If Europe is to enjoy a truly single market it must first tackle the fragmentation in its payments markets.
The single market is considered one of the primary achievements of the European Union, yet half a century after it was conceived it still features significant gaps that are causing fragmentation and creating obstacles to cross-border activity. Nowhere are these barriers more crucial, but less visible to citizens, than in the EU's dynamic and shifting payments market. The dream is for cross-border payments to eventually become as simple as domestic payments within a member state. Looking at this issue are two key reports currently moving through parliament; one looking at card-based transaction fees and another looking at the EU-wide market for electronic payments.
For Portuguese MEP Diogo Feio, who is rapporteur on electronic payments, it is vital to understand the "differences between the various states of the EU" when looking at the market for transactions. "Some are developed and more modern than others," he explained, adding that "For a Portuguese citizen it is usual to do a payment at an ATM or in internet banking. In other countries this is not the same." In addition to the various methods employed in different member states, there are also "different levels of payments and we need to understand these", said Feio. To properly deal with these diverging methods, he urged policymakers to "think of consumers", adding that "first of all we need a more simple and understandable law". He underlined the need for regulations on ePayments to have "clear and easy rules" and for Europe to move in the "direction of a single payments market". "This is a very important step in line with the internal market," he added.
Fellow EPP deputy Pablo Zalba Bidegain, whose report looks at card-based payments, highlighted the need for a "level playing field for all transactions based on payment cards". For him, this could achieved by setting the same multilateral interchange fees (MIFs) across the entire EU. MIFs, which are collectively agreed inter-bank fees, form part of the fees that payment service providers charge to merchants, who in turn pass the costs onto the consumer.
"One of the problems we face" said the Spanish MEP, "is that market entry for pan-European players remains difficult as interchange fees in EU member states vary a lot between one country and another. New entrants have to offer interchange fees at least comparable to those prevailing in each within the whole European Union will create a level playing field."
The European commission's proposal suggests capping MIFs at 0.2 per cent for debit transactions and 0.3 per cent for credit card transactions. This would represent a significant drop in member states such as Poland, where the fees are around 1.6 per cent, but would be over the 0.1 per cent charged in Denmark. Zalba Bidegain said that parliament wants to be sure that these figures are charged at the correct amount and that they "do not negatively affect consumers". However, when looking at the possibility of an outright ban for MIFs, he said, "I firmly believe in the case of credit cards that banks have the right to charge for that payment because there is a risk linked to that. In the case of debit card operations, although it is not so clear, I think it would make sense to charge something." The capped figures of 0.2 per cent and 0.3 per cent have reportedly been accepted by key players in the payments market, Visa, MasterCard and the French domestic scheme Groupement Cartes Bancaires.
A key issue facing both pieces of legislation is the dynamic and changing nature of the payments market. For Zalba Bidegain it was crucial to ensure that the regulation of these fees was made "futureproof ". "We have to make sure that there are no gaps in the regulation that PSPs can take advantage of," he added. Feio also underlined the importance of recognising "new ways of payment" and the need for any new regulations to be able to "understand and regulate" these novel methods. However, he also made it clear that he felt all different methods of payment "should have the same treatment as much as possible". For the Portuguese rapporteur, new problems such as the protection of data have also arisen through the use of these new methods. "Safety and security of data will be a priority," he said, adding that the protection of systems of payment against fraud" will be a key aspect of his report.
Zalba Bidegain was keen to stress that innovation was a crucial issue for him. "We want companies to go on having incentives in investing in innovation," he said, adding that MIFs have a negative effect on this. This understanding of the negative effect of transaction fees was in part inspired by the May 2012 general court decision against MasterCard, which found that MIFs restrict competition by inflating card acceptance costs, while providing no consumer benefits.
Both rapporteurs wanted to ensure that consideration for consumers was made a central pillar of their reports and ensuring an easy and transparent way of making payments across the EU is key to this aim. For Zalba Bidegain, both reports are inextricably linked in helping make the single market a reality. "We are working very closely on this report with Mr Feio. Same line, same direction, same timing," he said. For Feio the aim was simple "We are building what we need to have a single payments market."
