EU proposes lower bank charges for international payments

The European Commission has proposed the creation of a single payments area in the EU to make cross-border payments by credit or debit cards, electronic bank transfer, direct debit or by any other means as easy, cheap and secure as "national payments within one member state".

In Malta, as in the rest of the EU, bank clients who make a payment to an individual or a company abroad currently incur hefty charges. A similar transfer of funds inside Malta does not carry a fee.

According to the Commission, there is a huge diversity of prices for the same service between one member state and another. A credit transfer can be free of charge in one country and cost more than €10 in another.

It says this situation is creating a barrier to trade and yesterday it proposed new legislation aimed at ending such a hurdle. It believes EU citizens should be able make payments anywhere in the EU in the same way as is done at home.

The Commission's proposal basically means that if a Maltese resident is not charged for effecting a payment through his banking system for a purchase in Malta, the same should apply for a payment to another member state of the EU. The plan could bring down the cost of European payments and save the EU economy between €50 billion to €150 billion each year.

The Commission said the proposed directive, known as the New Legal Framework, will guarantee fair and open access to payments markets and will increase and standardise consumer protection. A more efficient and competitive payments market will also mean that individual Europeans pay less for basic banking services. Introducing the proposed legislation, Internal Market Commissioner Charlie McCreevy said that being able to pay for goods and services anywhere in the EU as one would do at home would bring a whole new dimension to everyone's purchases and would make Europe even more an everyday reality.

"When people are forced to pay nationally, they will of course tend to buy nationally. Europeans already use direct debits to pay their gas, water and electricity bills but this easy payment can only be used within one country. We want to change that.

"If banks find it too costly, then others will be there to do the business," he said. "I suspect banking institutions are going to lower their costs."

Mr McCreevy said he did not rule out offering banks incentives to get the plan in place by 2010 but said banks would wake up quickly to the benefits of the EU framework when it saw others ready to take a slice of a lucrative market.