EN    EN EN 
EN    EN  COMMISSION OF THE E UROPEAN COMMUNITIES 
Brussels, 13.10.2008 
SEC(2008) 2599  
  
COMMISSION STAFF WORKING DOCUMENT 
Accompanying document to 
 
the proposal for a Regulation of the European Parliament and of the Council 
on cross-border payments in the Community 
  
EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT 
{COM(2008) 640} 
{SEC(2008) 2598} 
EN 2   EN 1. INTRODUCTION  
The smooth and efficient functioning of payment systems is indispensable for the internal 
market. Efficient payment systems are of system ic importance for Europe's competitiveness, 
the facilitation of economic tran sactions and the conduct of m onetary policy. The integration 
of payments markets in the EU was identified in 2000 as one of the key measures to achieving 
the goals of the Lisbon Agenda. 
With the launch of the Economic and Monetary Union (EMU) it became evident that there is 
a need for a modern, stable and efficient pa yment infrastructure to assist cross-border 
electronic payments within the EU. In the abse nce of initiatives by the payments industry to 
develop the necessary pan-European processing  infrastructures and lower the charges for 
cross-border payments, the Commission decided to act.  
Regulation (EC) No 2560/2001 of the European Parliament and of the Council on cross-
border payments in euro ('Regulation 2560') entered into force on 31 December 2001. The Regulation applies to credit transfers, ATM cash withdrawals and card  payments made in 
euro up to the amount of EUR 50 000. It guarant ees that, when a consumer makes a cross-
border electronic payment in euro, it costs hi m the same as making a corresponding payment 
in euro within his own Member State. Regula tion 2560 can be considered as a kick-off for the 
establishment of an integrated market for euro payments. 
This impact assessment builds on the extensive preparatory work and co nsultations that have 
been carried out by the Commission and follows the conclusions of the February 2008 report 
to the European Parliament and to the Council on the application of Regulation (EC) No 2560/2001 on cross-border payments in  euro. The report identified three main 
problems as concerns the Regulation, which are di scussed in detail in the impact assessment. 
These are: 
– risk of high charges, market fragmentat ion and inconsistent legal regime for cross-border 
direct debits ;  
– low efficiency  of cross-border payments, an unlevel playing field and higher costs of 
payments resulting from the settlement-based statistical reporting obligations ; 
– a lack of national competent authorities  in charge of applying the Regulation and absence 
of out-of-court redress bodies  for disputes related to it. 
In addition, this Impact Assessment takes in to account recent developments in the retail 
financial markets, including the gradual em ergence of the Single Euro Payments Area 
(SEPA), and the Commission's commitment to align the text of the Regulation with the Payment Services Directive (D irective 2007/64/EC of the Europ ean Parliament and of the 
Council on payment services in the internal market – PSD). 
EN 3   EN 2. PROBLEM DEFINITION  
2.1. Risk of high charges, market fragment ation and inconsistent legal regime for 
cross-border direct debits 
When Regulation 2560 was adopted, cross-border dire ct debits did not exist. Therefore, they 
were not covered by its scope. However, the PSD provides the necessary legal framework making it possible to set up cross-bo rder direct debits. If direct debits were left outside the 
scope of the revised Regulation, th ere would be a serious inconsis tency in the internal market, 
since an important electronic payment instrument  would be allowed to have different prices 
for cross-border and national transacti ons, whereas other instruments would not. 
Direct debits constitute around 25 % of all non-cash payments transactions in the EU. 
According to the Commission estimates the va lue of cross-border di rect debits could 
relatively quickly reach some EUR 250 billion annually. 
The fact that direct debits, unlike other el ectronic means of payment, are currently not 
covered by Regulation 2560 presents a clear risk of having different pricing for national and 
cross-border direct debits. Individual financial institutions are, in the SEPA and PSD context, 
free to differentiate prices on a cross-border basis. The incr eased profit opportunities may 
well lead them to apply such a strategy. The pr ice difference could distort the functioning of 
an important part of the EU market in paymen ts, perpetuating its current fragmentation along 
national lines. If the prices of cross-border and national direct debits were not equalised, there 
would be no incentive for the payment service providers to quickly mi grate to modern and 
cost-effective SEPA infrastructures, as any co sts could be recovered from the consumers and 
businesses. 
2.2. Low efficiency of cross-border payments, unlevel playing field and higher costs 
of payments resulting from the settlement -based statistical reporting obligations 
Community legislation and European Central Bank acts require Member States to collect 
statistics on the balance of payments (BoP). However, the methodology adopted by 
Member States varies. The methods used can  be classified in two broad categories: 
– systems based on direct reporting and surveys , which collect the information directly 
from resident enterprises and households  involved in the economic activities; 
– systems based on settlements (payments), which collect the information through 
intermediaries, i.e. the banks  executing the payment orders. 
Regulation 2560 introduced an exemption from  BoP statistical repo rting based on bank 
settlements up to a threshold of EUR 12 500. This  speeded up the change to systems based on 
direct reporting, as no threshold ap plies when this method is used. 
