One Bright Spot In Debt Crisis As Greek Government Supports Electronic Payments

Though uncertainty reigns when it comes to Greece – whether the nation will stay with or exit the Euro, when banks will open or even if ATMs will function – there are some signs that the electronic payments segment of the financial system is continuing to function, and function well. That may have some powerful implications for the economy overall.

“Greece on the brink” has become such a common refrain that it is easy to get caught up in stock market gyrations, bank closings and other daily events. It’s also easy to lose sight of what the latest developments might mean for the Greek financial system, and especially for electronic payments. As of the beginning of this week, there are indications that electronic transactions may provide one of the few silver linings in an otherwise clouded Greek outlook.

With the news still fresh as of this writing, the country is under the grip of capital controls, with a slew of mandates designed to prevent a run on banks and the social unrest that would likely accompany that panic.

The latest controls came via quaint delivery in this age of instant communications — Alex Tsipras, the Greek prime minister, published an official decree in a government publication on Monday. Titled “Bank Holiday Break,” that decree does not sugarcoat the dire situation at hand. It makes explicit reference to “the extremely urgent and unforeseen need to protect the Greek financial system and the Greek economy due to the lack of liquidity caused by the Eurogroup’s decision” late last week to nix an extension of the loan agreement currently in place between the union and Greece.

With a nod to the fluidity of the situation, here’s what’s in place: All Greek banks are shut until July 6, which will allow for a referendum on bailout proposals. That bank holiday also extends to branches of foreign banks operating within Greece. The government has said the banking system will reopen for business on July 7.

ATM withdrawals are being limited to €60 a day. That’s a per card limit, and one that can be changed by the government if deemed necessary. This cash-machine control comes despite the fact that, as of Monday, many cash machines in the country were widely reported to be empty — though the government said on Monday that ATMs would be operational by midday.

In the meantime, the ATM limits do not extend to foreign bank cards, and this means that tourists and others who carry credit or debit cards that have been issued by banks outside of Greece will be able to withdraw the amounts they wish — that is, if the ATMs are indeed holding cash.

In reference to electronic payments, at least in part, the government has said that pension payments will be exempt from the aforementioned restrictions, and the decree states that there will be “no problem for wages paid electronically into bank accounts.” Also, payments made using cards (whether credit or debit) should function normally at businesses nationwide, as should electronic transfers between Greek bank accounts and online transactions made within the country.

And as might be expected in a scenario where the government is seeking to curtail panic and capital flight, foreign transfers have been prohibited and, if allowed at all, would require the approval of the Greek finance ministry.

At first glance, it may seem like folly to point to the payments system as being a bright spot in this story. After all, the trends remain in place to dampen consumer spending, and thus payments in general. Greece remains mired in recession, and meager disposable income does not translate into robust transaction activity.

But consider the fact that in the most recent austerity measures, electronic transactions are continuing uninterrupted — which represents a nod to the safety and controlled nature of electronic payments as a system. Also, there is the added boon of being able to “follow the money,” which for the government may allow for a better way of tracking transactions for tax revenue purposes.

It’s no secret that evading taxes and paying in cash is a way of life in Greece, one that helped contribute to a situation in which the government found itself unable to pay debts.

In so many ways, there’s nowhere for Greece to go but up. Just last month, reports hit the media via the Athens-Macedonian News Agency that the nation ranks at the very bottom of the European Union pantheon when it comes to electronic payments. Citing 2013 figures via the European Central Bank, the newswire noted that Greeks made only 18 payments per capita, a far cry from the EU average as a whole of 197 payments. And in Greece, where the “black economy” might account for as much as a quarter of GDP, reliable tracking would have tremendous implications for tax revenues.

Credit may be hard to come by going forward. And that may hamper credit card issuance in Greece, while the consumer mindset may be (forever?) altered to embrace a “pay now, not later” mindset. But that in turn supports debit and other paperless (instant) transactions, where in troubled times safety and reliability are prized above all.



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