EUROPEAN COMMISSION Brussels, 28.3.2018 SWD(2018) 84 final COMMISSION STAFF WORKING DOCUMENT



IMPACT ASSESSMENT

Accompanying the document Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EC) No 924/2009 as regards certain charges on cross-border payments in the Union and currency conversion charges {COM(2018) 163 final}

{SWD(2018) 85 final}



Contents 1.Introduction 1.1.Policy context and scope of the initiative 1.1.1. Background 1.1.2. Market context 2.Problem definition 2.1.Problem description 2.1.1. Expensive fees for cross-border payments - a market analysis 2.1.2. Two categories of payment services users in the EU 2.1.3. Restrictions to the Single Market: use cases that would benefit from reduced prices for cross-border transaction and volumes 2.1.4. Views of payment services users 2.1.5. Summary 2.2.What are the problem drivers? 2.3.How will the problem evolve? 2.4.A two-speed market based on a two-speed infrastructure 2.5.Why have Member States used or not-used the opt-ins of Regulation 924/2009? 2.6.What is not covered under this Impact Assessment? 2.7.Limits to the Impact Assessment 3.Why should the EU act?

3.1.Legal basis 3.2.Subsidiarity: Necessity of EU action 3.3.Subsidiarity: Added value of EU action 4.Objectives: What is to be achieved? 4.1.General objective 4.2.Specific objectives 5.What are the available policy options? 5.1.The Baseline scenario – Do nothing 5.2.Option 1: Extending Regulation 924 to local currencies cross-border transactions 5.3.Option 2 – Extending Regulation 924 to local currencies and euro cross-border transactions 5.4.Option 3 – Extending Regulation 924 only to euro cross-border transactions 5.5.Option 4 – Extending Regulation 924 to all cross-border transactions in currencies of Member States of the EU. 5.6.Option discarded at an early stage 6.What are the impacts of the policy options? 6.1.Overview of potential benefits and costs 6.1.1. Potential benefits 6.1.2. Potential indirect benefits 6.1.3. Overview of costs 6.2.Baseline scenario 6.3.Option 1: Extending Regulation 924 to local currencies

6.3.1. Benefits 6.3.2. Costs 6.3.3. Overall assessment 6.4.Option 2 – Extending Regulation 924 to local currencies and euro cross-border payments 6.4.1. Benefits 6.4.2. Costs 6.4.3. Overall assessment 6.5.Option 3 – Extending Regulation 924 only to euro cross-border payments 6.5.1. Benefits 6.5.2. Costs 6.5.3. Overall assessment 6.6.Option 4 – Extending Regulation 924 to all currencies of Member States of the EU 6.6.1. Benefits 6.6.2. Costs 6.6.3. Overall assessment 7.How do the options compare? 8.Preferred option 8.1.Impact on SMEs 8.2.Impact on Currency Conversion 8.2.1. The two currency conversion models

8.2.2. Risk of costs passed on towards non-transparent factors 8.2.3. Solution: Further transparency requirements to achieve comparability through Regulatory Technical Standards 8.3.Impact on competitiveness 8.4.Subsidiarity and Proportionality 8.5.UK leaving the EU 8.6.REFIT: Simplification and improved efficiency 9.How will actual impacts be monitored and evaluated? 1.Annex 1: Procedural information 1.1.Lead DG, Decide Planning/CWP references 1.2.Organisation and timing 1.3.Exceptions to the better regulation guidelines 1.4.Consultation of the Regulatory Scrutiny Board 1.5.Evidence, sources and quality 2.Annex 2: Stakeholder consultation 3.Annex 3: Who is affected and how? 3.1.Practical implications of the initiative 3.2.Summary of costs and benefits 4.Annex 4: A Market Analysis 4.1.Electronic transactions within the EU 4.2.Cross-border electronic transactions from EU Member States

4.3.The currency of cross-border transactions 4.4.A two-speed market based on a two-speed infrastructure 4.5.The Swedish case 4.6.Further information on estimates used for calculations on potential savings 5.Annex 5: Detailed legislative framework 6.Annex 6: Evaluation of Regulation 924/2009



Glossary Term or acronym Meaning or definition Card payment A payment based on a payment card scheme's infrastructure and business rules to make a payment transaction by means of any card, telecommunication, digital or IT device or software if this results in a debit or a credit card transaction. Cash withdrawal A transaction allowing a cardholder to retrieve cash from its bank account through the use of a card. Credit transfer A payment service for crediting a payee’s payment account with a payment transaction or a series of payment transactions from a payer’s payment account by the payment service provider which holds the payer’s payment account, based on an instruction given by the payer. Direct debit A payment service for debiting a payer’s payment account, where a payment transaction is initiated by the payee on the basis of the consent given by the payer to the payee, to the payee’s payment service provider or to the payer’s own payment service provider. Money remittance A payment service where funds are received from a payer, without any payment accounts being created in the name of the payer or the payee, for the sole purpose of transferring a corresponding amount to a payee or to another payment service provider acting on behalf of the payee, and/or where such funds are received on behalf of and made available to the payee. ACH Automatic Clearing Houses ATM Automated Teller Machine BGN Bulgarian lev BIC Bank Identifier Code CZK Czech koruna DKK Danish krone ECB European Central Bank EPC European Payment Council EU European Union EUR Euro GBP British pound sterling HRK Croatian kuna HUF Hungarian forint IBAN International Bank Account Number IFR Regulation (EU) 2015/751 of the European Parliament and of the Council of 29 April 2015 on interchange fees for card-based payment transactions PLN Polish złoty PSD / PSD2 Directives 2007/64/EC and EU 2015/2366 on payment services in the internal market PSP Payment Services Provider PSU Payment Services Users (consumers, businesses, sending or receiving payments) Regulation 924 Regulation 924/2009 on cross-border payments in the Community RON Romanian leu SEK Swedish krona SEPA Single Euro Payment Area STP Straight Through Processing TIPS Target Instant Payment Settlement USD United States dollar