At the beginning of 2008, 14 Member States were using direct reportin g/surveys to compile 
their balance of payments statistics, while 13 Member States relied on settlement-based BoP 
reporting. Six countries of the latter group decided to raise the threshold to EUR 50 000 on a 
voluntary basis, while the remaining seven c ontinued to apply the EUR 12 500 threshold. 
Seven out of the 13 countries applying settleme nt-based reporting are currently in the process 
of migrating or designing th e changeover towards the direct  reporting/survey collection 
method.  
EN 4   EN Statistical reporting arrangements differ across those 13 Member States. This seriously affects 
the efficiency of EU payment systems, sin ce it means that, in many cases, fully automated, 
straight-through-processi ng of cross-border payments above the exemption threshold may not 
be possible. According to estimates made by the national banking a ssociations, around 50 % 
of the payments subject to reporting require manual intervention, which significantly increases the costs and time needed for processing. 
Consequently, the settlement-based BoP reporti ng has a clear EU policy dimension, as this 
collection method constitutes a barr ier to the creation of the inte rnal market in payments and 
perpetuates the administratively imposed di stinction between natio nal and cross-border 
payments. From a competition perspective, a di stinction between payments made within and 
between Member States creates an unlevel pl aying field for paymen t services providers 
located in different Member States. It furthe r limits competition by creating barriers to entry, 
which could be too high for some categor ies of the payment service providers. 
The burden of reporting and of maintaining th e reporting infrastructure has a significant 
impact on the costs of credit tran sfers. For example, according to  the assessment of the Italian 
Banking Association, the direct cost of BoP reporting is ar ound EUR 3.40 for every single 
cross-border credit transfer . Calculations made by the Spanish banking industry indicate 
similar values (around EUR 3 per credit transfer). 
Moreover, the usefulness and accuracy of re porting based on settlements may gradually 
decline. When the SEPA project is fully implemented, payments data will often no longer reflect the underlying economic tran sactions, as economic agents will  be able to make all their 
payments through one account, not necessarily s ituated in the Member State where they are 
physically located. This may in turn have an impact on the relia bility of BoP data provided 
through settlement-based reporting and used for va rious purposes at the EU level, for example 
when preparing trade negotiations or in itiating excessive deficit procedures. 
2.3. Lack of explicit reference to the nation al competent authorities in charge of 
applying the Regulation and to the out-of-court redress bodies for Regulation-
related disputes  
Out-of-court redress bodies for consumer complain ts exist in all Member States. Nevertheless, 
in some Member States, they refuse to handl e complaints related to Regulation 2560, giving 
as their reason that they  have not been empowered to do so in their national legal system. As a 
result, in some countries the complainant sti ll has to go to court to seek redress. For a 
customer domiciled in another state, this cause s difficulties and is questionable in terms of 
cost/benefit.  
As regards the competent authorities, the majority of Member States have informally 
communicated to the Commission the identity  of the competent authority in charge. 
Nevertheless, in some situati ons, where a general problem of incorrect application of the 
Regulation has been identified, some Member St ates have refused to address the problem, 
arguing that they had no le gal obligation to do so.  
3. O
BJECTIVES  
The general objective  of the review of the Regulation is to achieve an Internal Market for 
payment services in euro, subject to effective competition and where there is no distinction between cross-border and national payments, thereby providing significant savings and 
benefits to the wider European economy. In or der to achieve this general objective, three 
EN 5   EN operational objectives  have been identified: (1) eliminate the administrative obstacles 
hampering the efficient functioni ng of the internal payments market (2) extend the guarantee 
of equal prices for national a nd cross-border payments to include  direct debits and (3) ensure 
the consistency of European payments legislati on and its applicability in the Member States. 
This would lead in the medium term to the achievement of the specific objectives  which seek 
to encourage and facilitate the use of cross-border electronic payment services by consumers 
and businesses, secure a level playing field from a competition perspective, enhance legal certainty as regards cashless payments in euro and reduce the costs of payments for European consumers, businesses and pa yment service providers. 
4. T
HE IMPACTS  
4.1. Impacts related to the extension of the scope to direct debits 
The options in terms of extending the scope of the Regulation to include direct debits are: 
(1) not to extend the scope of the Regulation to  direct debits (2) encourage industry self-
regulation and/or recommend regulator y action by Member States and (3)  extend the scope of 
the Regulation, by means of legislati on, to cover direct debit payments.  
In Option 1, payment service providers have the possibility to set different prices for national 
and cross-border direct debit payments. Many ar e likely to do so. As a result, direct debit 
would most probably not achieve its full cros s-border potential (other, regulated payment 
instruments would be used) and th e social benefits of the Intern al Market in payments (low 
payment prices) would be reduced. 
