January 6, 2010
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News: Computer Glitch Halts German Spending
Although reports differ regarding the estimated amount of debit and credit cards involved in a German banking computer glitch, everyone agrees it was an extraordinary inconvenience. According to the German Savings Bank Association, German debit and credit card customers experienced what the association calls a "belated year 2000 problem" when their cards wouldn't work at merchants' point of sales or automatic teller machines (ATM) outside Germany. Media reports that 20 to 45 million credit cardholders were affected by the problem. Lenders were swamped with complaints from cardholders that were unable to withdraw cash from ATM machines or process retail transactions.
The private sector bank association consisting of smaller financial institutions reported that 2.5 million to 22 million debit cards and an additional 3.5 million credit card customers experienced difficulty when trying to use their cards. These cards represent the largest amount of Germany's retail spending. On the other hand, the association of mutual banks said 4 to 27 million of their debit and credit card customers felt the wrath of the software problem. In an attempt to curb spending, many Germans have switched from credit to debit.
The 2010 software issue is likely to spark some longer term negative affects as consumers continue to recover from a large credit card data breach in Spain last year which had a significant effect on the Germans. Millions of cards were recalled by German banks as a result. Critics say that the German banks failed to adequately prepare for the 2010 change and that the latest problem caught them by surprise. Most likely they had become complacent because after a great deal of preparation for the 2000 millennium, there was little disruption. The problem is believed to be the result of an embedded microchip “chip and pin” card. Banks say employees are working long hours to rectify the situation. German banks will need to reconfigure thousands of ATM machines and retail payment terminals throughout the country as well as other popular German vacation spots.