1.Introduction Efficient and low-cost payments are a key enabler of the Single Market: they build trust between parties and facilitate exchanges across borders within the Single Market. Cross-border transactions within the European Union (EU) are usually cheap in euro within the euro area but can remain dissuasively expensive when they are sent or received in euro outside the euro area or when they involve other currencies of Member States of the EU. Since the introduction of the euro, the European Union has launched various initiatives to achieve a significant reduction in the costs of cross-border transactions, such as through the introduction of a set of standards for euro transactions (SEPA Credit Transfers and SEPA Direct Debits). Additionally, the Payment Services Directives increased the transparency of fees and allowed new players to enter the market. This contributed to enhanced competition in payments, including across borders, and increased the transparency of fees. This also resulted in improvements in the payments infrastructure, which became capable of handling increased payment volumes in euro at lower costs. Regulation 2560/2001, later replaced by Regulation 924/2009 on cross-border payments (hereafter "Regulation 924"), also contributed to this development by equalising fees for cross-border and national payments in euro within the EU. As indicated in the first recital of Regulation 924, "for the proper functioning of the internal market and in order to facilitate cross-border trade within the Community, it is essential that the charges for cross-border payments in euro are the same as for corresponding payments within a Member State." The Regulation covers all electronic payments: credit transfers, direct debits, card payments and cash withdrawals. All these initiatives contributed to the further integration of the Single Market and the emergence of a more integrated payments market within the euro area. They have brought the fees for euro payments within the euro area to very low levels, in the vast majority of cases. However, cross-border euro payments originating from non-euro area countries as well as cross-border non-euro payments, whatever the country of origin or destination, have not followed the same trend when it comes to the level of fees paid by payment services users. Payments involving currencies of EU Member States other than the euro are currently not covered by Regulation 924 although it does explicitly foresee the possibility for non-euro area Member States to extend the scope of the regulation to their currencies: ·Under articles 3.1 and 14, the Regulation can be extended to local currencies other than the euro so that a cross-border transfer in a non-euro currency is priced as an equivalent domestic transfer in this non-euro currency (e.g. a 100 SEK Swedish krona transfer from Sweden to France is priced as a 100 SEK Swedish krona transfer within the country). ·Under article 3.3, and in addition to the previous option, the Regulation allows Member States to require that a cross-border transfer in euro is priced as a domestic transfer in a non-euro currency (e.g. a 100 Euro transfer from Czech Republic to France is priced as an equivalent 2500 CZK Czech koruna transfer within the country – [currency exchange rate 1€ = 25 CZK]) – currency conversion costs are excluded). No Member State opted-in under this article.

Sweden is the only Member State that applied the first option, and did so already in 2002 (under the predecessor Regulation 2560/2001), extending the scope of application of Regulation 924 to its national currency. It reduced the prices of cross-border transactions in SEK, aligning them with prices for domestic transactions. An indirect effect in Sweden was that euro cross-border transaction fees were also aligned with domestic payments. The European Commission Action Plan on Consumer Financial Services, published on 23 March 2017, stressed "that opaque and potentially excessive fees are a deterrent to cross-border transactions within the EU, particularly when they involve non-euro currencies" and announced that it would "propose an amendment to the Regulation on cross-border payments to reduce charges for cross-border transactions in all Member States". This action was supported by the feedback received during the Open Public Consultation on the Green Paper on retail financial services that was carried out between 10 December 2015 and 18 March 2016 (14 weeks). The consultation sought views on how to improve choice, transparency and competition in retail financial services for the benefit of European consumers and on how to facilitate cross-border provision of these services. The issue of cross-border payments was covered by two questions (#12 on cross-border payments and #13 on currency conversion). Question 12 was of particular relevance in the context of this Impact Assessment: "What more can be done at EU level to tackle the problem of excessive fees charged for cross-border payments (e.g. credit transfers) involving different currencies in the EU?" The summary of responses states that "on the specific subject of cross-border payments, most consumers agreed in their answers to questions on cross-border transaction fees (Question 12) […] that transparency should be increased. They are also supportive of extending Regulation (EC) 924/2009 (equalising the prices of domestic and cross-border transactions in euro) to all currencies. But industry and some national authorities expressed confidence that the revised Payment Services Directive (2015/2366/EU) would bring the necessary transparency and suggested that no other measures should be considered at this stage". In total, 265 answers were received for Question 12, 108 from private individuals, 16 from public authorities and 141 from organizations or companies. Closely linked to the initiative to address the excessive fees of such cross-border transactions between euro area Member States and non-euro area Member States was the second action of the Action Plan on Consumer Financial Services, which aimed to address the lack of transparency in currency conversion practices. The Action Plan considered that: " Currency conversion rates are generally not transparent for consumers when paying with a card or a mobile device in a shop, or withdrawing money from a cash machine [and these] rates fluctuate in line with foreign exchange rates, and the internal bank margin applied to currency conversion rates differs from bank to bank." Between 24 July and 30 October (14 weeks), a second, more specific Open Public Consultation entered into details regarding prices of cross-border transactions for payment services users, costs for payment services providers and available options. The Open Public Consultation also contained several questions on the transparency of currency conversion, and consumers' awareness in choosing a specific option of currency conversion. The results confirmed those of the first consultation and provided further useful evidence on prices paid by payment services users. This second consultation attracted 141 answers. The synopsis of answers is provided in Annex 2. Later in 2017, in its report on the Action Plan on Consumer Financial Services adopted on 14 November, the European Parliament supported the extension of Regulation 924/2009 recalling that fees for cross-border payments outside the euro area still remained high and called on the Commission to "rapidly propose an amendment to Regulation (EC) No 924/2009 of the European Parliament and of the Council of 16 September 2009 on cross-border payments in the Community and repealing Regulation (EC) No 2560/2001 in order to reduce charges for cross-border transactions in all Member States ". 1.1.Policy context and scope of the initiative 1.1.1.Background What are cross-border transactions? Cross-border transactions are understood within this document as electronic payment transactions that involve two Member States of the EU. These Member States may have the same currency (the euro) or different ones. The transaction can both be initiated in a euro area or non-euro area Member State and will be concluded in a different euro area or non-euro area Member State. The cross-border dimension is defined by the fact that the payer's account and the payee's account are located in two different Member States. The transaction might involve a currency conversion at one point in time and would thus be cross-currency in addition to being cross-border. Which means of payments are covered? Regulation 924/2009 covers cross-border electronic payment transactions. An electronic transaction under this document means any payment which is processed electronically by the payment service provider. This includes the following means of payments: ·Credit transfers which are transactions from a payer’s payment account to a payee's payment account, based on an instruction given by the payer to its payment service provider (e.g. a German citizen sending a credit transfer to Malta); ·Direct debits which are transactions initiated by the payee on the basis of the payer’s consent (e.g. a Belgian company debiting customers in France); ·Card payments which are transactions by means of any card, telecommunication, digital or IT device or software resulting in a debit or a credit card transaction based on a payment card scheme's infrastructure and business rules (e.g. a Hungarian citizen using his payment card in France) ; and ·Cash withdrawals – a withdrawal of banknotes by a payment service user from its payment account (e.g. an Estonian citizen withdrawing CZK notes in the Czech Republic). The legislative framework Cross-border payments are covered by various EU laws that have all followed the same objective: creating the conditions for cheap, efficient and secure payments within the EU, as the backbone of the EU's internal market. A detailed description of relevant European legislation is provided in Annex 5. The main pieces of legislation are the following: ·Regulations 2560/2001 and 924/2009 on cross-border payments imposed the equalisation of cross-border and domestic fees for euro payments.