In Option 2, the payments industry is encourag ed to adopt, through self-regulation, the same 
prices for national and cross-border direct debit tr ansactions. As an alternative, or in parallel, 
the Commission would issue a Recommendation to  the Member States, inviting them to 
equalise the charges. The equa lisation of charges would exte nd most probably only to some 
Member States and/or banks, with the result th at fragmentation of the EU payments market 
would persist. The social benefits of the internal market would still be lower than they could 
be. 
Under Option 3, the prices charged for a national direct debit and a cross-border direct debit 
are the same within each Member State. C onsumers would be protected from the possible 
discriminatory pricing of cross-border direct de bits. European enterpri ses would benefit even 
more, since businesses act also in a payee capac ity. As a result of the equalisation of prices, 
payment transaction costs for businesses woul d be the same, irrespective of the payer's 
location.  
4.2. Impacts related to BoP reporting 
The options related to BoP reporting are (1) ma intain the existing exemption threshold of 
EUR 12 500, (2) create a voluntary additional Optional Service (AOS) Community within 
SEPA that would enable the collection of sta tistical data from settlements to continue, 
(3) encourage voluntary adjustments by the Member  States and (4) address the BoP reporting 
problems through legislation, with three sub-opti ons: (4a) raise the exemption threshold to 
EUR 50 000; (4b) abolish the BoP reporting obligations imposed on payment service 
providers; and (4c) raise the exemption thre shold to EUR 50 000 and, in a second phase, by 
January 2012, abolish BoP reporting based on settlements. 
EN 6   EN Under Option 1 the unlevel playing field for competition between payment service providers 
continues to exist and the efficiency of the in ternal market in payments is hampered by the 
reporting on cross-border payments. Consumer s and businesses in the 13 Member States 
where reporting is maintained continue to face higher charges (either directly, through pricing 
of payment services or indir ectly, through higher account serv ice fees and/or other related 
charges). 
Option 2 would make it possible to continue the statistical reporting base d on payments in the 
SEPA environment and enable automated pa yment processing. It would reduce costs of 
settlement-based reporting and raise the exemption threshold to EUR 50 000 for the 
voluntarily participating Member States. Howe ver, the fixed costs of maintaining the 
reporting infrastructure would still constitute an  important financial burden for banks, and the 
different treatment of national and cross-bord er payments would be maintained. Data on 
payments incoming from non participating Member  States (a majority  of Member States 
would not join the AOS, as it is not necessary for them) would also be unavailable.  
Under Option 3 the negative developments de scribed in Option 1 would be somewhat 
mitigated, although the degree to which they di sappear would depend on the reaction of the 
Member States.  
If the exemption thre shold is raised to EUR 50 000 (Opt ion 4a), a greater homogeneity 
between the EU members would be achieved, as the distortions of competition -at least for 
retail payments - are reduced. However, main tained reporting would still constitute an 
important barrier for cross-border payments. 
In Option 4b the costs of payments would be reduced to the maximum possible extent, no 
administrative distinction woul d be made between national a nd cross-border payments, and 
the level playing field for payment service providers would be achieved from a competition perspective. The use of cross-border payment services, especially fo r businesses, would be 
facilitated.  
Option 4c would present the same benefits as  Option 4b, the only difference being that the 
BoP requirements would be phased out, after an  initial phase during which the reporting 
threshold would be raised. This would allow the BoP compilers to gradually adapt their 
collection methods to the necessa ry changes, thus minimising the impact on the quality of the 
BoP statistics. 
4.3. Impacts related to the competent authorities and out-of-court redress 
The options related to the comp etent authorities and out-of-cour t redress bodies are (1) do not 
appoint competent authorities and out-of-cour t redress bodies and (2) appoint competent 
authorities and out-of-court redress bodies to deal w ith the Regulation issues. 
Under Option 1 the unavailability of a clear wa y of ensuring quick and cost-efficient redress 
would be detrimental to the consumer and to the efficiency of the internal market in 
payments. It would create a legal inconsiste ncy between the PSD and the Regulation and 
cause confusion in cases of payments fal ling under both payment laws. As regards the 
competent authorities, the lack of a clearl y appointed administrative body supervising the 
application of the Regulation w ould make it much more time c onsuming and difficult for the 
Commission to address any misint erpretation or market failure concerning the application of 
the Regulation. 
EN 7   EN In Option 2, Member States would be requested  to indicate which competent authorities 
would be responsible for the correct applic ation of the Regulation at national level. 
Consumers and businesses would have the possibi lity to limit the legal costs of judicial 
intervention and to acc elerate the resolution of payment disputes through arbitration and 
mediation.  
5. CONCLUSIONS  
The following are the preferred options fr om the Community policy point of view: 
(1) extension of the scope of Regulation 2560 to include direct debits; (2) phasing-out of the 
payments-based reporting obligations by Janua ry 2012; and (3) appointment of competent 
authorities and out-of- court redress bodies. 
The proposed amended Regulation would be ali gned with the wording and the definitions 
used in the PSD, so as to ensure legal consis tency and clarity between both payment laws.