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Brussels, 4 February 2000

Commission urges banks to improve cross-frontier payment systems

Banks and credit institutions must do more to ensure inexpensive, efficient and secure small value credit transfers between Member States, the European Commission has warned in a Communication on "Retail payments in the Internal Market". In particular, the Communication calls for improvements to the infrastructure for small value cross-frontier credit transfers both within banks and between different Member States' domestic transfer clearing systems. The Commission will evaluate the level of such transfer charges and publish its findings on the Internet every six months. The Communication also calls on banks to remove differences between charges for using payment cards domestically and in other Member States and to improve information on general conditions, fees and charges for payment card customers. As for exchanging cash, the Communication invites banks and bureaux de change to pursue a transparent, customer-friendly pricing policy.

"Unless banks do more to cut the costs of small value credit transfers between Member States, citizens and small businesses will be denied the full benefits of the Internal Market and the euro", warned Internal Market Commissioner Frits Bolkestein. "The entry into effect of the cross-border credit transfers Directive is already acting as an incentive for banks to accelerate such transfers and to improve their service to customers. But banks have to do more, in particular by making cross-frontier transfer systems as efficient as those for domestic transfers".

Credit transfers

Although large value (wholesale) payments can now be made cross-border nearly as quickly and cheaply as they can domestically, small value (retail) cross-border payments take longer and cost significantly more than domestic payments. These charges have declined in the past five years, but are still very high - typical charges for a credit transfer of €100 vary between €5 and €20 and are sometimes even higher. A domestic credit transfer of the same value usually costs less than €1.

The Communication underlines that full implementation of the Directive (97/5/EC) on cross-border credit transfers of up to €50,000 is imperative. The Directive was due to be implemented into national law by 14th August, 1999. It requires banks to complete cross-border credit/debit transfers within 6 days, to provide clear advance information to customers on tariffs, to make all costs payable by the originator (unless agreed otherwise) and to compensate for lost transfers (up to €12,500). The Commission may review whether the 6 day time limit should be brought in line with domestic transfers, which rarely take longer than 24 hours. Belgium, Greece, Italy and Portugal have still not implemented the Directive and the Commission is pursuing infringement procedures against them.

The fact that the development of cross-frontier payment infrastructure has lagged behind domestic development of electronic transfer systems is the major source of problems affecting small value cross-frontier transfers, according to the Communication. Part of the solution lies within banks' own internal processing systems. As for improving the efficiency of cross-border linkages between transfer systems, the Communication suggests that the TARGET system of the European System of Central Banks could play a role for urgent small value transfers. It also suggests that linkages could be improved between the various national Automated Clearing Houses (ACHs) or a separate European ACH could be established. Other existing systems could also be developed to handle small value cross-frontier transfers, the Communication suggests. These existing systems include the Euro Banking Association's Euro 1 system, the systems used by international credit cards (VISA, Eurocard, Mastercard) and systems established between groups of banks (e.g. Eurogiro, Unico, S-Interpay). The Commission will encourage the banking sector to develop these suggestions, notably by hosting a Round Table in the autumn of 2000.

The Communication also urges banks to commit themselves to implementing no later than 1 January 2002 existing standards developed by the European Committee for Banking Standards (ECBS) to speed the routing of cross-border payment orders directly and automatically from one bank to another. The standards on International Bank Account Numbers (IBAN) and International Payment Instructions (IPI) are particularly important.

Payment cards

Banks should phase-out remaining discrimination in fees between cross-border and domestic payment cards. A Commission Recommendation of 1997 offers guidelines for the contractual relationship between card holders and card issuers. For example, it suggests that customers should be informed as to how much they will be charged for using a credit card in an Automatic Teller Machine and who is liable in the case of a card's loss. The Commission is monitoring the extent to which these obligations are respected and if it finds that they are not well taken up, the Commission will propose to Member States that the Recommendation be turned into a legally-binding Directive.

Banks are also strongly encouraged to ensure interoperability for electronic means of payment and, in particular to see that electronic purses can be used across borders by 1 January 2002.

The full text of the Communication is available on the Europa Internet site: (Look under What's New)

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