·The Single Euro Payments Area (SEPA) Regulation created a common and unique way to pay in euro across the EU. ·The Payment Services Directives (PSD1 & PSD2) enhanced competition and security in payments. ·The Interchange Fee Regulation regulated excessive hidden interchange fees and put an end to competition in cards that drove up costs for consumers. 1.1.2.Market context Electronic transactions within the EU Cross-border transactions are offered by payment services providers defined under article 1 of the Payment Services Directive, essentially banks and other payment institutions such as e-money institutions. Banks provide current accounts to their customers (consumers, enterprises) that are linked to additional services such as the issuing of a debit or credit cards and the capacity to make and receive payments, domestically or cross-border. Payment institutions also provide these services. Based on the statistics provided by the European Central Bank, the total number of non-cash payments that take place within the EU is about 120 billion payments a year. Around 2/3 of these payments are in the euro area, and 1/3 outside the euro area. Card payments (including cash withdrawals) represent around half of the total number of payment transactions, followed by credit transfers for 1/4 and direct debits for about 1/5 of this total. Cheques still account for a small share of the total number of payments with 2.5%, but they are not considered as electronic payments. The total value of payments was of 267.8 trillion EUR in 2016, with credit transfers accounting for more than 98% of this total. Cross-border electronic transactions from EU Member States Cross-border electronic transactions account for a relatively small percentage of the number of electronic payments with about 7 billion transactions (around 6% of the total number of transactions) but represent quite large volumes with 35 trillion EUR (around 13% of the total values transacted). Details are provided in Annex 4. Cross-border transactions account for around 2% of the number of credit transfers, 9% of the number of card payments and 3% of the cash withdrawals. However, looking at values results in a quite different picture: up to 28% of the value of credit transfers in Italy is cross-border as well as 35% of the value of card payments with Bulgarian cards or 15% of the value of cash withdrawals made with Swedish cards. In the case of credit transfers, corporate payments may explain the relatively high values transferred per transaction. The high minimum costs of transactions also deter small cross-border credit transfers so that payment services users will only tend to transfer larger values. Overall, cross-border payments, though relatively marginal in terms of number of transactions are, in reality, hugely important within the EU economy, with relatively larger values transacted across borders, probably largely due to corporate payments. Among euro area Member States, cross-border transactions account for about 1/4 of the total values transacted. Such a discrepancy between the number of transactions and the values transacted does not exist for card payments and cash withdrawals which are in their vast majority retail payments. Cross-border card payments account for about 9% of the number of card payments (slightly higher in non-euro area Member States) and 10% and 14% of the transaction values for euro area and non-euro area Member States respectively. Cross-border cash withdrawals make up for about to 2% to 3% of both the number of transactions and the values transacted. One exception is Sweden where the use of cash (and hence cash withdrawals) has strongly decreased nationally; as a result, cross-border volumes are very significant (8.66% of transactions) compared to domestic volumes. Electronic payments are following a sustained growth trend in all EU Member States. While the average growth in the number of domestic transactions was 16% between 2014 and 2016, cross-border payments grew by 56% over the same period. The total value of domestic transactions rose by 13% between 2014 and 2016, compared to an increase of 23% for cross-border payments. In which currency do these cross-border transactions take place? It is important to understand in which currencies these cross-border transactions are carried out, and in particular how important transactions in EUR are compared to other currencies of Member States of the EU or other foreign currencies (USD, CHF and others) in order to grasp the potential impact of the initiative. Thus, this proposal deals with transactions that are currently not covered by the Regulation or remain expensive in spite of being covered, as in the case of euro transactions to and from non-euro Member States (Regulation 924 requires them to be priced like domestic EUR transactions, but these remain expensive in non-euro zone countries). Only limited detailed official statistics exist on intra-EU transactions, while such data for extra-EU transactions is more easily available. However, various sources can be used to provide estimates. All details related to these estimates are included in Annex 4. Figures are extracted from ECB public databases. As Regulation 924/2009 is limited to intra-EU transactions in currencies of Member States of the EU, our estimates of cross-border payments in the EU by area and type of transaction – in volumes (last line in table 1 below) limit the scope of this analysis to four types of transactions: cross-border non-euro transactions from euro area Member States and cross-border transactions from non-euro Member States in euro, local currency and other currencies of EU Member States. Overall, 44.09% of the cross-border payments in the EU are already covered by Regulation 924; these are the euro payments from euro area Member States. The remainder, 55.91%, also includes extra-EU transactions (about 10%), mostly in USD and CHF with the rest of the world. Within this second category, the scope that could be covered by Regulation 924 is composed of the remaining four types of transactions: ·non-euro intra-EU cross-border transactions from euro Member States which account for 23.49% of the potential scope; ·euro intra-EU cross-border transactions from non-euro Member States which account for 61.41% of the potential scope; ·local currency intra-EU cross-border transactions from non-euro Member States which account for 0.40% of the potential scope of transactions; and

·other EU currencies intra-EU cross-border transactions from non-euro Member States which account for 14.70% of the potential scope of transactions.



Table 1: Cross-border payments in the EU by area and type of transaction – in volumes (full table in Annex 4 – source: ECB payment statistics) Cross-border payments in the EU by area and type of transaction Sent from 19 euro area Member States + Sweden 360 million citizens and 16,3 million enterprises 8 non-euro area Member States 150 million citizens and 6 million enterprises Type of transaction Euro intra-EU Other EU currency intra EU Other currencies (USD, CHF…) Euro intra-EU Local currency intra-EU Other EU currency intra EU Other currencies (USD, CHF…) Credit transfers (millions) 302 60 40 149 12 18 20 Card payments (millions) 2333 583 324 1555 0 389 216 Cash withdrawals (millions) 187 47 26 101 0 25 14 Total transactions (millions) 2822 690 390 1805 12 432 250 Share of the total number of transactions 44.09% 10.79% 6.10% 28.20% 0.19% 6.75% 3.90% Share of the scope that could be covered by Reg 924 Already covered 23.49% Out of scope 61.41% 0.40% 14.70% Out of scope Which concrete everyday operations are covered by the scope of cross-border transactions? Who is the most affected? Cross-border payments within the EU represent a substantial part of total EU payments and underpin the integration of the real EU economy. These transactions cover a limited number of use cases which are the following: ·Consumer cross-border credit transfers (in euro or in local currency, sending or receiving): EU consumers buying goods or services abroad or simply transferring money to other people (family, friends) may use credit transfers in euro (SEPA credit transfers) or other currencies of Member States of the EU to send or receive payments. A student receiving a EUR 1000 monthly allowance from his family located outside the euro area to study in a euro area country would generate about EUR 100 per year of transactions fees that could strongly be reduced (to 0 or close) if cross-border and domestic fees were aligned. In addition, credit transfers have gained in popularity over the last three years with payment services providers launching smartphone applications to pay friends and relatives or even to pay merchants in some countries. These payment solutions are based on credit transfers, often using phone numbers linked to the IBAN numbers of the payment services users: Swish (SE), Jiffy (IT), Pumpkin (FR), PayM (UK), MobilePay (DK) are among the most prominent ones. These solutions typically facilitate domestic credit transfers, but efforts are underway, notably in the Mobile Proxy Forum, to make them interoperable at EU level. Lower cross-border fees would further encourage their development. ·Business cross-border credit transfers (in euro or in local currency, sending or receiving): EU businesses of any size with cross-border links have to make cross-border transfers to suppliers or receive money from clients located abroad, in their domestic currency or in a currency agreed with their business partners. Payment services users particularly commented on this point in the open public consultation: "Our bank charges a 25 euros fee for all bank transfer in euros that we make to other EU countries. This is strongly affecting us when we implement cross-border Erasmus+ projects" or "After years of living in Germany I returned to my hometown in Bulgaria and started my business there. My business partners are located in other EU countries. I was shocked to learn there are excessive transaction fees. Even in private matters: depending on the bank, sometimes you have to pay 10€ to transfer 10€." ·Card payments and cash withdrawals: EU consumers or professionals travelling across the EU or making cross-border e-commerce purchases will also most probably pay with their debit or credit cards (in euro or in the local currency of the merchant) or withdraw cash (in the currency of the country where the withdrawal is made) in order to pay for goods and services in the country where they are located.

