A study as weighty (over 300 pages) as it is interesting on retail banking and in particular on payment services has recently been released by some consultancy firms commissioned by the European Commission, with a title, certainly not captivating, which reads Study on the impact of Directive 2007/64/ec on payment services in the internal market and on the application of regulation no. 924/2009 on cross-border payments in the community. In summary, it announces yet another EU legislative intervention in the sector in question.
The report is fundamental not only for the payments industry, but also for the banking business, drawing future scenarios on the basis of a rich statistical heritage. At the same time, the work is a prelude to the amendment of the 2007 payment services directive, the so-called PSD, and the introduction of stringent rules on interbank commissions on transactions using debit or credit cards, even if the user does not directly incur any charges, as they are borne by the merchant with whom the transaction is made. And, indeed, on the Commission's website there is a real package of rules, impact studies, reports aimed at redesigning the world of payments in line with the other important legislative framework, already passed, for SEPA and with that, for today still in the making, of the banking union.
The relationship between SEPA and the PSD is very close and is clarified in the fourth recital of the original text of the directive, which reads "It is therefore essential to establish a modern and coherent Community legal framework for payment services, whether or not they are compatible with the system stemming from the financial sector's initiative for a single euro payment area, which is neutral so as to ensure a level playing field for all payment systems, thus maintaining consumers' freedom of choice, and which represents a clear advance in terms of cost to consumers, as well as safety and efficacy compared to currently existing national systems. SEPA is integrated into the regulatory framework of the PSD, the implementation of which is strongly influenced by the achievements of the SEPA itself.
In 2014, then, practically simultaneously, SEPA and the Banking Union will be implemented, momentous events which, despite having different underlying reasons, are also closely linked in fact, since the centralization of responsibilities in the matter of banking policy will stimulate a strong economic-financial integration, which also involves the creation of a uniform area of payments in euro.
The financial crisis has also demonstrated that, although essential, mere coordination between national supervisory authorities, especially in the context of the single currency, is not enough and that a common decision-making process is needed, limiting the risk of fragmentation of banking markets of the EU.
The enhancement of the relationship between retail banking and non-cash payment services therefore represents an important contribution to lowering risks and reducing the weaknesses and divisions highlighted above.
By trying to take a closer look at some transversal issues of interest to both projects, one can choose the perspective of competition in the market for payment services and consumer protection.
Ultimately, it will be the users who decree the success of the entire SEPA operation with significant effects on all retail banking: 500 million European citizens who use 90 billion means of payment every year to settle daily transactions mainly disbursed by banks, including whether at the regulatory level other subjects such as electronic money institutions and payment institutions can operate in competition with the banks themselves.
A distinctive feature of the industry is the wave of regulation that periodically hits payment services. Difficult to make a precise calculation, but this torrential production is now approaching that attributable to the Basel legislation or that on financial services, even if objectively retail banking of payments would require less attention, being generally devoid of systemic risk. Indeed, from the reports of the various authorities it emerges that the main risks of retail payment services are of a legal nature for compliance with money laundering prevention legislation or for containing fraud. Now in both cases, the safeguards exist and also appear to be effective, as they are linked to the efforts to achieve the traceability of payments in the SEPA world and to implement ever more secure standards in card transactions.
As can be deduced from the study cited at the beginning, even the efficiency benefits of these regulatory interventions are by no means marginal.
For example, in the sector of transfers between different countries of the European Union, the cost of these transactions decreases by 10 times compared to ten/fifteen years ago, aligning itself with domestic transfers, and the same happens, albeit to a lesser extent, for ATM withdrawals and POS transactions. Another aspect that particularly interested our country was the excessively long times for the execution of payment transactions. If we read the Bank of Italy Reports of the early 1s we can compare the times then with those of today, which now incorporate the "one day" or D+XNUMX rule, according to which the amount of a transfer is credited to the beneficiary's account the day after its acceptance by the bank or other authorized person.
Yet the overall picture that emerges from the work underway in Brussels and in the other European capitals is not yet satisfactory, to the point that it is proposed to intervene again, through the substantial revision of the 2007 directive and a regulation to lower the ex lege card fees. It should be noted that the essential content of these two proposals represents an intervention of the maximum scope on the methods of pricing services to users.
