The European Central Bank and European Commission on Monday urged banks to speed up adoption of common standards for customers to make euro payments throughout Europe from a single bank account, credit card or debit card.
They warned that without such action, the ambitious project risked missing a January 2008 deadline to begin operating. "I would hope the industry would take the bull by the horns and migrate to the Single European Payments Area (SEPA) as soon as possible," said Charlie McCreevy, European commissioner for internal markets, told a SEPA conference.
National governments will need to quickly implement a planned EU directive on an operating framework for a single payments area, without making substantive changes. Otherwise businesses and banks cannot proceed with building the infrastructure in a timely way, he said.
"I ask member states to rise above narrow sectoral interests and keep their eyes on the ... promise for the wider economy," McCreevy said. "It would be disastrous if member states let industry or consumers down."
Moreover, the EU would not hesitate to intervene if credit card companies engage in monopolistic practices as common payment methods are introduced across the EU, he said.
Banks complain that they are being pressed to invest millions of euros in new computer systems to allow consumers and businesses to make euro payments anywhere in the European Union using a single bank account, credit or debit card as quickly and easily as a domestic payment. Until the EU and national governments complete rules and the industry agrees to standards on how the SEPA infrastructure will operate, they have no legal certainty. This delays SEPA's implementation and imperils a 2008 deadline for a pan-European system to begin operating alongside national ones.
Now each country has different payment practices. Germany uses bank debit cards widely but few credit cards. The United Kingdom has a strong credit card culture. Bank cards cannot be used in all stores across the euro area. Creating a harmonised payment system among 7,000 European banks is proving difficult.
ECB President Jean-Claude Trichet said that while the task is as challenging as launching the euro currency, it is no less important. It will promote economic growth, reduce costs, spur innovation and improve the safety and soundness of the financial system in a way fiscal measures cannot.
"Financial integration in the euro area facilitates a better sharing and diversification of the risk of potential shocks, because it will allow for example economic agents to invest more easily in other regions of the euro area," Trichet said.
Trichet also encouraged customers to sign up to the new system. "Success of SEPA depends on participation of all stakeholders," he said. SEPA suffered a blow when the German government said it would use the new payment system only if it proves more cost effective and efficient than current systems. Accordingly, European finance ministers in October gave only a conditional endorsement to the project.
But McCreevy said this was a realistic approach from the government's perspective. "It is wholly logical that SEPA projects should be at least as good as existing ones." He said a study would be complete next year comparing the costs and benefits of the pan-regional payments system with the existing system.