Money Matters

The aim is to make transferring, withdrawing and paying money simpler and cheaper within the EU. It should also become just as secure as domestic transactions. The introduction of uniform standards is also intended to open up money transaction markets to free and fair competition.

Germany is one of the first countries to adopt the Single Euro Payments Area (SEPA) measures, which have to be implemented by member states by November 2009 at the latest.

The initiative has been spearheaded by the European banking sector and supported by the European Commission and the European Central Bank.

The SEPA is set to cover Iceland, Liechtenstein, Norway and Switzerland, as well as the 25 EU member states.

Dismantling barriers

Up to now, different payment practices have been common in different European states.

"In France a lot of checks are used, in Britain it's credit cards," said Kerstin Altendorf, the spokeswoman for the Federal Association of German Banks. "The types of overdraft facilities that are common in Germany are not familiar there."

The cost of payments between the individual states amounts to 2 to 3 percent of gross domestic product each year, according to the European Commission.

In addition, the lack of convergence in this area represents an obstacle for financial services providers, who would like a level playing ground to enable them to fairly compete fairly across Europe. Getting rid of these hurdles could save the European economy up to 28 billion euros ($40.9 billion) a year.

Since the beginning of the year, each bank customer needs an international bank account number (IBAN) and a common bank code (BIC) for cross-border money transfers within the European Union.

But the new system will coexist along with the old one for a few years.

"We have to wait and see when the old system will be finally dismantled," Altendorf said. "At the same time it's very tedious and expensive to maintain both systems at the same time. Customers should switch soon to the new system simply because it's much simpler. However we do see a lot of misgivings particularly in public transactions."

Fast, but not necessarily cheap

The regulations on money transactions foresee payments with an EC card all over Europe in future. The idea is that customers should be allowed to use their card to withdraw cash at every ATM and use it for payments. But it's unlikely that withdrawal fees will be lowered since each European country has different systems governing electronic cash.

The Single Euro Payments Area is also meant to speed up money transfers. The receiver can expect money in his or her account just a day after the transfer.

Until now, the transaction takes between three and eight working days. Similarly, for the first time a common cross-border direct debiting system is in the works. But it's not expected to come into effect until 2009.