Single European payments area may face delay

Brussels: Steps to make it easy and cheap for people to pay bills anywhere in the European Union from one bank account reach a key vote in the EU assembly today, but disagreements remain as a 2008 launch date nears.

The European Commission says the steps are needed to exploit the benefits of the euro and boost cross-border services.

It proposed a legal framework for a single European payments area (SEPA) covering retail payments in all the currencies of the EU. It needs European Parliament and member state approval.

The purchase of goods and services generates 231 billion transactions a year across the EU, worth 52 trillion euros ($65 trillion) but only 3 per cent are cross-border, according to Commission figures.

The assembly's lead economic affairs committee votes on the text today but differences remain on three crucial aspects:

• Execution time: The Commission proposed that payments must be completed within a day of the transaction or T+1. Some lawmakers want this extended to three days, and the bill's sponsor is likely to propose a compromise of two days.

"This takes away the incentive for things to become faster. It's a disaster for the consumer," one lawmaker said.

• Funding: The Commission has proposed lighter rules for firms that offer only payment services, unlike banks which also handle loans and other riskier services.

Finland, Britain also back minimal initial and working capital for pure payment institutions such a remittances firms, as they cannot loan out the money they receive, as banks can.

Germany, France, Italy and Austria want a "level playing field" between all banks and payment institutions.

"Letting payment institutions carry out the same operations without requiring them to raise a minimum of capital amounts to unjustifiable discrimination," the four countries said an internal EU document obtained by Reuters.

• Credit: There is no agreement over what this means.

Unless lawmakers and states agree the legal framework in first reading, the declared timetable of introducing the new rules in 2008 is threatened.

The EU's banking industry has thrashed out common technical standards to make a seamless payments system work in practice.

The aim is to replace national systems with a seamless EU system handling most payments in the bloc by 2010, but the European Central Bank and European Commission worry that the banks are not acting fast enough.

Areas of concern

There are still areas of concern, such as in common standards for credit and debit cards, said ECB Executive Board member Gertrude Tumpel-Gugerell. She urged banks to step up their activities in electronic and mobile phone payments.

The EU's Finnish Presidency has proposed that "modern mass payments" when provided at national level should be exempt from some of the rules. "In my opinion, this will create more complexity and uncertainty than benefits," Tumpel-Gugerell said.