Five-fold return on investment
I have yet to meet an informed person who does not see the need and potential of . Clearly, we need to complete euro monetary integration and to create an efficient payments market supporting the single market, which is one of the great European achievements. But sadly too often I feel is only seen as an expensive, politically-hatched, cross-border payment system, rather than as a golden opportunity to modernise and integrate the whole payments market. Moreover, using the power of information technology, we can use to build a platform that can and will provide substantial efficiency gains to the wider EU. So, fundamentally, is very positive for our economy. But we need to believe in this vision and we need to believe in this change. There can be no denying that will increase competition and indeed that is part of the objective of .
An integrated payments market will provide greater efficiency for payment processing as well as profitable business opportunities: short-term, through payment-related services in treasury and cash management, longer term through a whole range of value-added services such as e-invoicing and e-lending. I know of at least one major international bank that has already recouped its substantial investment in through the new business opportunities this investment made possible.
This investment return also corroborates the results of the study carried out by Capgemini which we published in 2008. The study estimated that, while the investment cost of could be ten billion euros, the forecast operational cost savings for banks could be as much as 49 billion euros which represents a five-fold return on investment.
As the effects of the credit crunch spread to the wider economy, companies will place a premium on efficient cash and liquidity management, especially where they manage a variety of euro denominated accounts in different Member States. For corporate customers, can provide opportunities to sell cash and liquidity management services; for consumers, can help attract retail deposits. Moreover, payments are a profitable business in its own right - providing a regular, reliable source of income with average annual volume growth of eight to nine per cent.
Need to avoid redundant costs
In this light and despite the crisis, payments remain an attractive business and one where a bank will wish to maintain its competitive edge. To capitalise on these investments, it is crucial to keep migration on track and on time - we need to avoid the redundant costs of running duplicate payments systems. The Commission has been actively working to help the completion process.
The Payments Services Directive provides the legal foundation for , particularly for the Direct Debit. We have been working closely with Member States and stakeholders through a series of in-depth transposition workshops to identify and resolve outstanding issues. The successful inter-active web-site today holds answers to over 125 questions relating to implementation. Thanks to these efforts we are fully on-track. All Member States are committed to transposing the PSD into national law by 1st November 2009. We will keep up the pressure to ensure this deadline is respected.
On the Direct Debit (SDD) which some may say is the flagship product, the has delivered sterling work. I am delighted that the Core Direct Debit Rulebook and the business to business version are already in place. For those countries where the Core Scheme is not suitable, our hope is that the so-called 'e-mandate' version will provide an acceptable alternative.
So far so good, but a successful launch of the SDD on 1st November 2009, still faces two major challenges:
- First, we must ensure the continued legal validity of existing direct debit mandates under migration. Nobody gains from the unnecessary and considerable expense caused by wholesale resignature of billions of direct debit mandates. We must avoid this problem. But, this is a problem that business cannot solve. Nor is it one that we can solve with legislation. For that reason we have been working hard with Member States behind the scenes to find a viable solution at national level. We are making progress. We hope that the handful of Member States who still harbour doubts can be inspired by the example of more pragmatic Member States and the practical suggestions of domestic industry and the National Central Banks.
- The second key issue for the SDD is the development of an acceptable business model. We all know how vibrant and active the debate has been on this subject. The Commission is playing its part to try and break the impasse. Earlier this year, Commission officials participated in a structured dialogue with industry. On September 4th 2008, the Commission together with the ECB took the unusual step of publishing a press release (IP/08/1290) to provide guidance and greater clarity to the market. Discussions are delicately poised. There is a compromise for an interim solution on the table, but there is also an urgent need for industry to develop a durable, long-term business model.
Intensify marketing activities with public authorities
As heavy users of payment instruments, public authorities can make a substantial contribution to migration by being early adopters and providing critical mass. A questionnaire was sent in June 2008 to collect information and data on migration by public authorities. Preliminary results show that after a slow start, efforts are now being made to prepare for migration. Countries such as Belgium, Finland and France are making good progress and are committed to early Credit Transfer () migration. However, more remains to be done.
Banks too could intensify their marketing activities with public authorities. The Commission intends to follow public authority migration very closely and to regularly discuss results with Member States. The progress report to ECOFIN to be delivered early in 2009 is an excellent opportunity.
Build a consensus on an end-date
All the great projects have an end-date: the single market, the euro changeover, the Financial Services Action Plan. Having an end-date would concentrate minds and increase certainty in the migration process. It would also reduce the unnecessary expense caused by the operation of dual payment systems. However, this is a sensitive subject with Member States - and even more so with competition authorities. Therefore to build consensus on an end-date, we need thorough and comprehensive analysis of its impact - or should I say its absence - on all stakeholders.
Do we need one or two end-dates? Do we need a single date? Do we need an option for progressive Member States to go faster? And how should an end-date be defined and implemented? All this calls for solid analysis. The Commission has invited industry to make the case by coming forward with concrete data and figures. This will allow us to launch a debate with all stakeholders and pave the way to the political endorsement necessary to make an end-date effective.
This leads to my last point, which is the Action Plan. There are signs of some ' fatigue' in the market place. There are calls that we need to move from a self-regulatory to a more 'co-regulatory' type process. In my view, remains fundamentally a market-driven process and in such a process it is imperative for banks to market products that are attractive to their customers, be they consumers, corporate or public authorities.
Nevertheless, is a project which is very beneficial to the wider economy. There is therefore a public interest, even I would say a public duty, for the Commission to promote the project. Two recent examples illustrate our support for . In our proposal of 15th October 2008 for a revised regulation on payment charges, we propose first lifting the threshold for settlement-based balance of payment reporting to 50 000 from 1st January 2010 and then waiving such reporting completely from 1st January 2012. A second example is the Forum of national Coordination Committees. We have established this to discuss and resolve practical problems as well as exchange experience and best practices.
Action Plan: timetable of concrete actions
But perhaps we need more. We have been reflecting with the ECB on how best to breathe some new life into . We are currently assessing the merits of a joint initiative or ' Action Plan'. This could cover five main issues, namely:
- communication and marketing;
- migration (in particular by public authorities);
- legal and compliance issues;
- governance arrangements;
- and technical issues, such as standards.
The finer details are being fleshed out, but the objective would be to establish a joint document with a timetable of concrete actions to be taken by various stakeholders to make happen. Ideally, this document would benefit from support at the highest level. I personally remain convinced that is a tremendous project for Europe and that despite the challenges, despite the financial turmoil around us, despite the market pressures, we can move beyond these first positive steps and make the full success it deserves to be.
Commissioner Charlie McCreevy is in charge of the Directorate-General Internal Market and Services of the European Commission.
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