|
 |
|
| SEPA lays down
its legal foundations |
|
| On 1st December 2005, the European Commission presented its Draft Directive on Payment Services. |
|
|
|
• What is the long term goal of the Commission in proposing this new legislation?
We want to enable the creation of a Single Payments Market in the EU that is as
efficient and competitive as that within the currently most efficient Member State, thereby reducing the costs of basic payment services for all Europeans. In particular, cross-border payments will become as easy, inexpensive and secure as 'national' payments within one Member State.
• Why is legislation necessary, rather than relying on self-regulation from the payments industry?
I rely to the greatest extent possible on industry self-regulation for the removal of technical and commercial [trade?] barriers and the development of EU-wide
products. But we need new legislation to bring down
existing legal barriers that would stop the payments
industry from achieving these goals. When adopted by the European Parliament and the Council, our proposal will provide the necessary legal platform on which the banking industry can build their activities for making the euro zone equivalent to a domestic payment space by the end of this decade. Both the Commission and the banking industry share this vision.
Despite slippage in the past, I am counting on the banks to deliver their part of the deal. However, if there is further slippage, I will not hesitate to propose additional legislative measures which will guarantee the creation of a Single Payments Market. There is too much at stake in SEPA for it to be allowed to fail. We must not miss the opportunity to realise the potential economic gains that a truly integrated and competitive payments market can deliver.
• Given that each type of payment (cards, direct debit and credit transfers) is different, would it not be simpler to have separate legislation for each, . rather than grouping them together in a single umbrella framework?
Whatever the payment instrument used - card payments, credit transfers, e-payments
 |
 |
| We want to create a single payment market that will be as efficient and competitive as
that of the EU Member State, with the highest performance. The aim is to cut the cost of basic services for all Europeans." |
|
|
or direct debits - the Directive, once adopted, will provide users with the same level of protection and legal certainty, independent of the origin of the payment instrument. I do not think that separate legislation could ensure the same result.
Furthermore, we need the same rules for all payment instruments so that they will compete on a level playing field. In that way, the user will choose the payment method which is most convenient and economical, rather than have that choice distorted by various legal regimes. For me, this is a necessary condition for an efficient payment system.
• Is there a risk that the transposition of the proposed Directive may not in fact provide the desired affect of harmonisation and free competition throughout the Union?
I do not think so. I believe that full harmonisation of legislation is the best means of achieving a well-functioning and efficient Single Payments Market. The proposed Directive introduces a high level of harmonisation, guaranteeing identical treatment for all providers and users of payment services, from which no Member State will be able to deviate. The proposed Directive allows for the creation of a simple, coherent framework which will benefit both industry and consumers and provide the basis for free competition throughout the EU.
• What is your view on the work being done by the European Payments Council (in particular the SEPA Cards Framework)?
The SEPA Cards Framework has the objective of building an environment in which there are neither technical nor commercial [trade?] barriers which stand in the way of cardholders, banks and merchants to choose and use card products based on value considerations only. Of course, I fully support this objective, but it is not yet certain whether the implementation of the SCF will be sufficient for the attainment of this goal.
I am particularly worried about outcomes that would lead to deterioration in terms of existing cost and service levels of the current best of breed domestic card schemes. In order to ensure that a competitive market process leads to the desired outcomes, an essential condition is a separation between scheme, infrastructure and open standards for all steps in the processing of card payments. But is this enough? How can we ensure that the inexpensive efficient schemes prosper at the expenses of more expensive ones? There is a danger that card issuers will adopt schemes with a high multilateral interchange fee (MIF), as this gives them most profits, and abandon efficient national schemes with a low MIF. I find this particularly worrying. However, my colleague Nelie Kroes, Commissioner for Competition, is examining the cards market in great depth in her sectoral inquiry, as is my staff in the incentives project. I am confident that, where necessary, we will be able to propose appropriate measures to ensure that effective competition is established.
• What is the reasoning behind the creation of a new category of Payment Service Providers (namely, the "Payment Institutions")? Will this create the desired "level playing field"?
Currently, payment institutions - such as supermarkets, non-bank card issuers, money remitters or, in some cases, GSM providers - already operate in a number of Member States. However, each Member State has its own rules on payments, which represents a significant impediment [barrier?] to new payment service providers, and effectively blocks them from competing and offering their services throughout the Internal Market. This situation has to change. Non-bank providers should be able to enter the market and to offer their services in competition with classic providers such as banks. The proposed Directive will facilitate the development of their activities on a pan-European basis, under a prudential supervisory regime that I consider well-balanced, proportionate and sufficient to the risks represented by payment institutions' activities.
• As far as the creation of SEPA is concerned, what main obstacles need to be removed ? What are the priorities and timescales?
As far as the main obstacles are concerned, I would say that the first major one is almost overcome – notably the development of the schemes and frameworks for credit transfers, direct debit and cards. It is a major achievement of the EPC to have forged an agreement between 7,000 banks. However, there are major obstacles remaining. I would cite two of particular importance:
• It is not clear whether banks will actually apply the SEPA schemes by making products available in 2008. Because payments are a network industry, all banks must provide the products simultaneously. Otherwise, the system cannot function!
• How can we be sure that customers will use the new SEPA products in sufficient volume by 2010 to ensure that they are economically viable? It is of particular importance that SEPA productsbe of high quality, otherwise users will retain their current national products.
These two issues and other impediments [barriers?] to the success of SEPA are currently being examined in the incentives project. I hope to be able to conclude this investigation before the end of the year and set out any additional legislative measures needed in a Communication [Memorandum? Press release? News release?] . However I sincerely hope that this will not be necessary and that I am able to conclude that industry self-regulation is going to deliver.
• What are the main hurdles to the creation of the SEPA?
We are hugely behind for trans-border direct debits. However, a major obstacle is about to be removed. The EPC has just signed an agreement with 7,000 banks on harmonising their systems! We still need to confirm SEPA compliance of the products proposed in 2008, and their economic profitability by 2010. With due respect to Aesop, I fear that the payments hare will find it difficult to catch up with the internal market turtle. But we will be doing everything to make sure it crosses the finish line! |
| • Interview by
Nicolas Humbert |
|
|
|
|
|
|