2.Problem definition Cross-border payments are crucial for the integration of the EU economy. They play an important role in bringing together citizens and enterprises of EU Member States. Restrictions and excessive costs affecting cross-border payments are an impediment to the completion of the Single Market. Overall, cross-border payments that are not done in euro and between euro Member States are subject to high fees that act as barriers to the further integration of the Single Market. These barriers particularly impact non-euro area Member States, creating two categories of payment services users in the EU: the vast majority who enjoy the benefits of the Single Euro Payments area and a minority living in comparatively small currency areas with high costs for all their cross-border transactions. The problem is not restricted to those living outside the euro area, as euro area citizens and enterprises will also face expensive fees for transacting cross-border in any other currency than the euro. Non-euro area citizens living in the euro area will also suffer from excessive costs when sending or receiving payments to or from their country of origin. The problem is also not limited to the size of the payment service provider processing the transaction. Not only small banks that only process cross-border payments very occasionally, but also large banks that are most likely to engage in cross-border payments charge high fees, as will be demonstrated throughout this impact assessment by figures extracted from the top three to seven banks in non-euro area countries. 2.1.Problem description 2.1.1.Expensive fees for cross-border payments - a market analysis Cross-border credit transfers from euro area Member States towards other EU Member States The fees for cross-border credit transfers in the EU will depend on the currency used for the transaction. In euro area countries, cross-border credit transfers in euro are most often free or close to free and aligned with domestic prices, as required by Regulation 924. Table 2: Min/max fees for making or receiving a EUR 10 credit transfer, cross-border and domestic, in euro in three EU Member States (Source: Deloitte study 2017 for EC) Member State France Italy Germany EUR 10 credit transfer Min Max Min Max Min Max Cross-border credit transfer Incoming 0 0 0 First 36 free, then 2.25€ 0 0.41 Outgoing 0 0 First 36 free, then 2€ First 6 free, then 4.50€ 0 0.05 Domestic credit transfer Incoming 0 0 0 First 36 free, then 2.25€ 0 0.41 Outgoing 0 0 First 36 free, then 2€ First 6 free, then 4.50€ 0 0.05

As soon as another currency than the EUR is used for such transfers, fees become very costly as illustrated below, both for sending and receiving funds. Table 3: Min/max fees for making or receiving a cross-border EUR 10 equivalent credit transfer in another currency of Member States of the EU (Source: Deloitte study 2017 for EC) Member State France Germany Equivalent EUR 10 credit transfer in other EU currency Min (€) Max (€) Min (€) Max (€) Cross-border credit transfer Incoming 0 19.05 0 5.50 Outgoing 9 24.50 5 12.50 Cross-border credit transfers from non-euro area Member States With the exception of euro transactions within the euro area, cross-border transaction costs are still an important impediment to the Single Market. Credit transfer fees, in particular, are a significant cost factor for enterprises and citizens in Europe. Many Europeans – especially in Member States outside the euro area – face very high fees whenever their funds are transferred outside the country or when they receive funds from another EU Member State . These fees are especially disproportionate for transfers of low values. The fees paid by payment services users for initiating cross-border credit transfers of values between EUR 10 and EUR 1000 are illustrated in tables 4 and 5 below. They reflect the minimum and maximum fees of the least and most expensive banks for each country. There are only minor differences between transactions in EUR and transactions in non-euro currencies. Tables 4 and 5: min/max fees for cross-border transfers in local currency and euro. (How to read the table: for a transfer with an amount of between EUR 10 and EUR 1000, a Bulgarian citizen is likely to pay between EUR 15 and EUR 24 of transaction fees) (Source: Deloitte study 2017 for the EC) Member State Cross-border transfer in local currency (transfers of EUR 10 to EUR 1000 equivalent) Member State Cross-border transfer in euro (transfers of EUR 10 to EUR 1000) Fees in EUR Min Max Fees in EUR Min Max Bulgaria 15.00 24.03 Bulgaria 15.00 24.03 Croatia 4.05 10.80 Croatia 4.05 10.80 Czech Republic 8.44 11.51 Czech Republic 7.48 9.59 Denmark 2.69 6.72 Denmark 2.69 6.72 Hungary 4.62 12.38 Hungary 4.62 12.38 Poland 4.74 9.48 Poland 1.19 1.90 Romania 9.86 19.73 Romania 9.86 14.90 Sweden 0 0 Sweden 0 0 UK 0 17.05 UK 4.55 11.37 As shown before, the same transfers in euro from and to any major bank of the euro area have, for several years already, been free or close to free (see figure 1 below). Figure 1: The evolution of the cost of sending EUR 100 cross-border in the euro area, in EUR (Source – EC study accompanying PSD2 ) Receiving payments may also be costly for payment services users in some non-euro area Member States, albeit not to the same extent as sending payments. The fees for receiving payments are also covered by Regulation 924: the fees for receiving cross-border transactions in euro should be aligned with fees for receiving equivalent transactions domestically in euro. As presented under Table 6, receiving fees are much lower than sending fees and in all Member States but two. Taking also into account that receiving fees are only relevant for credit transfers, in order to streamline this analysis, these costs will not be described at length and will be considered as amounting to about 10% of the fees for sending credit transfers. Table 6: Fees in EUR for incoming cross-border credit transfers of EUR 10 or equivalent (denominated in euro, local currency or any other currency of EU Member States – Source: Deloitte study 2017 for EC). Member State Bulgaria Czech Republic Denmark Poland Sweden UK EUR 10 or equivalent incoming credit transfer Min Max Min Max Min Max Min Max Min Max Min Max Incoming Euro 0 0 3.84 7.67 1.34 2.69 0 1.19 0 0 0 1.14 Incoming local currency 0 1.53 3.84 8.63 2.69 6.72 0 2.61 0 0 0 6.82 Incoming other EU currency 0 1.53 3.84 11.51 2.69 6.72 0 2.61 3.15 6.29 0 6.82

