The introduction of the euro will prompt more than two thirds of corporates to change banks, accelerate lower prices in the cross-border payments market and spur further globalisation, according to a new report.
Global Payments 1998, by the Boston Consulting Group, identifies three forces driving radical change in the world payments market:
1. Continuing migration from paper to electronic payments in all major markets; 2. The entrance of non-traditional players, such as First Data Corp in the payments market; 3. Continuing globalisation which, the report says, will lead to the market being dominated by between three and five global banks by 2005.
Boston Consulting says the expectation among corporates is that prices will fall as the euro simplifies the system and estimates that this could cost banks $2.0 billion in lost revenues.
The consultants say the price per payment will continue to collapse to 80 US cents compared with $1.26 now by 2005 for domestic payments, while the average cross-border price will halve to $8.
The new environment will also lead to corporates questioning the services they receive from their banks more generally and this will mean that banks must be well placed to compete.
"(The euro). . . is an opportunity for any bank with an appealing and credible euro offer, that is in a position to advise on the most appropriate transition strategies and can route payments through the most efficient and appropriate clearing systems," according to MrNick Viner, co-author of the report and a vice president at BCG.
The report does not mention who the likely winners will be in the global payments market but major banks such as Citicorp, Chase and HSBC would likely be involved.
Conversion of participating national currencies into euros and vice vesra, conversions between two national currencies and conversions in and out of non-participating currencies must be carried out according to rules established by the European Union.
