The European Commission has proposed on Wednesday rules to lower the costs that are assumed when making cross-border payments in euros – such as transfers, card payments or withdrawals of cash – throughout the European Union and not only in the countries use the single currency, as happens now
The current Community legislation guarantees that a euro transaction within the eurozone has the same costs as an equivalent transaction within a country that uses the euro. This means that consumers, depending on the bank they use, do not have to pay anything, or a few cents, for the service.
Expand the standard to the entire community block
However, as explained by Brussels, a cross-border transaction in euros between Bulgaria (which is not a eurozone country) and Finland (which does use the euro) costs between 15 and 24 euros, even if the transfer is only of ten euros.
Therefore, the Community Executive has proposed extending the scope of application of the rule to the entire EU block, so that all those payments in euros sent or received within the EU have costs exactly equal to the equivalent in the local currency. member from which the operation is performed. In any case, once approved by the Member States and the European Parliament, it will only affect transactions in euro. Brussels has explored the possibility of extending it to other divisions, but has concluded that its application would be “complicated” and would result in “few benefits”.
Transactions with the euro are the majority
Infrastructures and processes that require operations in euro, on the other hand, are available in all banks in the EU. In addition, the Commission argues that transactions in the single currency have much higher volumes, and that many banks in the EU bloc, even in countries outside the eurozone, have links to the euro.
“With today’s proposal (on Wednesday) we are guaranteeing citizens and companies from non-eurozone countries the same conditions as residents of the euro zone when making cross-border payments in euros. All Europeans will be able to transfer money from one country to another with the same cost they would pay for a domestic transaction, “said the vice president of the Community Executive responsible for Financial Services, Valdis Dombrovskis.
More transparency in currency conversions
Brussels also presented on Wednesday a proposal to provide more transparency in currency conversion services in cross-border payments, with the aim that consumers are fully aware of the costs they face and can opt for the option that most benefit
Overseas, consumers can choose whether they pay in local currency or in their own currency when using the credit card. If you opt for the first option, your bank will convert the transaction and know the cost only a few days later. If they prefer the latter, the payment service provider converts the cost on the spot in exchange for a fee. This process is called dynamic currency conversion (DCC for its acronym in English) and the problem is that it is a more expensive service than the bank offered by the cardholder.
Choose the most favorable currency
Given this, the Community Executive has proposed that payment service providers have to break down all the costs that would be charged to consumers, so that, when they are offered several currency conversion possibilities, they are able to compare between them and choose the most favorable.
However, the European Commission is in favor of establishing a transition period of three years to give the European Banking Authority (EBA) time to develop technical standards with the aim of adapting the market to these changes.