A massive electrical outage swept through Spain and regions of Portugal and France yesterday, leaving millions without access to electricity, mobile, and internet services.
While most areas regained power late on Monday night, the blackout laid bare the vulnerability of payments systems.
Many banks in Spain halted access to point-of-sale terminals, leaving shops and restaurants without ways to accept card or online payments from customers. The European Central Bank (ECB) extended its delivery versus payments deadline by an hour in a rare move, almost certainly prompted by the outage, as banks’ central securities depositories struggled to reconcile payments made during the day.
The blackout, which affected Spain as well as the Basque regions of France and much of Portugal, including Lisbon and Porto, was due to an electrical failure in Spain’s power grid, which in turn affected the connections with its neighbors; overall, an estimated 50 million people were affected.
The cause of the blackout is believed to be a “rare atmospheric event” that caused extreme temperature variations in Spain, leading to an imbalance in the frequency of the national power grid that had knock-on effects on all surrounding regions. Extreme temperature variations, an effect of climate change and global warming, are expected to sweep through most of Europe this week, with the UK experiencing temperatures as high as 27°C in some areas.
The outage has had little if any economic impact, as critical infrastructure like hospitals stayed mostly unaffected and many businesses stayed open. The Spanish stock exchange remained functioning throughout the outage, opening this morning with a slight gain. However, the widespread, immediate halt in online payments highlighted the fragility of the international payments system and its reliance on underlying infrastructure.
Spain’s central bank said that by 15:30 local time – four hours after the beginning of the blackout – its national and cross-border payments system was back to normal. However, bank branches, merchants, and individual businesses experienced problems throughout the day as card readers ran out of batteries and ATMs remained inactive. The ECB postponed the start of the delivery versus payment cut-off by an hour.
Spain is one of the most cash-dependent countries in Europe, despite efforts by the governments to encourage more uptake of online and card payments to decrease corruption. If the blackout had occurred elsewhere, the effect may have been even more pronounced, grinding national economies to a halt: the UK, for example, only has 6% of payments made in cash, compared to Spain’s 57%.
