Cards without borders

The European Competition Commissioner Neelie Kroes appeared determined to bolster competition to the benefit of consumers and reduce banking charges, at a recent presentation of the Commission’s survey on the retail banking sector in the European Union. The Commission’s intention is far from a vague wish; it is a new reality that goes by the name «Single Euro Payments Area (SEPA).» This promises the actual unification of the economic area of banking transactions, which would lead to greater competition and lower banking charges. Such a target is particularly important for those who borrow or have deposits in Greece, as in most cases they now pay more charges for their banking transactions than other Europeans. Significant benefits are also expected for Greek tradesmen, who also pay higher commissions than their European colleagues. SEPA touches upon three sensitive transaction sectors: credit/debit cards, remittances and direct debit. SEPA requires that in less than a year, and definitely by 2010, all European banks will have to merge their debit card use systems so that every European can access his/her bank account in any country. This is an historic development, as it will effectively facilitate the use of the debit card in the same way the credit card is used. The prospect of merging plastic money systems along the lines of credit cards is particularly important for European citizens, who own 350 million cards and make transactions worth -12 billion per year and -6 billion worth of overdrafts on their accounts. Its importance is associated with the fact that 70 percent of these cards are debit cards, unlike in Greece where 70 percent of cards are credit cards. Breaking the duopoly The upcoming developments will also affect payment systems, to the extent that they will lead to the end of the duopoly of the two dominant systems of Visa and Mastercard. In a recent report, the European Central Bank had announced its intention to favor the emergence of other payment systems, which can be found in great variety in several European countries, and mainly in Germany. Bank officials consider very likely the creation of more alternative schemes, which does not rule out efforts by certain countries to develop their own local schemes, which in most cases would be cheaper than the two main ones. Enterprises in countries where banks collect high commissions, such as Greece, would benefit most from European integration, as comparisons show that Greek companies pay three or four times higher commission to banks than those in Germany. On payments, SEPA promises to abolish any kind of limitations to money transfers and to ensure transactions are made at the same speed, transparency and reliability for all Europeans. This effectively is the merging of the banking area, which will facilitate the provision and use of services supplied by European banks to all European citizens without exception. It will then be easier for Europeans to compare the cost of services charged by their domestic banks.