What does the recent loss of 60% of Spain's electricity power mean for digital payment networks?

When a country loses power due to a nationwide blackout, like happened in Spain and parts of Portugal on Monday April 28th, the consequences are immediate and widespread, affecting nearly every aspect of daily life and the economy. About 55 million people were affected and it lasted more than half a day. Estimates for this recent blackout put the total losses between $900 million and $1.7 billion. Consumer spending dropped sharply, with economic activity falling to just 55% of a normal day, and industrial production also suffered significant setbacks. This article will not investigate the various reasons for the blackout. Here we will focus on the implications on consumer digital payments.

ATMs and POS devices were not operational, crippling commerce and making it difficult for people to access funds or make purchases in stone and online. POS systems in merchants failed, forcing cash-only transactions where possible. Digital payments are a transformative force with significant positive impacts on consumers, businesses, and the economy. They enhance convenience, efficiency, and financial inclusion while driving economic growth and innovation. Personally, I only use non-digital payments, i.e., old fashioned cash, for my barber and the dry cleaners.

During the nationwide power outage, such as the one we recently saw in Spain and parts of Portugal, the digital payment infrastructure simply does not operate, forcing consumers and businesses to rely on cash transactions. Digital payment systems require internet or mobile network connectivity to authorize and process transactions. Power outages often disrupt these networks, rendering digital payments impossible. While some ATMs have backup power, they are limited and quickly ran out of cash due to increased demand and the inability to replenish them. Furthermore, without network connectivity, ATMs were not able to communicate with bank systems to authorize the cash withdrawals. Consumers could not access online banking platforms and mobile payment apps, making it impossible to check balances or initiate digital transfers.

Digital payment systems require internet or mobile network connectivity to authorize and process transactions. The power outages disrupted these networks, rendering digital payments impossible. Mobile wallets such as ApplePay, and Google Pay and the local payment scheme Bizum failed, impacting almost all 27 million Bizum users. All the international card networks, such as Visa, Mastercard and Amex were impacted. Bizum, that facilitates instant transfers between bank accounts using mobile telephone numbers, relies on both mobile network connectivity and the functioning of the banks' digital infrastructure did not operate for almost 10 hours on Monday 28th. The power outage had severely disrupted telecommunication cell towers, and bank servers and payment gateways - all of which went offline or operated on limited backup power. Bizum did not come back online until the next day around 7am.

Non-functional traffic lights, communication blackouts, and overwhelmed emergency services can create an environment where law and order become difficult to maintain. Security systems often fail without power. When communication networks are down, rumours and misinformation can spread, leading to panic and irrational behaviour. People become anxious and fearful about the unknown duration and extent of the outage. Short power outages, i.e., no longer than 24hours, and localized outages are usually manageable. However, a nationwide outage lasting days or weeks can push people to their limits as resources dwindle and frustration mounts. If the government and emergency services are perceived as unable to handle the crisis effectively, public trust can erode, leading to a breakdown of social cohesion.

History shows that major blackouts, especially when coupled with existing social or economic grievances, can trigger social unrest and even riots. The New York City blackout of 1977, for example, saw widespread looting and arson. More recently, power outages have been a significant factor in protests in countries facing economic hardship and political instability, such as the recurring blackouts in Cuba. Bangladesh suffered a large blackout affecting around 80% of the population in 2022. The temporary but widespread power outage recently in Spain and Portugal, while not leading to widespread riots, did cause significant disruption and highlighted the economic vulnerabilities.

Just a couple of weeks before the Spanish blackouts there was a massive island-wide blackout hit Puerto Rico, which left 1.4 million customers without power. Hundreds of merchants, including the largest shopping mall in the Caribbean, was forced to close, leading to significant economic losses. There was widespread anger and frustration among Puerto Ricans, with many renewing calls for the government to cancel contracts with the power generation companies.

The Californian wildfires in 2024 and the associated Public Safety Power Shutoffs (PSPS), like the South African load shedding was implemented to prevent hardship and disruption. Moreover, they did not typically lead to widespread riots and general social breakdown in the way some other major power outages in history. Load shedding in South Africa first began in 2007 and the country experienced a returned to load shedding as recently as 2024 after a period of relative stability, highlighting the ongoing challenges with the power supply.

A nationwide power blackout will always cripple a digital payment ecosystem. This means that consumers are faced with a challenge to buy necessities which in turn places huge emphasise on the need for resilient payment infrastructure and the persistent importance of physical cash as a fallback payment method during the power disruptions. Whilst we may be on the journey of moving away from plastic payment cards and only using smartphone digital wallets, cash remains the preferred fallback when there is no electricity.

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The content of this article does not reflect the official opinion of Edgar, Dunn & Company. The information and views expressed in this publication belong solely to the author(s).