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EU approves ruling to chop charges for cross-border Euro transactions

EU approves ruling to chop charges for cross-border Euro transactions

The European Parliament has approved plans to make banks slash fees on cross-border euro payments between EU countries that are in the euro zone and those that are not.

Currently, there is no difference for euro area residents or businesses if they carry out euro transactions in their own country or with another of the 19 euro area countries.

However, residents of EU countries outside of the euro area do not have the same privileges. For example, a EUR10 cross-border credit transfer from Bulgaria could be subject to a fee of up to EUR24.

This, says the EC, is an obstacle to its vision of a single market, creating barriers to the cross-border activities of households and businesses, in particular SMEs.

Under the new proposals, a cross-border credit transfer in euros from Bulgaria will be priced the same as a domestic Bulgarian lev credit transfer.

The new rules also require that consumers are fully informed of the cost of a currency conversion before they make a payment, for example, with their card abroad. The ruling will hit banks, merchants or ATM operators who will all have to declare currency conversion charges in the same way, making it easy for consumers to select the best option.

Commission VP Valdis Dombrovskis, says: “With this agreement, non-euro country citizens will also enjoy one of the benefits of the euro. That is, low-cost euro transactions using highly efficient euro payments infrastructure. Moreover, this regulation will boost competition in the area of currency conversion. And it will allow Europeans to easily check and compare conversion charges when paying abroad with their cards, or when sending money online to a country with another EU currency."

Comments: (1)

A Finextra member
A Finextra member 23 December, 2018, 23:30Be the first to give this comment the thumbs up 0 likes

Has the EP considered extending this rule to Euro payments originating outside the EU?

Strictly, the SCT rulebook does not allow payments originating from outside the EU to be processed as SCTs within the EU.

An EU PSP receiving an incoming payment from outside the EU can ony forward it to its final destination in an EU account through Target2, Euro1 or a bilateral arrangement, all far more expensive than a SCT.

This restriction makes remittances into the EU expensive, creating friction in cross-border payments, in particualr for consumers and SMEs - a barrier to new business models (eg internet of things), new payment flows and trade.  

Payments originating from outside the EU all have to screened under the funds transfer regulations, but once done, they should be allowed to be processed as SCTs (as they are in other domestic clearing systems such as FPS in the UK and IMPS in India).

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