European Payments Council Blog and Discussion Board
Join the European Payments Council (EPC) discussion board to have your say on recent Single Euro Payments Area (SEPA) developments and highlight subjects that you would like to debate. The platform has been designed to ensure the communication of frequent and useful EPC information as well as engage the payments community and encourage the exchange of opinions. Please note that by accessing or contributing to the discussion board you agree to abide by the terms of the EPC Blogging Policy, so please read them carefully before doing so.
To receive notification when a new EPC blog goes live, subscribe using the RSS feed in the left-hand column of this webpage.
Dare to be Bold - A SEPA Legal Tender Model Spanning Both Cash and Electronic Payments Viewed 5928 times
The author serves as a member of various EPC bodies including the EPC Cash Working Group. The ESBG is a member of the EPC. The views expressed in this blog are those of the author and may not necessarily represent the views of all ESBG members.
Key strategic initiatives launched by European Union (EU) policy makers in the past decade - including the 2010 Lisbon Agenda, the Europe 2020 Strategy, the Digital Agenda for Europe and the Single Euro Payments Area (SEPA) programme - imply that migration to electronic payments is a key objective. If this is truly as important to policy makers as they state, then they should ensure that there is coherence across agendas. This is essential when it comes to the use of cash as a payment instrument.
The European Commission recommendation outlining ten guiding principles clarifying the scope and effects of the legal tender of euro cash is one example which illustrates prevailing inconsistencies in public policies. This recommendation, adopted in March 2010, forcefully asserts the position of physical cash (banknotes and coins) as legal tender. It also artificially inflates further the perceived value of cash as a payment instrument in scope, to the detriment of a broader use of those electronic instruments which will ensure Europe's competitiveness in the wider economy. The recommendation contradicts the strategic objective defined by EU policy makers to incentivise a shift to electronic payment instruments, which aims to reduce the societal costs resulting from the use of cash today.
Latest data predicts that over the coming decade Western Europe will see the slowest growth of non-cash payments volumes of any region globally. Contradictory EU policies will exacerbate the negative effects of this development on Europe's relevance in international standardisation bodies, its influence on providers of payment solutions and ability to transact more efficiently.
A forward looking solution could however be rather close. Europe's payment systems have proven that they are secure and reliable and they are certainly well overseen. The Payment Services Directive (PSD) adopted by most EU Member States in November 2009 has provided for much enhanced consumer protection for non-cash payment instruments. Both the PSD and the new e-Money Directive allow for quality competition. Bancarisation (the number of people holding a bank account) is almost complete (acknowledging that a very small percentage of the population would not hold an account under any circumstances). The two Directives referred to above provide solutions which cater to these exceptions, thus ensuring access to convenient and secure means of payment for all segments of society. These assets and developments pave the way for a SEPA legal tender model spanning both cash and electronic payments which would notably fully transpose the principle of ‘indifference' between payment instruments so often referred to by policymakers. In such a model, either discounting or surcharging for the use of any payment instrument would be allowed, in order to enable genuine competition in the marketplace. Merchants would no longer be compelled to accept high denomination banknotes, and the quality of legal tender would be awarded to any SEPA payment instrument.
A bold proposal? Not any bolder than the proposals which have brought the EU forward since the Treaty of Rome. What are we waiting for?
Join the discussion and share your comments. For more information and related links, please view the article ‘Dare to be Bold: Electronic Legal Tender is an Option' in the EPC Newsletter.
|Follow us on Twitter|
|Join us on LinkedIn|
If you would like to comment on this blog entry or propose a subject for discussion, please identify yourself with your first and last name. Please note that your name will appear next to your comment. Email addresses will not be published.
To receive notification when a new comment is added to this specific discussion, please subscribe to get updates by email (using the "Subscribe" link below) or RSS (using the "RSS Feed" at the top left of the page). (These links are not available on the mobile version of the EPC Website, to subscribe by email or RSS, please visit the standard version of the EPC Website).
06.05.14Join the Debate on the Further Evolution of the SEPA Credit Transfer and SEPA Direct Debit Schemes: Less Flexibility, More Harmonisation? An Overview of the Options, Variations, Exceptions and Exemptions Possible in SEPA Today
15.04.14PSD2: The New Article 67, (‘Refunds for Payment Transactions Initiated By or Through a Payee’), Proposed by the European Commission Risks Undermining Consumer’s Unconditional Refund Right for Direct Debits Included with the SEPA Direct Debit Core Scheme
25.03.14PSD2: EPC Identifies Considerable Scope for Amendments of the Proposed New Set of Rules Related to the Activity of Third Party Payment Service Providers Offering Payment Initiation or Payment Account Information Services
20.02.14Don't Count on 1 August 2014: Different SEPA Migration Deadlines Apply Across the Euro Area During the “Additional Transition Period” Agreed by the European Commission, the European Parliament and EU Governments
08.11.13SEPA Fact Check: the Rationale for SEPA as Defined by the EU Governments, the European Parliament, the European Commission and the European Central Bank Driving the SEPA Programme and Determining the SEPA Compliance Requirements
24.10.13Conclusions Agreed at Multi-Stakeholder Workshop to Discuss Minimum Requirements for 'BIC from IBAN Derivation' Solutions for Cross-Border SEPA Transactions. European Law Mandates Transition to the 'IBAN only' SEPA Environment by February 2016
10.10.13Next Generation SEPA Credit Transfer and SEPA Direct Debit Rulebooks Will be Published in November 2014 to Take Effect in November 2015. EPC Invites Suggestions for Changes by 28 February 2014
01.08.13Talking about SEPA to Small Businesses? Food for Thought for Public Authorities, Banks and Other Service Providers: “Keep it Simple,” Says the Owner of Dance and Gymnastics School Girlfriends (45 Direct Debit Collections per Month)