Friday, December 16, 2005

Single Payments Area: pay anywhere in the EU as you would do at home

The European Commission has put forward proposals that will bring down existing legal barriers to enable the creation of a "Single Payments Area" in the EU that could save the EU economy €50-100 billion per year. The aim is to make cross-border payments – by credit card, debit card, electronic bank transfer, direct debit or any other means – as easy, cheap and secure as 'national' payments within one Member State. Currently each Member State has its own rules on payments, and the annual cost of making payments between these fragmented systems is 2-3% of GDP. Service providers are effectively blocked from competing and offering their services throughout the EU. The proposed Directive, known as the 'New Legal Framework', will guarantee fair and open access to payments markets and will increase and standardise consumer protection. A more efficient and competitive payments market will also mean that individual Europeans pay less for basic banking services, the average yearly cost of which ranges from €34 to as much as €252 across the EU. There is today a huge diversity of prices for the same service from one Member State to the other: a credit transfer can be free of charge in one country and cost more that ten euros in another.

The Directive applies to all Member States and all EU currencies, while providing the necessary legal platform for the Single Euro Payments Area (SEPA) proposed by the European Payments Council. The aim is to make the Single Payments Area a reality by 2010 at the latest.

Internal Market and Service Commissioner Charlie McCreevy said: "Easier, cheaper, faster payments - the Single Payment Area will benefit each and every European, and bring big-money savings to EU economy to the tune of €50-100 billion a year. Being able to pay for goods and services anywhere in the EU as you would do at home will bring a whole new dimension to everyone's purchases and will make Europe even more an everyday reality for us all. The simple, reliable legal framework we are proposing today is a big step forward to making all this a reality. We will work with the industry and ECB as closely as possible to make sure it happens by 2010. I count on the banking industry, which is responsible for removing the technical barriers which stand in the way of a Single Euro Payment Area, to accelerate its work. "


The proposed Directive aims to establish a modern and harmonised legal framework for an integrated payments market in the EU. This common set of rules will enable consumers to shop around on the basis of an informed choice.

It will reduce legal compliance costs for payment service providers and also foster competition between them, as there will be greater choice and no effective differences between national and cross-border payments systems. For example, when adopted, the Directive will allow for the use of direct debit services (a common and cost-efficient mean of payments for gas, water or telephone bills) on a cross-border basis. This is not possible for the time being in the EU.

Its particular benefits are:

1. Enhanced competition between national payment markets by opening up markets to all appropriate providers and ensuring a level playing field. The Directive allows better control of money remittance activities while at the same time encouraging innovation.

2. Increased market transparency for both providers and users through a simplified and fully harmonised set of rules on information requirements, replacing divergent national rules.

Standardised rights and obligations for providers and users of payment services in the EU, with a strong emphasis on a high level of consumer protection. This includes mandatory/default execution time of one day for payments, the liability of the payment provider for correct execution, and a guarantee of full and timely payment.
These proposals are based on extensive impact assessment and consultation. See FAQsMEMO/05/461) for more information. The proposed Directive is available at:

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