_Akzente für die Zukunft

1. _Akzente für die Zukunft The way forward to a Single Payment Market in the EU Eva HoffmannRetail Issues and and Payment SystemsEU Commission The Kangaroo Group, 30.03.2005, Brussels

2. Agenda • Present state of payments market integration • What are the driving forces for the EU to act • What do we need to do to modernise the payment system • Who is doing what – role of industry, Eurosystem and EU regulator • The objectives and impact of a new legal framework for payments in the EU • Outlook: Where should we be in 2010

3. I.Present state of payments market integration • Single Market since 1992, single currency since 1999, no single payment market • No domestic payments area - Electronic payment infrastructure still reflects the situation inherited from national currencies/borders. • Regulation 2560/2001 had the desired effect of kick-starting modernisation process. However, it left banks to bear the extra costs. Now it is necessary to develop infrastructures to make payments more efficient and cheaper to improve profitability. • Efficiency of national payments markets is a factor 1 to 10. Convergence of share of electronic payments and efficient processing infrastructures towards more efficient countries is necessary. • Efficiency of cross-border payments is substantially lower than for national payments; efficiency should be at par with the best performing national markets.

4. II.1What are the driving forces for the EU to act Key indicators clearly tell us the problem areas • The total costs of (cash & electronic) payments to the economy ranges between 3 - 4% of GDP. • A shift to electronic payments* (example: Nordic countries)can half average cost of producing payments over a period of ten years and has a positive impact on consumption and GDP growth (10% increase in e-payments  0,5 increase GDP). • Substantial differences between Member States in terms of efficiency of payments, e.g. percentage of electronic payments, execution time and cost of payment processing. • Cross-border infrastructures where they exist – not the case for direct debits and debit cards - lack critical mass to be efficient. • Infrastructure consolidation progresses only slowly, potential efficiency gains due to the much larger scale of the Single Market and euro area remain unexploited

5. II.2 What are the driving forces for the EU to act Key indicators clearly tell us the problem areas • The huge price disparity between domestic and EU markets hints at a lack of efficiency and poor functioning of the Internal Market for payments. • The principle of equality of charges for national and cross-border payments is not fully respected and the costs for the payment system remain unchanged. • High costs for businesses because of a lack of interoperable infrastructures and standards (EACT, Nordea, savings potential 50 bio EUR) • Fragmentation of market access conditions for providers and legal uncertainty and market entry barriers for new innovative players • Fair and open access and separation of scheme and infrastructure are preconditions to allow for consolidation and more competition. • Poor market structure, lack of competition and high prices (e.g. card aquiring).

6. III.What do we need to do to modernise the payment system EU policy makers’ point of view is to provide EU citizens and businesses with first class payment services: • Throughout the European Union, all modern standard payment services should be available, interoperable, cheap, efficient, and reliable. • All EU standard payment services should reach a level of efficiency at least at par with the best performing national payment systems today (with the priority of euro payments). • SEPA infrastructure should be available by 2008 and migration to PEACH-compliant ones should be completed by 2010.

7. IV.Who is doing what – role of industry, Eurosystem and EU regulator • Role of the industry Develop infrastructure requirements and standards for pan-European payment services. Ensure business case and timely implementation in a competitive environment (split) by 2010. • Role of the Eurosystem Promote the smooth operation of payment systems, maintain public confidence in payment systems and instruments and the Euro currency. • Role of the EU Regulator Provide legal framework for an integrated and modern payment market, remove obstacles for the development of pan-European payment services and infrastructures.

8. V.The objectives and impact of a new legal framework for payments in the EU Regulatory principles Provide coherent, technical-neutral, non-discriminatory legal framework for all payment services provided in the EU. Cash and cheques are outside the scope. Provide level-paying field for all payment service providers located in the EU: same activity, same risks, same rules. Minimum regulatory intervention: Relation of customer – provider relationship, self-regulation of industry on issues concerning the provider – provider relationship

9. V.The objectives and impact of a new legal framework for payments in the EU 1. Regulatory pillar: • Create a level playing-field and enhanced competition between payment service providers; • Better consumer information and protection and improved transparency; • Potential for improved efficiency and security of the payment system. 2. Monitoring pillar: • The new Payments Committee will ensure consistent implementation, monitor interface of regulatory and industry action and progress on Single Payment Market. 3. Review pillar: • Comprehensive review will ensure that objectives are reached and will consider further action if regulation or self-regulation should fail to deliver.

10. V.1Regulatory pillar • Remove market entry barriers, all appropriate providers shall be able to access the market under conditions of legal certainty. • Simplified and fully harmonised set of customer information requirements to allow customers to make an informed choice, reduce legal compliance costs for providers and foster competition between payment services. • Define benchmark for efficiency: mandatory/default execution time of 3 days, liability of provider for correct execution, guarantee that full amount arrives. • Define rights and obligations of users and providers e.g. when is a payment authorised, how long and for what reason can it be cancelled, rights in cases of disputes about fraud on account/card

11. VI.Outlook: Where should we be in 2010 • Milestones and deadlines fixed by industry for the delivery of SEPA should be respected. • Standard payment services should be available, interoperable, cheap, efficient, and reliable without difference between national and cross-border. • Execution time of cross-border payments should be further reduced to one day to be at par with best national payment system. • Interoperability & usability of payment systems to ensure that each card works on all terminals. • The policy of separating the scheme from infrastructure should effectively be implemented. • The access to clearing and settlement systems should be non-discriminatory.

12. Thank you for your attention! Your questions are highly welcome! If you should need further information please contact: Eva Hoffmann, DG Internal Market Phone: 0032-2-298 4587 Email: eva.hoffmann@cec.eu.int