17 December 2015

Commission Green Paper on Consumer Financial Services: This Time, `Fintech’ may make it happen!

The political imperative to answer the question “What has Europe done for me today?” has risen sharply – matching the rise of eurosceptic political parties around the EU. A component of the answer must include a demonstration that the single market delivers cheaper financial services.

A single market in retail financial services has been a goal of the EU ever since the Single European Act of 1987 made the “Four Freedoms” (free movement for people, goods, services and capital) a fundamental objective of the Union. The 1999 review of the progress of the Single Market produced the Financial Services Action Plan (FSAP) and sought to make retail markets `open and secure’. In the halcyon economic times of 2006, the Commission published “A citizen’s agenda – delivering a Europe of results”.  But the financial crisis that began to explode on Europe in 2007 buried such ideas for many years.

However, the political imperative to answer the question “What has Europe done for me today?” has risen sharply – matching the rise of eurosceptic political parties around the EU. A component of the answer must include a demonstration that the single market delivers cheaper financial services – especially in those states that use the euro.

Back in 2007, the Single Market Review could only include calls for efforts to deliver the Single Euro Payments Area (SEPA) as a necessary requirement for a genuine single market in retail financial services. If you cannot pay for the services easily, securely and cheaply, no-one will buy them! Today, SEPA is fully operational and the ECB is pushing the payments industry hard to capitalise on the technology of mobile phones - owned by everyone – to make instant payments. The debate is about how many seconds is `instant’. Yet it feels like only a moment ago that UK banks were trying to persuade their customers that it was quite impossible to clear cheques in less than five days!

So the latest Green Paper re-heats a number of familiar topics but the main evidence base remains the 2012 Eurobarometer survey which showed that 1 in 10 EU citizens did not even have a bank account. It also showed the reluctance of consumers to switch suppliers but the prices quoted for annual credit card fees (ranging from about €40 Germany to just over €50 in Italy) do not suggest that many people will rush to change card supplier – unless they come to the UK for a €0 annual charge. But is that for a sterling-based card where transaction fees to convert from the euro can be 2.75% and the exchange rate (if known) may be quite penal? It seems to be precisely these unknowns and fears that put consumers off exploring across borders. [...]

Full article available for consultancy clients here

© Graham Bishop