Fear over EU action on payment systems

Date: 16/05/1996

By Tim Jones

UNNECESSARY or premature European legislation risks nipping the creation of a vibrant plastic money market in the bud, warn representatives of the EU's banking industry.

While Europeans continue to use cash in large numbers and do their banking through conventional means, they are turning increasingly towards telephone and electronic banking, and more futuristic payment systems are starting to appear.

“We have so little experience in this whole thing and the Commission has even less,” says an official at the European Savings Banks Group. “We fear that if any regulations are set at such an early stage of development, it will make comprehensive legislation more difficult later.”

In several EU cities, consumers can already buy 'pre-paid cards', charge them up with a set amount of money and use them in shops, while 'electronic purses' allow extra banking services on a piece of plastic.

The possible legal ramifications of these new forms of money were the subject of a study ordered by the Commission last year. Since then, DGXV, the Directorate-General for the internal market, has begun consultations with experts and industry to discern the areas where legislation might be needed.

The banks argue that, at the moment, the only legal clarity required is whether card issuers should be established credit institutions, or could include other forms of private company.

In their detailed response to the Commission study, savings banks stressed that buying a pre-paid card was just the same as making a deposit at a bank, since the issuer was assuming the responsibility for paying a retailer in return for the cash.

“This means that the issuer should be a fully-fledged credit institution, so as to protect the consumer against failure,” said a spokesman for the savings banks group.

It argues this would ensure that clients were covered by deposit protection schemes in the event of failure of the issuer to meet its liabilities. The issuer would also be subject to the same supervisory reporting standards as the banks, so avoiding giving it an unfair competitive advantage.

That is the same recommendation as made by the European Monetary Institute when it reported on this issue last year.

Savings banks believe the Commission is mistaken in its wish to examine legal intervention in all new areas of banking from electronic banking and pre-paid cards to 'virtual' banking.

“Lumping together the question of cards and ways of getting access to banks does not make sense,” says Gael du Bouetiez, spokesman for the savings banks. “The banks want a clear indication from the Commission as to why any action is deemed necessary at this time.”