While the EU admits its plan to create a Single Euro Payment Area (SEPA) across Europe will take longer than expected, consumer and banking groups argue that the scheme needs to be revised before it is rolled out any further.
Monday (2 November) marks the launch of SEPA's hotly-anticipated direct debit scheme, which aims to cut red tape on cross-border payments.
But banking and consumer associations say they have serious concerns that SEPA will open the way for more fraud and unfair pricing on payments.
SEPA, which aims to establish a single rulebook on credit transfers, debt transfers and payment card services, began on 28 January with the introduction of the SEPA Credit Transfer.
SEPA a 'slow burner'
According to figures from the European Central Bank (ECB), as of August 2009, only 4.5% of transactions were processed as SEPA Credit Transfers.
"SEPA is a slow burner, not a chain reaction," Elemer Tertak, director for financial institutions at the European Commission, admitted at a banking event yesterday. The latest figures show that only 2,600 of Europe's 8,000 banks will be ready for the launch of SEPA's direct debit scheme on 2 November.
There are different commitments in different member states, Tertak divulged. Evidence gathered by the EU executive shows that there is still considerable resistance from retailers to use and accept SEPA payments and that the crisis had produced low confidence in card payments.
Bank and consumer associations say SEPA is not ready to be launched and that the European Payments Council (EPC) still has to address major concerns highlighted by stakeholders.
In July, EuroCommerce, the SME association (UEAPME), the European Association of Corporate Treasurers, Insures of Europe (CEA), the European Consumers Organisation (BEUC), BusinessEurope, the distance-selling union Emota and the voice of Europe's periodical press (FAEP) released a joint statement saying SEPA had failed on two counts: security and pricing. Three months on, those concerns are still outstanding and have not been addressed, the groups insist.
Interchange fees still not addressed
In the past, consumers and SMEs have expressed reservations about SEPA, fearing that transaction fees would unfairly penalise both groups. Multilateral Interchange Fees (MIFs), which are charged to the beneficiary, have come under scrutiny by the European Commission and by EuroCommerce, a retail sector lobby group (EURACTIV 11/09/09).
Ruth Milligan from EuroCommerce says pricing was provisionally dealt with by the EU with a temporary ruling against MIFs due to expire in 2012. The EU has not said what will happen beyond that date, she added.
In most member states, customers do not have to pay for direct debits between banks, but SEPA still does not guarantee that this will continue to be the case, said David McCullough of European consumer group BEUC.
The EPC argues that policing pricing strategies does not fall under its remit and this kind of regulation would be anti-competitive.
Lack of security
"The lack of security on SEPA payments is massively open to fraud," McCullough also insists. Milligan, for her part, argues that there need to be more safeguards on both the creditor and debtor side to prevent fraud.
Under SEPA, a cross-border payment would require a bank account number only and the bank is not obliged to verify the accountholder, McCullough argues. Currently cross-border payments require a series of codes like an international bank account number (IBAN) and a bank identifier code (BIC), among others.
An automatic right to reimbursement, included in the Payments Services Directive, SEPA's legal framework, does provide safeguards against fraud, insists Herman Segers, the EPC's secretary-general.
SEPA respects a payer's right to reimbursement within eight weeks of the payment being debited, according to Segers.
No deadline in sight
The banking industry is worried that the persistent lack of a deadline for implementing SEPA is creating a huge disincentive to get involved with the scheme.
The EU will specify an end-date for the discontinuation of so-called 'legacy schemes' – the payment systems that have been up and running in the individual member states.
"We are very concerned by the unclear migration dates," Deutsche Bank's head of corporate payments, Karoline von Richthofen, admitted at an event yesterday (27 October).
Discussions between the ECB, the EU executive and European finance ministers are trying "to establish a clear reasoning on the need for an end-date," Tertak told EURACTIV.
Negotiations are trying to reconcile different factors to come up with dates for when retailers will be ready for SEPA and what the lifecycle of the technical applications that will be used for SEPA payments is.