Concern over payment system rules

Date: 26/02/1998

By Chris Johnstone

THE European Commission is looking beyond the introduction of the single currency to a future where online and electronic-purse transactions could replace cash and where banks will no longer control payment systems.

Electronic purses, such as the Proton card launched in Belgium, are currently being pioneered by banks. But the Commission is already preparing for the day when non-banks could enter the market with rival versions.

Internal Market Commissioner Mario Monti is expected to propose a directive by July on the conditions or licensing requirements which should be imposed on non-bank issuers of purses and operators of electronic banking services. "There is a possibility that telephone firms or the likes of Bill Gates' Microsoft could offer banking services. Things could just creep up on us," said an official.

The issue is already sparking controversy. European banks are opposed to any special rules, insisting there is no reason why newcomers should not set up as financial institutions and submit themselves to exactly the same regulations as those governing the banks. "We do not see why there should be any special rules," said a spokesman for the European Banking Federation.

The Commission stresses that it does not want to rule on who should be allowed into the market. "We only want to have guidelines in place. We are trying to create a level playing-field rather than protect any monopolies," said an official.

The European Monetary Institute has in the past raised concerns that the introduction of new payment systems in fresh hands could make it impossible to control the amount of money in the economy. It is expected to deliver an updated report before the Commission's own proposals are finalised.

The Commission is looking at the issues involved where on-line and electronic-purse transactions could replace cash and where banks will no longer exclusively control payment systems.