The introduction of the euro currency next January, followed by the introduction of notes and coins in 2002, means a three-year period where euro transactions will be predominantly via plastic - credit, debit and new electronic purse cards.
Dublin-based Flexicom, which announced flotation plans on Wednesday, sees this as an opportunity for its card-processing software products. It says it expects 20 per cent annual growth in the issuing of cards in Europe and, importantly, increased demand within and around the periphery of the EMU zone for multicurrency transactions, whereby customers may choose a currency in which to pay for goods.
Multicurrency support is an important selling point for Flexicom's off-the-shelf products, which manage individual cards (called issuing) and process transactions at the point of sale, by the banks and by the card companies (called acquiring). Ironically, the company says, multicurrency support was included before the euro was planned, and was originally a response to the needs of multinational companies.
Chief executive officer, Mr Patrick Shiel, said the five-year-old company has averaged 80 per cent growth in revenue, which up till now funded expansion. He said the flotation, expected in four to five months, will allow it to meet the opportunities of a "booming unique market", adding, "we need an accelerated growth path."
The company expects revenues of "slightly in excess of £3 million" for the current fiscal year, according to Ms Orla Branigan, senior vice-president of marketing, while Mr Shiel said the company aims for average profit margins of 20 to 30 per cent. He said product licences account for 70 per cent of revenue, while services account for the remaining 30 per cent. The company plans to increase the service contribution to 40 per cent, he said.
While not putting a value on the market for software products alone, Mr Shiel said the total annual value of expenditure on IT equipment to support acquiring, as distinct from the issuing of new cards, is £38 billion.
Europe isn't the only multicurrency market. Ms Branigan said that while Europe remains the company's target core market in the medium term, it is also planning to expand in Latin America and Asia, where multicurrency transactions are already common.
Within Europe, she said, the non-EMU countries are also intensely gearing up for the introduction of the euro, citing Marks and Spencer and Barclays Bank in Britain as examples. This is partly due to deregulation in the rules for cross-border acquiring.
This deregulation, from the beginning of next year, is leading to aggressive expansion by banks, including the entry of US banks into the European market. Ms Branigan said in future a single bank will be able to process all the card transactions for a single multinational company, regardless of location or currency. She cited the example of the Forte hotel group where up until now every country has required a separate card acquirer. In future, she said, a single bank will be able to take all that business.
The expected growth of sales via the Internet means US banks will also need multicurrency capability, even those traditionally trading just within the US and outside the traditional multicurrency areas.
Ms Branigan said the Internet, which technically is just another form of merchant, is important because its rapid expansion worldwide highlights the need to accept multicurrency payments.
Flexicom's acquiring products run on Microsoft's NT operating system. This is a strong selling point, according to Mr Shiel, who said many existing card processing solutions are custom-written for expensive mainframe computers, while US and European banks are keen on downsizing, not least because of year 2000-related costs.
Eoin Licken may be reached at elicken@irish-times.ie
