EU plans cheaper electronic transactions
Move seen as barrier to the prevalence of international systems like Visa, MasterCard and others
The European Commission wants to make online transactions faster and safer by making immediate payments the main option to pay for online items or simply transferring money. The EU’s proposed law aims to make quick payments a barrier to the dominance of international systems such as Visa and MasterCard, as well as the entry of large internet companies into the payments sector.
Although the use of credit or debit cards is the most common method of purchasing goods or services online, international studies show the costs of processing these transactions and using the infrastructure are not insignificant, ranging between 1.5% and 3.5% of transaction turnover. While consumers are not charged for using their card at the time of purchase, the cost is borne primarily by the suppliers, who pass this charge on to the final product.
Until recently, this method of transaction appeared to be more affordable than payment in e-commerce via an account, i.e. using an IBAN, which, while common in countries that have traditionally been averse to the use of cards (such as the Germans), was heavily burdened by bank charges on what is called a credit transfer – i.e. a simple bank transfer.
The imposition of charges on this type of transaction is not a Greek novelty, but a widespread banking practice in the past that is now being universally challenged by the Eurosystem and the European Central Bank itself, which are attempting to intervene in the field in response to pressure and the entry of large tech companies into global trade.
The proposed solution is now instant payments, which under the guidance of the ECB and the Commission (through the TIPS infrastructure) is being sought to be universally adopted in the eurozone as the fastest, safest and cheapest way to transfer money and payments in e-commerce.
The EU initiative will effectively enforce direct payments by stipulating that all payment service providers offering credit transfers in euros must offer direct payments in euros to all their customers. It will also stipulate that charges for direct payments in euros must be equal to or lower than charges for non-direct payments in euros. It will also govern security by stating that all providers of direct payment services in euros must offer the service by checking the correspondence between the account number (IBAN) and the name of the payee, and before the provider authorizes the transaction, warn the payer of any discrepancy found that could indicate fraud.
