McCreevy sets 2010 date for single EU payments

Europeans will be able to pay quickly and securely for goods and services in any member state by 2010 under new proposals from Brussels.

But European banks remain sceptical that the ambitious targets set out by European Internal Market Commissioner Charlie McCreevy can be met on time.

Each EU country currently has its own national payment system, described by the Irish commissioner as “a nice little earner” for the banking sector.

While cross-border payments are possible under the existing system, they are often expensive, complicated and time-consuming.

The annual cost of making cross-border payments amounts to two to three per cent of European GDP, the European Commission estimates.

The commission claims that a harmonised system would generate savings of €50-100 billion a year.

“There is very little competition in this market, and service providers are effectively blocked from offering cross-border payments,” McCreevy said

“By opening up the market to competition, and by setting out minimum standards that will apply across the EU, the costs to both consumers and banks will come down.”

The proposed legislation covers electronic payments such as direct debits, widely used in domestic markets for paying bills, as well as credit and debit cards.

But cheques – described by McCreevy as “inefficient, expensive and on the way out” – will not be covered by the new rules.

The most controversial element of the commission’s proposal is the stipulation that all payments must be received no later than one day after the order is made.

The European Payments Council, which represents the banking sector, believes that this requirement will place too great a financial burden on its members.

It had called for a maximum delay of three days for payment transfers.

McCreevy acknowledged that the proposed pan-European system would involve a significant investment on the part of the banking sector.

“Our discussions with the EPC have made it clear that there will be costs involved in getting a European payments system up and running so quickly.”

“But I am open to the idea of offering incentives to the banking sector to make the necessary investments, which after all will benefit them in the long term.”

He declined to rule out sanctions against banks that failed to move quickly enough, although he stressed that he was “favouring the carrot rather than the stick” at the present time.

McCreevy’s proposal will also cover every European currency and not just the euro, as the EPC had wanted.

The EPC is working towards the creation of a single European payment area for the 12 eurozone countries by 2008.

“I am aware that the EPC is keen to focus on the eurozone, but this proposal takes the longer view,” said McCreevy.

“But if the banks wish to concentrate on eurozone payments, these new rules will in any case allow other service providers to cover payments in other currencies.”

“The banks will then be faced with deciding whether or not to focus on just one area of the market.”

“I think that very few of them will be happy to leave such a lucrative market to the competition.”

European businesses welcomed the commissioner’s determination to push through the single payment system as quickly as possible.

“No European consumer will complain that the airline market has been deregulated. It brought more choice in the proposed services, more innovation, more competition and much lower prices,” said Xavier Durieu, secretary general of retailers group EuroCommerce.

“The same will eventually prevail in the European payment area where there will be great opportunities for dynamic and innovative players.”

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