The system, known as Visa Direct, has been developed to enable banks to comply with tough new regulations on cross-border money transfers. From July 2003, banks within the Eurozone will no longer be able to charge more for low value (below EUR12,500) EU cross-border transfers than they do for domestic transfers.

Visa Direct uses existing Visa connections, systems and account numbers to provide banks with a plug-and-play package for entering the EUR25 billion a year European money transfer market. To transfer money, all the sender needs to know is the email address or account number of the recipient. Transactions may be initiated by phone, over the Web or in person at the branch. The system has been developed by Visa EU in collaboration with Clear2Pay, the Brussels based financial services software vendor.

Swedish bank ForeningsSparbanken and Spanish banks BBVA and La Caixa have already committed to the service and are expected to be live with Visa Direct early in 2003. Further issuing banks are expected to sign up later this year, says Visa.

The scheme is initially open to any Visa EU cardholder but this will be widened to other Visa regions and payment schemes in the future.

The initiative is facing competition from alternative payment systems, such as eBay-owned PayPal which has recently introduced sterling and euro currency transfers, and mobile payment operators, including paybox and Vodafone. Paybox currently charges a standard rate of EUR1.50 per transaction for cash transfers between users in the UK, Germany, Spain, Sweden and Austria .