology service sector of Singular, and Euronet Worldwide, which acquired Instreamline SA from Piraeus Bank. Both companies target the growing credit card market in Greece and the rapid expansion by domestic banks into neighboring Balkan countries. The targets of most of the five or six important acquisitions of domestic companies by foreign groups were similar the last couple of years. Investors either see that they can set up «headquarters» in Greece for the broader region or are positioned in companies involved in changing sectors. For example, the deal between Euronet and Piraeus Bank provides for the former to not only manage credit and debit cards in Greece but also for the cards to be issued in the neighboring states into which the Greek bank has expanded. There is, nonetheless, another reason, as Michael J. Brown, chairman and CEO of Euronet Worldwide, explained to Kathimerini. He believes that in this country «there is the talent» for the creation of software centers to develop the systems that support electronic transactions. «You can place technology and computers anywhere, but the know-how for providing a service is what you need to go after,» said the Euronet chief. With his long and successful career in the software domain, Brown moved up to the chairmanship of Informix. In the mid-1990s he went to Budapest and took part in the establishment of Euronet, aimed at developing an independent automatic-teller-machine (ATM) network for Central and Eastern Europe. Euronet, which is listed on the Nasdaq market in New York, developed rapidly and today manages one of the biggest ATM networks in Europe and India. It operates an independent network of about 7,000 ATMs in 12 countries. It is also the biggest player internationally in managing terminal networks for the purchase of cellular telephony airtime; its systems operate at more than 100,000 sales points. It is further involved in electronic fund transfer and in the payment of bills through subsidiaries such as Euronet Payments and Remittance. The acquisition of Instreamline in Greece forms part of the plan by Euronet to strengthen its presence in the credit card management sector. Greece is a privileged field because, according to Brown, «some 70 percent of transactions are today handled internally by banks» with their own IT systems. He believes that gradually banks will allocate the management of specific systems to companies such as Euronet. Changes «A few years ago, Greece lagged behind the rest of Europe, but today the penetration of credit cards is approaching the European average,» said the Euronet head. Furthermore, «the market is now more clear and bank managers can see what lies ahead. They have become multinational through their expansion into the Balkans and are beginning to think differently,» he noted. Brown has first-hand knowledge of Greek bankers’ views, as he came to Athens last month and met with four bank governors. Euronet has been in Greece for about 10 years, having clients in the electronic transaction software systems. Although the firm is the biggest in the world in managing terminal networks for the purchase of cellular telephony airtime, it has no such clients in Greece. Greeks buy airtime through prepaid cards of 5, 10 or 15 euros which they purchase from retail stores. Euronet today manages 218,000 terminals through which about 32 million transactions are made every month to buy prepaid airtime for cellphones or for long-distance and international calls. «Greece is the exception, without any obvious business reason for that,» says Brown. He suggests that «when there are four or five cellular networks in one market (there are four in Greece) the cost of card management is considerable. Retail sales get a hefty percentage as commission, there is the cost of storing and distributing millions of cards, etc.» In markets where the companies wish to reduce their costs, such as those of Britain, Germany or Spain, they have adopted the electronic distribution of airtime. Instead of going to a kiosk to buy a card, users receive through a terminal a piece of paper with a code number that adds airtime to their cellphone. They can also use the banks’ ATMs, as happens in certain cases in Greece, too. The Euronet CEO appears reserved concerning the theories about the disappearance of money, about electronic wallets and other innovations forecast some years ago by several analysts. The need for cash, he said, is growing year after year, mainly due to the immigration waves toward the West. Immigrants send cash to their families back home. This is why Euronet recently invested in electronic money transfers, as it believes it has great scope for growth. «The needs for cash are growing at a greater rate than the process of turning cash into electronic money,» Brown stressed. Why, then, did he abandon the software market, having founded software companies and having been the head of Informix which dominated the database sector? He responded that in IT services, which is Euronet’s main field, you can benefit from the creation of economies of scale. Gaining a bank as a client may be hard, but losing it is equally hard. There is also a steady flow of income, contrary to the software market where «in one quarter I was a hero and in the next quarter a zero.»

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