Clearing the Euro hurdle?
It is now nearly six months since the introduction of euro notes and coin, but we are still no closer to seeing the development of what the European banking community refers to as the Single European Payment Area. There are very efficient payment systems within all the eurozone countries, with straight-through processing achievable for many domestic payments. But the introduction of international standards aimed at facilitating straight-through processing for crossborder transactions (such as IBAN, BIC and MT103+), have had limited effect. The cost of making a cross-border payment is still higher than making a domestic one.
It is not as though the banks haven’t recognised that their customers want to be able to make efficient cross-border payments. It is just that the different banks can’t agree on how to deliver the service and have little incentive to do so. Whilst processing payments is a crucial part of what banks do, it will not be very remunerative when cross border payments in Europe are all handled as quickly and efficiently as domestic payments. Introducing a more efficient way of making these cross-border payments will also leave the banks with significant development costs.
The threat of punitive action from the European Commission has not worked either. As usual, the banks are getting all the blame for the failure to develop a pan-European payment system. To be fair, it’s not all their fault. There are suggestions that the individual National Central Banks (who still have responsibility for domestic payment systems) are reluctant to see this power taken away from them. By extension, the governments of the individual member states are similarly reluctant to see the European Central Bank take responsibility for pan-European payments.
It’s all very well for us to criticise the banks for lack of action and for us to criticise the European Commission for its ineffectiveness. But it’s the national governments and the National Central Banks that have the power to encourage the development of a true Single European Payment Area and for all of us to use our influence on all these players.