An end to high banking transfer charges in the EU?

On 28^th March, the EU Commission put forward a Proposal for a Regulation that will reduce charges for bank transfers in the European Union outside the euro area. This initiative is aiming at making the banking union ever closer, especially in retail banking where there have been fewer actions compared to prudential regulation.

Thanks to Regulation 924/2009 fees for cross-border payments in euros between euro area members have been equalised. However, the situation in non- euro zone EU countries is very different with consumers often paying expensive fees even for the transfer of small amounts of money. As mentioned in the press release for the Proposal, consumers in some instances were called to pay as much as 24 euro charges for the transfer of 10 euros, making it highly detrimental to consumers.

The proposed Regulation amends Regulation 924/2009 and aims at removing this perceived barrier to the single market by extending its scope to non-euro area Member States. It must be noted that the proposed regulation only covers transactions in euros and not in other currencies. Regulation 924/2009 offered the possibility to extend the regulation to other currencies, yet only Sweden has made used of that rule. Therefore, the Commission decided this was the time to introduce this measure as now euro payments are cheaper than they were in the past.

The effect of the Proposal is two-fold, as it harmonises cross-border banking charges as well as improving transparency. According to the Proposal charges for cross-border payments in euros will be the same as charges for national (non-euro) payments. This means that the transfer fees will be significantly lower if not nonexistent. Consumer will not be the only ones to benefit, as also businesses will be able to be more competitive to businesses operating in the euro area.

As for transparency, at present consumers are not able to compare options, especially when paying with a card where they are offered the option to pay either in the local currency or in their home currency. The Proposal tackles this issue by obliging payment service providers to offer the full cost of both options to consumers prior to the initiation of a payment transaction. Furthermore, recognising the constant technological advances in the field, the European Banking Authority (EBA) will develop regulatory technical standards on how payment service providers are to fulfill their transparency obligations as well as being able to place caps on such conversion charges.

The Proposal has been positively received by consumer organisations, as reported in a euractiv article .Indeed this is a positive development for EU consumers and should it be voted in the Parliament as it will have a tangible effect on their everyday transactions making them easier and cheaper and making the banking union ever closer.

More on PSD2

As anticipated yesterday, tomorrow is the deadline for MS to implement the Payment Services Directive two. Here some recap and useful links.

While the stop to payment surcharges may be the most visible change for consumers, the Directive contains a number of other rules aimed at facilitating market entry for a number of operators providing payment-related services, next to some additional consumer-friendly provisions (for instance, consumers will bear no responsibility for online frauds if their bank has authorised payments without identification procedures).   

The ban on surcharges, to which MS were allowed to make exceptions for a limited set of cases (business cards, PayPal, Amex...), is applicable both on- and offline. There seems to be nothing, however, in respect of traders who simply refuse non-cash payments - which is the problem consumers most often encounter in high-street shopping. 

For retailers, the new possible burden is alleviated by the Directive's interaction with Regulation 2015/751, which aims to reduce the interbank exchange charges ultimately making card payments expensive for consumer service providers. 

A summary of the main points addressed by the Directive is available here. BEUC, the consumer union, celebrates the news but also points out that some countries - like Belgium and Slovenia - have already announced delays in implementation.