Regulation 924 also applies to euro payments in non-euro countries, but euro payments remain expensive within these countries and hence also across borders, even though the payment services providers in non-euro area countries have full access to clearing and settlement infrastructures in euro and thus face the same low costs as payment service providers in euro area countries. Yet, there have been very few signs of significant fee reductions for this type of transactions outside the euro area. The Commission already analysed the effects of Regulation 924 on the market in 2012 covering also non-euro Member States. While the two studies were not done by the same contractor and did not look at the exact same payment services providers, the figures can still be used to compare the average cost of a transaction in 2012 and 2017 and analyse how the market evolved without regulatory intervention. There have not been any significant reductions in fees, with the exception of maybe Hungary and Poland, although the current fees still significantly exceed the typical fees in the euro zone, even in those two countries. Table 7: average fee for a cross-border EUR 100 equivalent transaction between 2012 and 2017 (Sources Deloitte study 2017 for the EC, London Economics and PaySys study 2013 for EC) Average fee for a cross-border EUR 100 equivalent transfer in local currency Year 2012 2017 Bulgaria 18,68 € 19,98 € Croatia N/A 8,23 € Czech Republic 9,50 € 8,71 € Denmark 2,17 € 2,69 € Hungary 15,32 € 5,93 € Poland 2,73 € 1,54 € Romania 12,58 € 11,19 € Sweden 0 € 0 € UK 15,63 € 9,26 € Cross-border card payments and cash withdrawals from euro area Member States Cross-border card payments and cash withdrawals from euro area Member States follow the same logic as credit transfers. In most cases they will be free of charge in euro, within or outside the borders of the country. However, as soon as the transaction becomes cross-currency, fees will apply, in particular for cash withdrawals. Table 8: min/max fees for cross-border card payments and cash withdrawals from three euro area Member States in euro and other currency of Member States of the EU (Source: Deloitte study 2017 for EC) Member State France Italy Germany Transaction Min Max Min Max Min Max Card payment Non-euro cross-border 0.25 1.19 0.10 0.20 1 1.50 Euro cross-border 0 0 0 0 0 0 Domestic 0 0 0 0 0 0 Cash withdrawal Non-euro cross-border 0.43 3.29 4.75 6.13 Euro cross-border First 4 free then 1€ First 3 free then 1€ First 12 free then 2€ First 12 free then 2.10€ 0 5.99 Domestic at ATM group 0 0 0 0 0 0 Domestic at other ATM First 4 free then 1€ First 3 free then 1€ First 12 free then 2€ First 12 free then 2.10€ 0 5.98 Card payments and cash withdrawals from non-euro area Member States The same observations as for credit transfers from non-euro area Member States apply to card payments and cash withdrawals, although the fee difference between euro and non-euro transactions, domestic and cross-border, is smaller, especially for card payments. Table 9: Fees charged to consumers for paying by card and withdrawing EUR 10 (or equivalent) in another EU MS for countries of the EU which do not have the euro as a currency. (Source: Deloitte study 2017 for EC) Member State Bulgaria Croatia Czech Republic Denmark Poland Romania UK EUR 10 or equivalent card payment Min Max Min Max Min Max Min Max Min Max Min Max Min Max Euro or other currency (cross-border) 0 0.04 0 4.10 0 0 0.01 0.15 0.28 2.37 0 0.20 0.20 1.98 Local currency (domestic) 0 0 0 0.20 0 0 0 0.02 0 0 0 0 0 0 Member State Bulgaria Croatia Czech Republic Denmark Poland Romania UK EUR 10 or equivalent cash withdrawal Min Max Min Max Min Max Min Max Min Max Min Max Min Max Euro or other currency (cross-border) 2.14 2.66 2 3.47 3.80 4.79 4.03 NA 0.30 2.37 2.51 14.9 0.27 2.55 Local currency (domestic) At ATM group 0 0.15 0 0 0 0.19 0 0 0 0 0 1 0 0 At other ATM 0.45 0.61 1.41 2.70 1.15 1.53 1.08 1.34 0 1.19 0.6 3.29 0 0 For card payments, the same transactions will usually be free within the country (with only two exceptions noted where the card payments are charged to the consumer at 2 eurocents and 20 eurocents respectively). In many non-euro area Member States, there are some banks on the market that do not charge any additional fee for cross-border transactions. Differences between domestic and cross-border fees are generally small. For cash withdrawals, the comparison of fees should be done with fees for cash withdrawn at ATMs that do not belong to the PSP's group. Fees are usually multiplied by three as soon as a border is crossed. The range of fees varies widely as some banks will charge nothing or a very small fee (e.g. 6 eurocents) for cash withdrawals abroad, while others can charge up to 15 euros for the same transaction. 2.1.2.Two categories of payment services users in the EU

When it comes to fees for cross-border payments, Regulation 924 brought major improvements to euro area residents, but not to non-euro area residents. On the one hand, there are 350 million European citizens in the euro area who benefit from intra-EU cross-border payments that are priced exactly at the same level as domestic payments, in the currency of their country. As an example, a France - Finland euro transaction is priced exactly as a France - France euro transaction, and in the vast majority of cases studied – credit transfer, card payment or cash withdrawal – the transaction is free . Euro area citizens are not limited to the euro area for those payments in euro. They can also send euro to non-euro area countries at the same cost: it is the receiver who will be paying a fee for receiving a cross-border transfer. On the other hand, 160 million Europeans outside the euro area are scattered across monetary islands separated by very high charges for cross-border payments –– to which a margin on currency conversion has to be added. A Bulgaria - Finland credit transfer transaction of the equivalent of 500 euros in BGN is not priced the same as an identical Bulgaria - Bulgaria transaction: it can cost up to 24 euro cross-border, and only one euro for the domestic transaction. In addition to this, currency conversion margins of the payment services providers will apply. This difference between euro and non-euro Member States means that consumers or companies of the euro area can transact (send and receive) with 350 million people and 15.7 million enterprises at no or very low cost. They can also transact with 160 million additional people and 6.5 million enterprises in euro only at no or very low costs on their side (costs will be on the receiving side). The only case where they will not be able to transact at low cost with these non-euro area stakeholders is when the transaction is denominated in another currency which, as illustrated in table 1, rarely happens. By contrast, the 160 million Europeans and 6.5 million enterprises outside the euro area will only be able to transact within their Member State at similarly low costs as those borne by euro area citizens or enterprises. Crossing a border will increase the price of any transaction, whether the transaction takes place in the local currency, in euro or any other currency of EU Member States. In addition, receiving a transaction from abroad will also incur a cost, sometimes even when the transaction is received in the local currency. In a hypothetical non-euro Member State with 19 million inhabitants (the average population of non-euro Member States), citizens and businesses would be able to reach almost 20 times fewer partners with low-cost payments than if they resided in a euro area Member State.The exception is Sweden where consumers and companies can enjoy low-cost domestic and cross-border payments towards the euro area, allowing them to reach a total of 360 million citizens and 16.3 million enterprises. 2.1.3.Restrictions to the Single Market: use cases that would benefit from reduced prices for cross-border transaction and volumes Offering residents and businesses in non-euro area countries the same low costs for cross-border transactions as can be observed in euro area countries would overcome a significant obstacle to the full integration into the Single Market of non-euro area residents and businesses. Use cases that would benefit from reduced prices for cross-border payments with their corresponding volumes and values (detailed in Annex 4) are presented below. Cross-border credit transfers from consumers (in euro or in local currency): buying a good or service abroad and paying with a credit transfer is, in the vast majority of cases, not a good option for non-euro area residents as the cost of the transfer will be prohibitive. While a EUR 100 SEPA credit transfer will hardly cost anything when done by a euro area resident, the average non-euro area consumer would have to pay fees of around EUR 8 and up to EUR 20 in the most expensive countries. Cross-border credit transfers from enterprises (in euro or in local currency): whereas larger enterprises will be able to negotiate the prices of cross-border transfers with their banks through "cash management" agreements, small- and medium-sized enterprises (SMEs) and sole traders will face significant costs when paying their cross-border suppliers and when receiving payments from abroad. The available statistics do not differentiate between retail payments (consumer, SMEs) and corporate payments. Overall, the volume at stake for intra-EU cross-border credit transfer from consumers and enterprises (in euro or in local currency – euro area to euro area excluded) is of 17,390 billion euros and 239 million transactions. Card payments and cash withdrawals will also result in additional costs when made in another EU Member State. Although the additional costs for card payments may be rather limited, the cost of withdrawing cash abroad can be significantly higher for non-euro country cardholders, putting them at a disadvantage compared to euro area card holders. Card payments and cash withdrawals amount to 2.7 billion transactions, representing a volume of 149 billion euros a year (131 billion euros for card payments, 18 billion euros for cash withdrawals). The previous use cases all concern citizens and enterprises from non-euro area Member States. Euro area residents and enterprises would also gain from lower cross-border transaction costs, to the extent that they transact with counterparts in non-euro area countries and in non-euro currencies. In such cases, they face high transaction costs whenever they make or receive a payment from non-euro Member States in another currency than the euro. Lifting these restrictions could allow euro area Member State residents and enterprises to reach an additional 160 million Europeans and 6.5 million enterprises with low-cost payments. The total number of transactions covered by this use case would then be 690 million transactions (60 million credit transfers, 583 million card payments and 47 million cash withdrawals) for a total value of 2.6 billion euros (figures already included under first and second use cases). 2.1.4.Views of payment services users Overall, payment services users consider that cross-border payment transactions in currencies other than the euro, or in euro from non-euro countries, are expensive or very expensive. More details are provided in Annex 2. The opinion of payment services users on the price of cross-border payments was confirmed by the public consultation held between 30 July and 30 October. It attracted about 150 answers. Nearly 80% of individuals and 67% of companies classified cross-border transaction in local currency as expensive or very expensive (percentages of respondents who expressed an opinion). For cross-border payments in euro from non-euro Member States, nearly 70% of individuals and 56% of companies classified these transactions as expensive or very expensive. These figures are confirmed by the results of a survey contracted by the European Commission. Regarding cross-border transactions, about 92% of respondents are dissatisfied with the costs of cross-border transactions. Only 8% indicated that this practice has never been the subject of complaints. Respondents further indicated that the following situations occur, either occasionally or frequently: ‘lack of transparency of the actual payment fees for cross-border transactions’ (77%), ‘expensive costs to withdraw money abroad’ (73%), ‘being obliged to pay a fee for payment transactions within the European Union’ (69%), ‘expensive costs to transfer credit abroad’ (64%) and ‘expensive costs to make card payments abroad’ (64%). Overall, according to the respondents, consumers complain more often (either occasionally or frequently) about practices in relation to their cross-border transactions as compared to domestic transactions. The survey also aimed at gathering feedback directly from consumers and representatives of PSU associations on an extension of Regulation 924/2009. Overall, 60% of respondents were in favour of this. Citizens were questioned on their perceptions of fees charged for transactions in or to EU Member States where other currencies are used. 62% of respondents who had made one of these transactions agreed the information on fees charged is transparent. 64% respondents who had made one of these transactions considered that the fees charged for such transactions were too high. 2.1.5.Summary