Summarizing, the situation today is this: despite these policies, which sometimes appeared even intrusive, it is believed that competition in the sector is not yet sufficiently adequate and that this creates the conditions for keeping regulatory construction sites in constant progress.
By way of paradox, the study mentioned at the beginning provides some examples of the effects of this hyper-regulation which are reconnected to fluctuating, or at least disjointed, visions of the world, whereby as soon as one takes a step forward, one immediately takes one back often returning to the starting situation. Two examples are able to better explain this sort of step of the prawn.
The first concerns the methods of forming the prices of payment cards and other payment instruments. In the application of the 2007 directive regarding the so-called phenomenon of overcharging, i.e. the surcharge applied to the end user on card payments, 14 states representing half of the European population have absolutely banned it; Denmark allows it for credit cards, but not for debit cards, while 12 other countries tolerate this form of overpricing. Such a fragmentation is truly singular, given however the widespread belief that an extra undue profit is incorporated in the surcharge (an example for all is the 5 euros paid for airline tickets purchased on the Internet). Given the choice, the preference for everyone could go to the Danish solution, Solomonic as much as one likes, but at least clear.
The second concerns the boundaries of the payment services industry which have gradually been extended to allow the entry of new intermediaries. And, in fact, at the end of September 2012 there were 2773 European payment institutions, of which 2.203 with business volumes below the established thresholds. In terms of law, these subjects can issue any payment instrument but, in fact, 40% of the largest and all of the small ones operate in the money remittance sector in the world of migrants. Once again the legal conditions are created, but they have little impact on the competitiveness of the sector globally understood. The European world is almost divided into two quasi-monopolies: in the remittance sector, money transfer operators dominate, in the sector of wire transfers, direct debits, cards, banks, with practically no osmosis between the two segments. Yet they cannot escape the competitive potential of a payment institution which, in addition to cards, directly offers transfers and direct debits in SEPA format at prices determined on the basis of the industrial logic of the production cost topped up with a mark-up proportionate to those costs.
Why the situation still remains unsatisfactory and is accompanied by reduced levels of diffusion of technological innovation (as opposed to what is found in other network industries such as telecommunications, internet, railway transport) needs to be explained.
The doubt that there is an excess of regulation and of authorities involved with different, often divergent objectives does not seem to be without foundation: in addition to the Commission, the issue is dealt with by national legislative authorities, antitrust authorities, anti-money laundering authorities, of privacy and central banks, both in their function of overseeing the payment system and overseeing authorized intermediaries.
To be a low-risk business sector, pro-competition action certainly cannot be said to have been lacking, but it is also true that duplications, different visions and interests and a myriad of detailed interventions resulted in the end being dispersive and little effective.
The proposal is therefore simple: a single European authority with national branches (at the same central banks which also possess centuries-old expertise in payments), with the single mandate of consumer protection and regulatory reduc- tion and with a precise institutional cap; no situation should be changed, no payment instrument can be modified, unless the advantage in terms of price for the consumer is demonstrated and if this does not happen, the ex ante situation is restored without hesitation. This would still appear to be the step of the prawn, but, unlike what has occurred so far, it would be pragmatically a step of the virtuous prawn.
Try and see, the practitioners would say. While waiting for this approach to be hopefully reached at European level, it is worth taking a look at what is happening outside our continent.
Thus, for example, the more than ten-year dispute over whether or not to prohibit interchange fees on cards has found an easy solution in Australia: you try it and if the final prices increase, you pragmatically go back.
Another case that is being reported these days concerns the United States, where a district judge held that a ceiling on the so-called "interchange fees" paid by consumers on debit card transactions had been set too high by the FED and which therefore had to be reduced, taking a decision that the American Bankers Association has condemned because it would have had disastrous consequences for the banks (Financial Times, July 31, 2013). Upon the mere announcement of the possible negative impact on income, the shares of VISA and MasterCard immediately suffered heavy repercussions on the NYSE. A compromise will have to be found.
It will therefore still be the step of the prawn to guide - this time wisely - the policy makers to trigger a spiral with virtuous effects, trying and retrying in practical terms the measures that economic and legal theory have not yet managed, in general, to establish for the solution of such complex issues, obviously with the only imperative of preventing that, due to errors of evaluation and inadequate measures, paradoxically give rise to the unfortunate return to cash.
