Big business reaps the single market rewards

One question that is increasingly being asked of the European Commission’s efforts to forge a single market in financial services is whether citizens are actually seeing the end benefits. After all, the internal market is supposed to be for the benefit of consumers as much as business.

Critics of the Commission’s financial services action plan claim that the rewards thus far have mainly been reaped by big business. Closer integration in the banking, insurance and securities markets has so far failed to translate into a better deal for consumers, they say.

"The internal market should be an advantage to people, but, at the moment, this is not the case. Companies benefit, but not people," says Edgardo Iozia, vice-president of trade union federation UNI-Europa, which reported on the gaps in EU financial services policy to the European Economic and Social Committee (EESC) last year.

One of the main conclusions of the EESC was that the role of national supervisory authorities should be strengthened. Iozia goes so far as to say that a single consumer-oriented regulatory body covering the eurozone, or perhaps the entire EU27, would be preferable. In areas such as insurance, says Iozia, the industry still has much freedom to offer unregulated products.

Legislation such as the consumer credit directive is specifically targeted towards ensuring that consumers get a fair deal on the single market. But updating the directive, which dates from 1987, has been a fraught process. Consumer groups doubt that the update, which proposes to cover all areas of credit up to €50,000 (bar mortgages), will help consumers, given that complex protection laws in some member states could be watered down.

The European Parliament held its first reading vote on the update in 2004, redrafting proposals substantially. The German presidency has made political agreement on the update a priority for the coming months, but member states are still loath to change their rules.

Progress is being made on other fronts. In the area of payments, the creation of the single euro payments area, which will reduce the cost of cross-border payments, is now in sight. Harmonisation of national regulatory regimes governing payments will soon commence when the payment services directive is agreed by member states this month, in line with the German presidency’s wishes. Full migration to the system will be completed by 2010.

Despite last week’s announcement by Competition Commissioner Neelie Kroes, threatening action against the payment cards sector for high fees charged to customers, it seems that consumers could face charges for some time to come. Cecile Grégoire, adviser on payment systems at retailers’ lobby Eurocommerce, warns that the oft-ignored fees for debit card payments could soon be on the rise. "The credit card problem is well understood," she says. "The debit card problem…less so." High charges exacted from retailers for transactions, she says, will inevitably be passed on to the consumer.

One question that is increasingly being asked of the European Commission’s efforts to forge a single market in financial services is whether citizens are actually seeing the end benefits. After all, the internal market is supposed to be for the benefit of consumers as much as business.