Fees for cross-border transactions, sent from, or received in, non-euro Member States, or sent in a non-euro Member State currency have remained excessively high. This creates barriers to the Single Market resulting in a divided EU when it comes to cross-border payments. For currencies other than EUR, the high costs appear to be due to lower volumes and a lack of modern infrastructures, as well as weak competitive and regulatory pressure on payment services providers to adapt to the payment needs of consumers and enterprises in the Single Market (see next section). 2.2.What are the problem drivers? The problem of high transaction fees results from various drivers, some of which are outside the scope of the current exercise. First of all, they reflect the fragmentation of the retail banking markets with competition problems, particularly in non-euro area Member States, which continue to rely on legacy infrastructures for cross-border payments. Although EU legislation has led to increased competition over the last 10 years, the effects on prices have not been the same in all Member States. Cross-border transaction volumes are small compared to domestic payments – also likely to be the result of the high fees. Low volumes make investments in modern cross-border payments infrastructures less profitable, keeping internal costs high for payment services providers. Non-euro area Member States appear to be caught in a high-cost trap. The evidence presented in the Impact Assessment covers the top three to seven largest payment services providers in each non-euro area country. These are the banks with the highest volumes of cross-border payments and the highest number of clients making them. They are also likely to be the banks most active in transactions involving foreign currencies (in particular the euro) - some of them being subsidiaries of euro area banks. Hence, the problem is rather universal and not confined to banks and clients with low volumes of cross-border payments. Considering the problem drivers within the scope of the current exercise, the infrastructure for cross-border payments is one of the main issues. Euro payments benefit from a single standard across the EU (SEPA standard) and a centralised infrastructure to achieve EU-wide reachability. This modern infrastructure and the SEPA standards are a direct consequence of Regulation 924/2009 and its predecessor Regulation 2560/2001, which aligned the fees that banks could charge to their clients for domestic and cross-border payments in euro. This alignment reduced the revenues of banks, which in turn invested to reduce their costs of processing cross-border transactions. This euro infrastructure has been modernised over time (Target 2, Step 2 from EBA Clearing) and developments are still ongoing, notably with the future Target Instant Payment Settlement (TIPS) system of the European Central Bank. At the same time, a major market failure exists for cross-border payments in other currencies as BGN, GBP, HRK, CZK, DKK, HUF, PLN, RON or SEK have no central EU infrastructure and standardised format. Instead, they rely on various intermediaries, such as correspondent banks, typically one per currency for each payment service provider. Correspondent banking processes (executed mostly through the SWIFT network) are relatively slow, expensive and had basically been unchanged for decades. A regulatory failure can also be identified: the decision taken in 2009 not to apply Regulation 924 to non-euro currencies (also to make joining the euro area more attractive) resulted in a lesser degree of modernisation of infrastructures for cross-border transactions in non-euro countries. While the absence of regulatory pressure might not be considered as a problem driver in itself, a recent study from McKinsey points out the regulators' role in resolving this issue: "As cross-border payments did not face the same regulatory and competitive pressure, banks have had little incentive to innovate structurally on customer offerings, back-end systems and processes. And as cross-border payments revenue margins remained healthy and price erosion moderated, no structural cost-reducing processes were introduced across the industry. As a result, operational cost per transaction for international payments continues to average well above $20 (these costs vary widely across institutions and between cross-border corridors)." […] The opportunity is significant. Banks can aspire to a future with new revenues from additional services and where the operating cost of a cross-border payment drops to between $1 and $3, with full transparency and execution in less than 15 seconds". The importance of regulatory pressure was also highlighted in the last CapGemini World Payments Report 2017 which noted that "regulatory initiatives were identified by bank executives as the top driver of structural changes (for 65% of bank executives)." Regulation 924 did not create the regulatory pressure that would have reduced the costs of cross-border transactions in all countries, even though it does also apply to euro transactions in non-euro countries. The voluntary opt-in foreseen in Regulation 924 was only used by Sweden. Thus, while Regulation 924 was very effective at overcoming the divide between countries in the Euro area when it comes to fees for cross-border payments, it did little to overcome the remaining deep divide between euro area countries and the rest of the EU, and among non-euro countries. The 2012 evaluation of the implementation of Regulation 924/2009 concluded that extending the Regulation to other currencies of Member States of the EU (see Annex 6) would be beneficial to payment services users but should be left to the decision of Member States. Making this option mandatory is studied under Options 1 and 2 of this impact assessment. Other ways to solve the problem described earlier are also proposed under Options 3 and 4. Finally, another market failure comes from pricelists for cross-border transactions which today are long and complex, differentiating incoming and outgoing, domestic and cross-border transactions, often sub-divided by currencies (local, euro, other currencies of the EU, other currencies), with categories for credit transfers, direct debits, card payments and cash withdrawals. This complexity reduces the comparability and transparency of cross-border transactions and weakens competition. The problem drivers, issues and consequences are presented below in Figure 2. Figure 2: problem tree related to cross-border payments 2.3.How will the problem evolve? It is to be expected that high cross-border payment costs will remain a barrier between non-euro Member States and the rest of the EU. The problem would disappear if non-euro countries adopted the common currency (enlargement of the Euro area), or if they decided voluntarily to comply with Regulation 924 as permitted through opt-in solutions. However, there are no indications that this would happen fast, so legislative action seems justified. The market could also bring a solution, and there are already new FinTech players offering cross-border payment services and bringing some competition to the market in the long run: as an example, TransferWise and PayPal both offer low-cost cross-border payments through credit transfer or online card payments. However, two obstacles will remain: TransferWise and PayPal do not allow consumers to make ATM withdrawals or pay in a shop with a payment card (PayPal is exclusively used online). Most importantly, they are not universally used payment service providers: TransferWise's market share is very limited (0.0003% of all EU credit transfers) and the company is mostly known by Internet-savvy users. PayPal's market share is bigger (up to 25% of online payments in the UK – no information on cross-border/domestic market shares) but it is a closed-loop provider. In order to be paid through PayPal, a user needs to have a PayPal account which limits the reachability of the service. So far, there is little evidence, though, that this competition has resulted in banks lowering their charges. This could change somewhat in the years ahead, should more consumers decide to make use of these FinTech services, but this process could take a long time as these FinTech providers are currently, and are likely to remain, niche players typically used only by consumers who are both financially and IT literate. As a consequence, the competition brought by these new players will not be sufficient to fully address the issue in the short to medium term. In the absence of EU initiatives promoting the setting up of a cross-currency infrastructure that would encompass all currencies of EU Member States and allow for lower internal cost, it is to be expected that payment services users will have to wait for a long time before they can benefit from lower fees. The high costs faced by the banks today will persist and may even increase as security costs and maintenance costs of ageing infrastructures go up. 2.4.A two-speed market based on a two-speed infrastructure

