There has been a European Single Market since 1992 and a single currency for the eurozone since 2002.
And yet unitl now payments still remained fragmented and inefficient at a pan-European level. Even efficient electronic payment methods such as internet banking could not always be used across member states. For example, direct debits - a common way to pay for utilities and other regular bills - cannot be used across borders, even though they are a reliable and secure means of payment, reducing costs for businesses and consumers.
A real Single Payment Market within the EU, particularly the eurozone, would allow all citizens and businesses to make payments electronically, just as conveniently and rapidly as the most efficient national payment systems existing today.
Studies have estimated that the overall cost to society of the current payment system could be as much as 3 per cent of the EU's GDP.
Instead of using efficient electronic payment services, which cost only a few euro cents, the cost of cash transactions range between €0.30 and €0.55. Given that the EU currently handles 231 billion payments per year, the potential savings linked to use of efficient payment services are enormous and amount to billions of euros.
This is why commercial banks, the European Commission and the European Central Bank started to work on the Single Euro Payments Area (SEPA) project.
SEPA is radically changing the structure of the European Payments industry. SEPA intends to make all electronic payments in the eurozone as easy as cash payments are now. It will mean that you can make fast and secure transfers between bank accounts anywhere in the eurozone. If you are shopping abroad, you will be able to use your bank debit card (such as your Cash Link) to make a payment in euro, just as you would at home.
SEPA means much more than this; it means enhanced customer rights. It means better banking services for everyone, transparent pricing and valuable guarantees ensuring that your payments are received promptly and in full with banks taking responsibility if something goes wrong with your payment.
European banks including those in Malta have been upgrading their systems and accounts to make this happen as from January 28, although the project is being phased in and will not be complete until December 2010.
As from January 28, most Maltese banks will be accessible in terms of credit transfers for SEPA credit transfer payments (basically, euro payments into and out of bank accounts).
In Malta, SEPA will also play an important part in the repositioning of both cheques and cash, encouraging people to use more modern and cost-effective means of payment. Over the next three years, as a result of SEPA Maltese citizens and businesses will reap the following benefits:
● Using your local debit card anywhere in the eurozone: In fact, over the next few years all debit and credit cards in Malta will be of the Chip and Pin type as defined by the SEPA Cards Framework Scheme rules. Within the current scenario it seems that Maltese cards debit cards will be co-branded with Visa or Maestro. The European Commission and the European Central Bank are encouraging European banks to create a pan-European debit card that would rival both Visa and Maestro;
● Better cross-border bank transfers: SEPA and the Payments Services Directive, which is the legal backbone of SEPA per se, introduce new standards and enhanced consumer protection. These include execution time, liability of a payment provider, liability of a payment service user, introduction of the full amount principle, conditions for refund and irrevocability of payment orders;
● Direct debits from anywhere in the eurozone: For example a German citizen living in Berlin would be able to pay his Gozo holiday flat Enemalta bill through his German bank account. Be it for travel or for work a eurozone citizen would only need one bank account for all his eurozone needs; and
● Lower prices for basic payment services in high-cost countries: In some eurozone countries such as Italy, the annual cost of running a bank account can be as much as €250 compared to others where it is free. More competition will drive down costs. Furthermore, the SEPA rule books and the Payments Services Directive will continue to enhance price transparency.
As stated in the European Payments Council Declaration of March 17, "We will deliver the two new pan-EU
payment schemes for electronic credit transfer and for direct debits. We will also design a cards framework to define a single market for cards. The scheme rulebooks and the cards framework definition will be delivered by end 2005, and the services will be operational by January 2008. We know from feedback from our community in the eurozone that by the beginning of 2008 the vast majority of banks will offer these new pan-EU services to their customers.
"We are also convinced that a critical mass of transactions will naturally migrate to these payment instruments by 2010 such that SEPA will be irreversible through the operation of market forces and network effects.
"SEPA will be delivered by the banking industry in close conjunction with all stakeholder communities (consumers, SMEs, merchants, corporates and government bodies) and supportive public authorities.
"The community of European banks is strongly committed to this ambitious programme of action, based on self-regulation and a full recognition of the role of market forces and competition."
• Mr Sant is a senior economics officer within the Bank of Valletta's strategy and business development department. He also represents the Maltese banking sector on the European Payments Council (EPC) plenary. The EPC is the banking industry body responsible for the Single Euro Payments Area project at a pa- European level.
