Zatvaranje mjenjačnica: Kako je uvođenje eura promijenilo tržište financijskih usluga

The introduction of the euro in Croatia as the official currency at the beginning of 2023 brought significant changes to the economy, as well as to the financial services market. One of the sectors most affected by this change is currency exchange offices, which have seen mass closures across the country in the last two years.

As the euro replaced the kuna, the need for currency exchange services within the borders of Croatia has almost disappeared, leaving numerous businesses without a significant portion of their income. This trend is reflected in the reduction of employment in the sector, as well as on local economies, especially in tourist areas where exchange offices have been key in providing services to foreign visitors for years. The question is how the remaining exchange offices will adapt to the new situation and what alternatives are available to this endangered sector.

We received answers to these questions in a conversation with Davor Žic, the CEO of Goldman Graff Group and the chain of exchange offices EXC Exclusive Change, which was purchased in 2024 by the Dessardo family, thus becoming part of the Auro Domus network.

The Croatian National Bank (HNB) published the last list of exchange offices on December 16, 2024. This list contains data on 253 authorized exchange offices. Two years earlier, on December 15, 2022, there were 1,080 authorized exchange offices on that list, meaning there are 827 fewer authorized exchange offices than in mid-December 2023. The number of authorized exchange offices decreased the most during 2023, when 783 approvals for conducting exchange operations ceased to be valid.

– This outcome is not unexpected, considering that a huge portion of exchange offices’ income, even up to 90 percent in some cases, came from euro transactions. With the introduction of the euro at the beginning of 2023, that portion of income was lost, making the operations of most exchange offices unsustainable. Among the remaining two hundred exchange offices, it is likely that only a handful can be counted on one hand as those for whom the exchange office is their only business activity; most often, it is a supplement to other activities that generate the majority of income – said Žic.

Given that authorized exchange offices cannot conduct exchange operations without a contract with a commercial bank, and that commercial banks report monthly on authorized exchange offices with which they have such contracts, it is known that the condition for conducting exchange operations (a contract with a commercial bank) is currently met by 199 authorized exchange offices. Accordingly, it can be concluded that 54 out of 253 legal entities and crafts with approval from the Croatian National Bank for conducting exchange operations do not perform exchange operations.

– The reduction in the number of active exchange offices is a very expected scenario. Currency exchange is now mostly a secondary activity, and for a certain number of exchange offices, it has completely ceased, but they have not yet updated their status with the HNB – said Žic.

Others left with 95 percent of their turnover

Before the introduction of the euro as the official currency of the Republic of Croatia, authorized exchange offices provided exchange services at around 3,500 exchange locations, while now that number is around 1,400 (this number includes exchange locations of Hrvatska pošta d.d. and FINA – a total of about 930 exchange locations). Accordingly, the remaining 197 authorized exchange offices conduct exchange operations at about 470 exchange locations. Žic believes that this calculation should certainly include hotels and gas station chains that also provide exchange services, so the real number is significantly lower.

– Most of the remaining exchange offices operate from one location, with many supplementing their offerings with other services, such as cryptocurrency exchange or souvenir sales. Realistically speaking, the largest network where the exchange office is one of the main activities is the connected network of Exclusive Change and Auro Domus, which provides exchange services at 60 locations in Croatia – he said.

In 2023, authorized exchange offices purchased foreign cash from individuals and sold it to individuals (they are not allowed to trade with legal entities) worth 277.61 million euros, while by the end of November 2024, they achieved a turnover of 236 million euros. For comparison, in 2022, they achieved a turnover of 3.8 billion euros.

– This data also shows how significant the share of euro transactions was in the volume of exchange office operations. The drop in turnover is also related to the closure of a large number of exchange offices, but it is clear that with the introduction of the euro, this activity, directly or indirectly, has lost almost 95 percent of its turnover. As expected, the introduction of the euro has significantly and irreversibly changed the activity of exchange offices, and the service has continued to be provided by those authorized exchange offices that have managed to adapt their operations well to the new conditions, or whose exchange activities are a side activity, such as in hotel companies – says Žic.

As in several other exchange offices, the scope of work and the way of doing business in the Exclusive Change chain have decreased since the euro was introduced.

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Davor Žic

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– Of course, the scope of work has significantly decreased in the Exclusive Change chain as well. Due to the drop in income, most locations have closed, and for most of 2024, EXC operated at 16 locations in shopping centers across Croatia. New services have also been introduced, among which the cryptocurrency trading through Electrocoin has the greatest revenue potential, but these are revenues that are significantly lower than the lost exchange transactions. Simply put, the business before and after January 1, 2023, in exchange offices is incomparable – said Žic.

Žic states that Exclusive Change will end 2024 with a loss of about half a million euros. Precisely because of the recognition that the current business is unsustainable, the previous owners of the company decided to sell, and since October, Exclusive Change has joined the Auro Domus network, which consists of another 48 Auro Domus Money Shop branches, two Auro Domus – The Bank of Gold branches, and three Goldman Graff branches. Under new management, cost-cutting has been initiated, primarily by closing four locations that were operating ‘at a loss’ and increasing revenue, primarily by introducing new services based on gold trading, for which Auro Domus is known as a brand.

Closure or consolidation

Regardless of the fact that Exclusive Change recently introduced new services, Žic believes it is essential to always seek opportunities to upgrade the service portfolio, if it makes financial and operational sense, to be even more competitive.

– It is necessary to be careful not to find ourselves in a situation of dispersed focus on activities that do not generate significant financial benefits. That is why we also made a ‘cut’ in EXC after the takeover and eliminated five activities at most locations that together generated less than four percent of revenue, in order to free up capacity for introducing new services, gold buying, investment gold sales, and gold pledges, from which we have high expectations. In activities such as exchange offices, Western Union, and cryptocurrency exchange, we believe there is still significant room for improvement, so we will focus on optimizing existing services before introducing new ones – said Žic.

In conclusion, Žic shared his expectations for the future with us. He believes that after two years of operating without the euro, it is not too uncertain what awaits us in the future.

– I believe that the situation has stabilized regarding exchange office operations, that there will not be major upheavals in terms of closing or opening new service providers, while we predict that exchange office activities will remain at the current level or see a slight decline in revenue, not exceeding three percent annually, primarily due to a decrease in cash transactions. Given that there are announcements about changes in legal regulations, which should facilitate the operations of exchange offices, primarily regarding so-called ‘exotic’ currencies, it is possible that this trend may indeed reverse – said Žic.

However, he believes it is difficult to expect that locations offering exclusively exchange office services will be able to survive in the long term, unless there is a significant change in the composition of tourists visiting Croatia in such a way that the share of travelers from destinations that do not have the euro as their national currency dramatically increases. It is more realistic that existing ‘independent’ exchange offices will either close or supplement their operations with new activities or fit into larger chains in some later consolidations.

– As for EXC, we are not worried about our business, given that we have gone through all three scenarios in the past two years: we closed unprofitable locations, became part of a larger service chain, and introduced new activities based on gold. Our predictions, realistically grounded, show stable and positive business in 2025 and beyond. The first few months are promising, and the financial picture of EXC looks significantly better. In 2025, we expect a positive result of around 200 to 300 thousand euros, while we plan a slight decrease in revenue from exchange offices, but an increase in revenue from money transfers (Western Union), cryptocurrency exchanges, and new activities: gold buying, investment gold sales, and gold pledges – concludes Žic.