The capacity of payment services providers to provide efficient cross-border payment services is strongly related to the availability of clearing and settlement infrastructure in the case of credit transfers. On the one hand, euro payments benefit from standards such as SEPA Credit Transfer, SEPA Direct Debits and the very recent SEPA Instant Credit transfers with EU-wide clearing and settlement infrastructures (EBA Clearing and Target2) that allow any bank of the EU to reach any other bank of the EU for payments in euro. The costs of these infrastructures are known and are very low (e.g. less than EUR 0.01 per transaction for euro transactions, independent from volumes). Further information on infrastructures is provided in Annex 4. Scenario 1 – Credit transfer - Payment processing in euro On the other hand, non-euro transfers are not harmonised (no common standard for payments in SEK, BGN, PLN, HUF etc., no EU-wide clearing and settlement infrastructure in currencies other than the euro, manual processes, intermediaries such as correspondent banks). In particular, the use of correspondent banking is costly. Deloitte estimated that internal costs of these transactions are 30 to 40 times higher than those of euro transactions. It should be noted that there is currently no EU wide initiative that would bring new infrastructure on the market to reduce the internal cost of these payments for banks (the only approaching initiative is TIPS which includes a multi-currency functionality but which may not be used before 2020/2021). There is also no initiative to agree on a single standard similar to SEPA standards for non-euro credit transfers. Scenario 2 – Credit transfer - Payment processing in other currencies than the euro Card payments and cash withdrawals are different insofar as they already benefit from infrastructures for all currencies provided by international card schemes to process cross-border transactions. In addition, in most non-euro area Member States, local schemes have disappeared and been replaced by international schemes (e.g. Maestro, a MasterCard brand or VPay by Visa). More details are provided in Annex 4. 2.5.Why have Member States used or not-used the opt-ins of Regulation 924/2009? The two opt-ins of Regulation 924 both imply the equalisation of fees for cross-border transactions in local currency with domestic payments – a restriction to euro cross-border payments only (as proposed later in this document under Option 3) was not foreseen. Sweden used the local currency opt-in and justified it as benefiting the Swedish integration in the European Union and pushing Swedish banks to develop payment functions that are competitive (namely that are more automated/efficient, thus benefiting consumers and SME businesses - see the presentation of the Swedish case in Annex 4). However, no other non-euro Member State implemented the opt-ins. Indeed, the cost that such an opt-in would impose on payment service providers would be high, in view of the major difference in costs for domestic and cross-border payments at least when it comes to non-euro transactions. Offering cross-border local currency payments at the same price as domestic payments would most probably bring losses to payment services providers. They indeed made their opposition to the opt-in foreseen in Regulation 924 very clear in their responses to the open public consultation, and it is likely that they would seek to dissuade national governments envisaging an opt-in. National governments may also fear that payment services providers forced to align cross-border transaction prices with domestic transaction prices might raise the prices of domestic transactions to recoup the losses they would incur on costly cross-border transactions. For this reason, this Impact Assessment will analyse other options that could provide a solution to expensive fees while avoiding the need to offer cross-border transactions at a loss. This would indeed be possible for euro transactions to and from non-euro countries. 2.6.What is not covered under this Impact Assessment? Currency conversion costs Currency conversion costs are excluded from the scope of Regulation 924/2009 under article 3.4 and do not constitute a part of the fee charged for a transaction – even though they come as an additional cost for the user. In addition, dynamic currency conversion costs are in particular imposed by merchants' technical or payment services providers and not payers' payments services providers which Regulation 924/2009 covers. These currency conversion charges, however, are regulated under the Payment Services Directive in order to bring transparency to the practice and to allow the payer to make an informed choice. Under its Title III - already in force and maintained in the revised Directive that applies as from January 2018 – it imposes a certain degree of transparency on payment services providers as regards the relevant conditions and information requirements. In particular, article 37 of PSD requires that payment services users be informed of: -"all charges payable by the payment service user to his payment service provider and, where applicable, the breakdown of the amounts of any charges" -and "where applicable, the actual or reference exchange rate to be applied to the payment transaction."