And yet unitl now payments still remained fragmented and inefficient at a pan-European level. Even efficient electronic payment methods such as internet banking could not always be used across member states. For example, direct debits - a common way to pay for utilities and other regular bills - cannot be used across borders, even though they are a reliable and secure means of payment, reducing costs for businesses and consumers.
A real Single Payment Market within the EU, particularly the eurozone, would allow all citizens and businesses to make payments electronically, just as conveniently and rapidly as the most efficient national payment systems existing today.
Studies have estimated that the overall cost to society of the current payment system could be as much as 3 per cent of the EU's GDP.
Instead of using efficient electronic payment services, which cost only a few euro cents, the cost of cash transactions range between €0.30 and €0.55. Given that the EU currently handles 231 billion payments per year, the potential savings linked to use of efficient payment services are enormous and amount to billions of euros.
This is why commercial banks, the European Commission and the European Central Bank started to work on the Single Euro Payments Area (SEPA) project.
SEPA is radically changing the structure of the European Payments industry. SEPA intends to make all electronic payments in the eurozone as easy as cash payments are now. It will mean that you can make fast and secure transfers between bank accounts anywhere in the eurozone. If you are shopping abroad, you will be able to use your bank debit card (such as your Cash Link) to make a payment in euro, just as you would at home.
SEPA means much more than this; it means enhanced customer rights. It means better banking services for everyone, transparent pricing and valuable guarantees ensuring that your payments are received promptly and in full with banks taking responsibility if something goes wrong with your payment.
European banks including those in Malta have been upgrading their systems and accounts to make this happen as from January 28, although the project is being phased in and will not be complete until December 2010.
As from January 28, most Maltese banks will be accessible in terms of credit transfers for SEPA credit transfer payments (basically, euro payments into and out of bank accounts).
In Malta, SEPA will also play an important part in the repositioning of both cheques and cash, encouraging people to use more modern and cost-effective means of payment. Over the next three years, as a result of SEPA Maltese citizens and businesses will reap the following benefits:
● Using your local debit card anywhere in the eurozone: In fact, over the next few years all debit and credit cards in Malta will be of the Chip and Pin type as defined by the SEPA Cards Framework Scheme rules. Within the current scenario it seems that Maltese cards debit cards will be co-branded with Visa or Maestro. The European Commission and the European Central Bank are encouraging European banks to create a pan-European debit card that would rival both Visa and Maestro;
● Better cross-border bank transfers: SEPA and the Payments Services Directive, which is the legal backbone of SEPA per se, introduce new standards and enhanced consumer protection. These include execution time, liability of a payment provider, liability of a payment service user, introduction of the full amount principle, conditions for refund and irrevocability of payment orders;
● Direct debits from anywhere in the eurozone: For example a German citizen living in Berlin would be able to pay his Gozo holiday flat Enemalta bill through his German bank account. Be it for travel or for work a eurozone citizen would only need one bank account for all his eurozone needs; and
● Lower prices for basic payment services in high-cost countries: In some eurozone countries such as Italy, the annual cost of running a bank account can be as much as €250 compared to others where it is free. More competition will drive down costs. Furthermore, the SEPA rule books and the Payments Services Directive will continue to enhance price transparency.
As stated in the European Payments Council Declaration of March 17, "We will deliver the two new pan-EU
payment schemes for electronic credit transfer and for direct debits. We will also design a cards framework to define a single market for cards. The scheme rulebooks and the cards framework definition will be delivered by end 2005, and the services will be operational by January 2008. We know from feedback from our community in the eurozone that by the beginning of 2008 the vast majority of banks will offer these new pan-EU services to their customers.
"We are also convinced that a critical mass of transactions will naturally migrate to these payment instruments by 2010 such that SEPA will be irreversible through the operation of market forces and network effects.
"SEPA will be delivered by the banking industry in close conjunction with all stakeholder communities (consumers, SMEs, merchants, corporates and government bodies) and supportive public authorities.
"The community of European banks is strongly committed to this ambitious programme of action, based on self-regulation and a full recognition of the role of market forces and competition."
• Mr Sant is a senior economics officer within the Bank of Valletta's strategy and business development department. He also represents the Maltese banking sector on the European Payments Council (EPC) plenary. The EPC is the banking industry body responsible for the Single Euro Payments Area project at a pa- European level.