During the summer, I ran extensive research into the state of transposition of the Payment Services Directive (PSD) and the implementation of the Single Euro Payments Area (Sepa).
These two key developments in payments are effectively 'live' as of this month. Unfortunately, this is not quite the case as the research has revealed huge chasms in country implementations of the PSD, which was flawed in drafting by allowing leeway in how payments accounts and legal structures are defined, which immediately opened the doors to inconsistency. The transposition into implementation is also considered flawed because member states have too much ability to misinterpret the PSD's definitions.
All in the interpretation
In particular, the ability to provide options and the use of derogation, where European countries are allowed differing legal interpretations to transpose a law, has caused huge inconsistencies. For example, while the PSD requests that countries classify small businesses as consumers so that they use only consumer-based products, some countries define them as microenterprises so that they can use corporate bank services.
Similarly, one country says that currencies entering Europe will be subject to being covered by the PSD's rules, rights and obligations, while another does not; one country labels a payments account as one that processes payments on a regular basis, and another does not; one country says that direct debits are subject to an eight-week window of challenge, contradicting a different nation that says there is no time limit to repudiate a payment. And these are just a few of the issues.
Here is a brief summary of the survey results:
- 58% of survey respondents state that the PSD is being transposed inconsistently and 63% say this is because of different interpretations at country level.
- The Austrian, Belgian, Swedish and Swiss say there is no consistency of interpretation, while the Spanish and Swedish say the implementation is inconsistent.
- Nevertheless, we should not be too pessimistic, because 61% of respondents believe this programme
is either 'critical' (18%) or 'very important' (43%) to Europe's future.
- When asked what the key benefit would be, 35% stated that it would make European commerce 'seamless and simple, with fewer banks and fewer barriers to cross-border trade', 18% felt the major benefit was to 'allow international corporations to rationalise their bank relationships' and 13% thought it would create a eurozone as large and competitive as the US or China.
- This still does not mean the PSD is necessarily something driven for these benefits, because when those surveyed were asked what the main driver is for these changes, only 14% said the 'benefits', with 19% voting for the 'cost savings' and 15% for 'increased competition'; the single largest group were the 38% who believe 'politics' and Brussels to be the main driver.
- However, these views vary dramatically across Europe, with 58% of Germans saying it is political, compared with 23% of Italians. Similarly, businesses held widely differing opinions, with 42% of banks stating it is political compared to 25% of the technology firms.
- Some 37% of respondents believe the biggest barrier to the PSD's success is national protectionism. If this is the major barrier then many people believe it is compounded by the ability to use 'additional optional services' and derogations, which are allowable under the PSD's transposition, to protect historical national interests.
An evolution process
This is why the European Commission has made it clear that there will be a review of the PSD's progress in 2012. There will also be an evaluation of the legislation and a report showing how the PSD has been implemented and any issues in the transposition process that should be revisited.
In other words, a second PSD. And yes, in case you wondered, this is highly likely as we already have an Undertakings for Collective Investment in Transferable Securities IV, a Basel III and a Markets in Financial Instruments Directive II on the cards, so the continual evolution of legal contents that materially impact the costs and structures of banking is par for the regulator's course.
It just makes our jobs a bit more of a headache than they should be, but c'est la vie.
Chris Skinner is an independent financial commentator and chairman of London-based The Financial Services club (www.thefinanser.com)
