EU Parliament panel backs electronic payments law to cut costs

Banks and payment services such as Western Union won extra time to process payments in the vote on Tuesday, members of the panel said. In a tradeoff, the committee broadened the requirement to cover any size transactions in all European Union currencies, not just the euro used by 12 of the region's 25 countries. The approval advances an initiative to boost efficiency in processing € 52 trillion ($66 trillion) of transactions a year, which costs some 3% of gross domestic product largely blamed on the expense of handling cash. Electronic invoices could save businesses € 50 billion to € 100 billion a year, the European Commission estimated in making the proposal. Banks „have to open their systems to more transparency and more competition on the market,” said Mario Mueller, spokesman for EuroCommerce, a trade group for retailers and product wholesalers. Consumers as well as businesses will benefit, he said. The backing from the Economic and Monetary Affairs Committee sends the measure to the full Parliament for a vote as soon as next month. EU governments must also agree to turn the proposal into law, and they may consider it as soon as November.

Three years after the EU barred banks from charging more for cross-border euro transfers than for domestic ones, the measure seeks to harmonize rules for banks and payment services such as Western Union, a unit being spun off from First Data Corp. The requirements come on top of anti-money laundering rules already in place on such businesses. Transactions would have to be completed the second business day after a request, according to committee members, a day later than in the commission's Dec. 1 proposal. The European Banking Federation said the deadline is a stretch for requests made just before 5 p.m., too late to be entered into payment systems that day. The timetable is even less realistic for multiple-currency payments, as it can take two days just to convert currencies, the trade group said in a statement. The retailers' and product wholesalers' representative disagreed, saying banks will be able to meet the deadlines. „The technical possibilities are there,” Mueller said in a telephone interview. „We're giving extra time to the banks but the consumer is losing time.”

The changes aim to make the directive work better, taking into account technical constraints on the industry while cutting costs to the benefit of customers, Jean-Paul Gauzes of France, the measure's sponsor in Parliament, said in a statement. Non-bank processors must meet safeguards including € 100,000 minimum capital, or € 500,000 for providers of some services, plus protection of clients' money in case of a service provider's bankruptcy. In exchange, they would be able to operate throughout the EU, as part of efforts to create a borderless financial market. The proposal pushed by Internal Market and Services Commissioner Charlie McCreevy also paves the way to link together national payment systems and let people make payments anywhere in the euro currency area from a single account by 2010. „My hope is simple, to have a single European payments area as quickly as possible,” McCreevy said to journalists in Brussels, declining to comment immediately on the committee's action. „The purpose of the directive was to break down the legal barriers.” (Bloomberg)