Banking Reform Deal
March 27, 2007
"The necessary legal security now exists not only for payment service providers but also for the customers, the people in Europe," German Finance Minister Peer Steinbrück told journalists after chairing the meeting.
"Things are going to improve vastly for our citizens, it will be less bureaucratic, consumer protection is taken into account and there will be enormous savings for people," he added.
The plans aim to make cross-border payments by credit card, debit card, electronic bank transfer, direct debit or other means as easy, cheap and secure as payments in a single EU country.
That will be done by harmonizing rules across the European Union for retail payment providers who can offer such services, opening the door for non-banks such as supermarkets or mobile phone operators to muscle in on the market.
Plans could save consumers huge sums of money
The European Union is currently covered by a patchwork of national payment rules which can lead to wide variations between the prices charged for payment services.
For example, a bank transfer that is free in one EU country can cost more that 10 euros in another member.
The EU's executive arm has calculated that the annual cost of making payments between these fragmented national systems is two to three percent of gross domestic product and that the shake-up could save EU consumers 50-100 billion euros per year.
The plans aim to complement an industry initiative, know as the Single Euro Payment Area, to harmonize non-cash payment rules in euros starting in 2008 through a legal framework that would also cover other EU currencies.
If the new rules are approved by the European Parliament next month, member states would have to adopt them by November 2009 at the latest.
Under a compromise reached by the ministers, the rules would allow new players such as retailers or mobile phone operators to enter the payments market on condition they meet strict rules.
It also allows for non-banks to provide credit across borders if it is linked to a purchase and if providers meet minimum capital requirements and repayment takes place in less than a year.