Improving cross-border retail payment services - Progress report
A progress report, published today, describes the advances made by the banking and payment systems industry since the publication in September 1999 of a report entitled "Improving cross-border retail payment services - the Eurosystem's view" (the "1999 Report"). The 1999 Report underlined that, in the context of Economic and Monetary Union, consumers should be able to transfer money as rapidly, reliably and cheaply from one part of the euro area to another as is now the case within each Member State, but recognised, however, that this goal was far from being reached. In order to launch the discussion and send a clear signal to the banking and payment systems industry, the Eurosystem defined seven objectives for the industry to fulfil by 1 January 2002. The progress report provides an interim assessment as at August 2000 against the objectives and identifies the outstanding issues.
The banking and payment systems industry has clearly committed itself to the fulfilment of the Eurosystem's objectives and has focused on cross-border credit transfers, as it was called upon to do. Most objectives are not yet fulfilled at present, but substantial progress has been made in preparing the ground for a more efficient handling of cross-border retail payments. The banking sector has agreed on straight-through processing (STP) standards, which will allow the automated execution of cross-border payments. The Euro Banking Association has announced the development of a payment system specifically designed for cross-border low-value payments. As from 2002, cross-border payments below EUR 12,500 will no longer need to be reported for balance of payments purposes and hence statistical reporting will no longer constitute a justification for high customer fees.
So far, however, customer prices have not decreased since the introduction of the euro and in too many cases the payee has been illegally charged with some costs even though the payer has asked to bear all costs. Two initiatives currently being developed by the European Credit Sector Associations are intended to address this situation. First, a multilateral interbank exchange fee (MIF) is being developed, which should solve the problem of "double charging" and, second, a "basic" service will be defined which should provide a guaranteed service level and ensure transparent and attractive price conditions. In order for the basic service offer to contribute more effectively to greater price transparency and hence to enhanced competition, the Eurosystem invites banks to make it unambiguously a standard cross-border payment product with a common name, to be provided by most banks.
It should be highlighted, however, that corporate and private customers will only benefit from a better service offer if they include adequate information in invoices and payment orders in order to facilitate automated and hence cheaper execution of their payments. The banking industry should help to prepare its customers by means of an information campaign.
In view of the substantial progress made by the banking sector towards establishing the necessary conditions for the objectives to be achieved by 2002, the Eurosystem is at present maintaining its policy of not becoming operationally active. It will continue to facilitate and encourage discussions aimed at the timely fulfilment of the objectives.
The Eurosystem considers that the ultimate touchstone will be the price level and quality of the cross-border payment service to the customer, for which current market practice regarding domestic payments remains the benchmark. It is still questionable whether a fully satisfactory situation will prevail by 2002, since this will depend on the timely resolution of the outstanding issues and developments in customer prices. The banking sector is therefore urged to maintain and reinforce its efforts and, in particular, to take the following measures:
Payment infrastructure providers and banks should publicly commit by the end of 2000 to the implementation of STP standards and should implement these standards by mid-2001.
The banking sector should cease, with immediate effect, the unlawful "double charging" practice and find a solution to the underlying problem. If the MIF is adopted by the banking sector for this purpose, it should be implemented by mid-2001.
The banking sector should define a standard cross-border credit transfer product with a common name, which would contain the basic cross-border payment service order, fulfil the Eurosystem's requirements and which most of the banks would provide. This product should be implemented by mid-2001 at the latest and its roll-out should be accompanied by a marketing campaign.
The banking sector should launch information campaigns targeting private and corporate customers in order to inform them about the standards and the information which should be included in invoices and payment orders. The banking sector should elaborate a practical proposal for this campaign by the end of 2000.
The full report, entitled "Improving cross-border retail payment services - Progress report", will be distributed by each of the EU central banks to interested parties in their respective countries. It can be accessed via the ECB's website ("other publications" section). Copies are also available from the ECB.
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