The single market is considered one of the primary achievements of the European Union, yet half a century after it was conceived it still features significant gaps that are causing fragmentation and creating obstacles to cross-border activity. Nowhere are these barriers more crucial, but less visible to citizens, than in the EU's dynamic and shifting payments market. The dream is for cross-border payments to eventually become as simple as domestic payments within a member state. Looking at this issue are two key reports currently moving through parliament; one looking at card-based transaction fees and another looking at the EU-wide market for electronic payments.
For Portuguese MEP Diogo Feio, who is rapporteur on electronic payments, it is vital to understand the "differences between the various states of the EU" when looking at the market for transactions. "Some are developed and more modern than others," he explained, adding that "For a Portuguese citizen it is usual to do a payment at an ATM or in internet banking. In other countries this is not the same." In addition to the various methods employed in different member states, there are also "different levels of payments and we need to understand these", said Feio. To properly deal with these diverging methods, he urged policymakers to "think of consumers", adding that "first of all we need a more simple and understandable law". He underlined the need for regulations on ePayments to have "clear and easy rules" and for Europe to move in the "direction of a single payments market". "This is a very important step in line with the internal market," he added.
Fellow EPP deputy Pablo Zalba Bidegain, whose report looks at card-based payments, highlighted the need for a "level playing field for all transactions based on payment cards". For him, this could achieved by setting the same multilateral interchange fees (MIFs) across the entire EU. MIFs, which are collectively agreed inter-bank fees, form part of the fees that payment service providers charge to merchants, who in turn pass the costs onto the consumer.
"One of the problems we face" said the Spanish MEP, "is that market entry for pan-European players remains difficult as interchange fees in EU member states vary a lot between one country and another. New entrants have to offer interchange fees at least comparable to those prevailing in each within the whole European Union will create a level playing field."
The European commission's proposal suggests capping MIFs at 0.2 per cent for debit transactions and 0.3 per cent for credit card transactions. This would represent a significant drop in member states such as Poland, where the fees are around 1.6 per cent, but would be over the 0.1 per cent charged in Denmark. Zalba Bidegain said that parliament wants to be sure that these figures are charged at the correct amount and that they "do not negatively affect consumers". However, when looking at the possibility of an outright ban for MIFs, he said, "I firmly believe in the case of credit cards that banks have the right to charge for that payment because there is a risk linked to that. In the case of debit card operations, although it is not so clear, I think it would make sense to charge something." The capped figures of 0.2 per cent and 0.3 per cent have reportedly been accepted by key players in the payments market, Visa, MasterCard and the French domestic scheme Groupement Cartes Bancaires.
A key issue facing both pieces of legislation is the dynamic and changing nature of the payments market. For Zalba Bidegain it was crucial to ensure that the regulation of these fees was made "futureproof ". "We have to make sure that there are no gaps in the regulation that PSPs can take advantage of," he added. Feio also underlined the importance of recognising "new ways of payment" and the need for any new regulations to be able to "understand and regulate" these novel methods. However, he also made it clear that he felt all different methods of payment "should have the same treatment as much as possible". For the Portuguese rapporteur, new problems such as the protection of data have also arisen through the use of these new methods. "Safety and security of data will be a priority," he said, adding that the protection of systems of payment against fraud" will be a key aspect of his report.
Zalba Bidegain was keen to stress that innovation was a crucial issue for him. "We want companies to go on having incentives in investing in innovation," he said, adding that MIFs have a negative effect on this. This understanding of the negative effect of transaction fees was in part inspired by the May 2012 general court decision against MasterCard, which found that MIFs restrict competition by inflating card acceptance costs, while providing no consumer benefits.
Both rapporteurs wanted to ensure that consideration for consumers was made a central pillar of their reports and ensuring an easy and transparent way of making payments across the EU is key to this aim. For Zalba Bidegain, both reports are inextricably linked in helping make the single market a reality. "We are working very closely on this report with Mr Feio. Same line, same direction, same timing," he said. For Feio the aim was simple "We are building what we need to have a single payments market."