Among the possible reactions of payment services providers confronted with reduced transaction fee revenues following any legislative intervention in this domain, those aiming to compensate their losses could choose to recoup losses of revenues through currency conversion charges, which are usually not transparent to consumers even though they are covered by the Payment Services Directive (as described above). Possible counter-measures should address this issue. As described in Chapter 8 of this analysis, more detailed transparency requirements would make the existing currency conversion requirements as defined under the Payment Services Directive more effective. Direct debits Direct debit transactions are also not covered under this impact assessment. This type of transaction is covered by Regulation 924 but, in view of the volumes at stake (they are not offered by all banks in the EU, especially not outside the euro area and there is currently no cross-border direct debit between non-euro area Member States and euro area Member States) they will not be analysed. The special case of remittances People working abroad and sending money back to their families in their home country on a regular basis may not use electronic payments to do so. Instead they typically turn to companies that operate cash-to-cash payments such as MoneyGram or Western Union. Remitters may use this type of services for lack of cheap bank alternatives or because they do not have access to bank accounts. Though not covered by Regulation 924, reliance on such cash-to-cash remittances may decline as a result of reduced prices for cross-border transactions and cheap bank alternatives. Thanks to the Payments Account Directive, which guarantees the right to a basic bank account for all EU citizens, intra-EU remittances could be shifted to the traditional banking environment. According to Eurostat figures, such remittances amount to about 12 billion euro a year. 2.7.Limits to the Impact Assessment This Impact Assessment is based on a wide range of data gathered through previous studies conducted by the European Commission in relation to Regulation 2560/2001 and Regulation 924/2009 as well as the second Payment Services Directive, through a study conducted in 2017 to analyse the fees charged to payment services users for cross-border payments and the internal costs of banks for the same transactions, two Open Public Consultations enriched by payment services users’ examples of fees, and payment services providers explanations on cost differences as well as publicly available payment statistics from the ECB and Eurostat. A major limitation is the lack of data on cross-border exchanges among non-euro area Member States. This Impact Assessment uses estimates whenever public data are not available or reliable (see details in Annex 4).

3.Why should the EU act? 3.1.Legal basis The Treaty on the Functioning of the European Union confers to the European institutions the competence to lay down appropriate provisions that have as their objective the establishment and functioning of the internal market (Article 114 TFEU). Payments are an enabler of the Single Market which encompasses the free movement of goods, persons, services and capital. High cross-border payment costs are creating barriers to the Single Market - effective barriers to cross-border activities of households (buying goods/services in another currency zone) and enterprises (using suppliers located abroad, reaching clients in another currency zone) that restrict their access to the Single Market by imposing additional costs on their transactions - and should be addressed as an obstacle to the free movement of goods, persons, services and capital. High costs of cross-border payments also create two categories of payment services users, those in the euro-area who are able to reach, with their payments, a majority of EU citizens and businesses at very low costs, and those in non-euro countries who can only reach a small number of people and businesses with low-cost payments. To address these two concerns, legislative action at EU level is the most effective response, and it is in line with the objectives of the Treaties. 3.2.Subsidiarity: Necessity of EU action Member States were given the option to extend Regulation 2560/2001 and its successor Regulation 924/2009 to their national currencies already about 17 years ago. To date, only Sweden made use of this option and the consequences were clear: prices of cross-border payments in Swedish krona from Sweden are aligned with domestic payments (in fact, though not mandated by the Regulation, they are free). This option also impacted euro payments that are also free in Sweden. As other Member States failed to follow Sweden’s lead (see Chapter 2.5 on reasons why they have not used opt-ins), there are now two categories of citizens and enterprises when it comes to cross-border payments: those covered by EU legislation benefiting from low-cost cross-border transactions fees and the others. The political decision not to include non-euro currencies within the scope of the Regulation 924/2009 was seen as an incentive for these countries to join the euro area as quickly as possible. However this has only partially materialized and there is currently no movement towards the adoption of the euro in sight from non-euro area Member States. For the proper functioning of the Single Market and in order to further integrate national markets, to facilitate exchanges across borders and to put an end to the two-tier situation, it is essential that charges for cross-border payments are brought down to the level of charges for national payments. This reduction of fees can efficiently be achieved through an extension of Regulation 924/2009 as further discussed in the next chapters.

The status quo will maintain this de facto divide, slow down economic integration and the deepening of the Single Market. By contrast, a regulatory push that would reduce the cost of cross-border payments would allow for a better integration of the Single Market. An EU initiative would also be an important political signal and represent a tangible measure to the benefit of citizens and enterprises, similar to the roaming regulation in the telecom sector. 3.3.Subsidiarity: Added value of EU action Member States could have taken action on their own but have not done so over the past 17 years, apart from Sweden. Cross-border payments are not everyday transactions for EU citizens and may not trigger as many complaints as other core banking services would, if priced excessively, so Member States did not have strong incentives to act on their own. Individual actions by one or the other Member State would decrease the discrepancy between EU citizens and enterprises that benefit from low-cost cross-border payments and the EU citizens and enterprises that do not. For this reason, tackling the problem by acting at EU level is preferable to leaving it to individual Member States or the market, which does not guarantee swift progress and the full coverage of the EU. Such action at EU level would generate economies of scale (increasing the volume of cross-border transactions, leading to enhanced efficiency in the payments infrastructure); it would increase the volume of intra-EU cross-border trade, stimulate competition and further deepen the EU's economic integration. Non-regulatory tools Market players could also have taken action and envisaged self-regulation. However, revenues deriving from cross-border payments are significant and the status quo is the best guarantee to maintain revenues. Non-regulatory measures would not be putting enough pressure on payment services providers to offer services at prices that reflect their internal costs, particularly with regard to euro payments.

4.Objectives: What is to be achieved? 4.1.General objective The general objective of EU action in the domain of cross-border payments is to reduce the fees for cross-border payments across the EU and thus to contribute to a better integration of all EU citizens and businesses into the EU economy. This general objective addresses the main issue of high fees for cross-border transactions from non-euro area countries and in addition, focuses on all issues of market failure (fees imposed on payment services users do not reflect the real cost), regulatory failure (the lack of effect of Regulation 924/2009 on cross-border transaction fees in non-euro area countries) and equity/discrimination concerns (cross-border fees for non-euro area payment services users not aligned with euro area users' fees). 4.2.Specific objectives This general objective translates into various specific objectives that all correspond to one or several problem drivers. EU action to reduce the fees of cross-border payments should seek to: ·Cover the broadest possible range of transactions and payment services users. Covering the broadest possible range of transactions ensures that the measure is most effective in terms of reach and supports equity between non-euro area and euro area payment services users. Any reduction of fees should benefit the maximum number of people and enterprises by covering the largest share of transactions (in number and value of transactions). ·Increase the transparency of fees in cross-border transactions. The objective of increased transparency derives from the alignment of the fees of cross-border transactions in euro with domestic ones, which are usually fees that payment services users know very well. This will have an impact on the level of competition by making fees more transparent and comparable between providers (resolving a market failure). ·Push all EU payment services providers towards a modernisation of cross-border payments services. Any action on fees should ensure that lower fees will be the result of lower costs and hence increased efficiency in providing cross-border payment services, as happened in the case of euro transactions in the 2000's, rather than cross-subsidisation of such services using increased revenues from domestic payments or currency conversion services.

·Equal access to low-cost payments for euro area and non-euro area citizens and enterprises. Finally, reducing fees, in addition to benefiting the broadest possible range of stakeholders, should also bring more equality of opportunities among citizens and, for enterprises, a level-playing field. Figure 3: How do general and specific objectives answer the problem and problem drivers identified in the problem tree?

5.What are the available policy options? This section will present five policy options related to the above objectives. The baseline scenario consists of the current status quo (i.e. no further action). A soft-law option (recommendation, voluntary initiatives) is not considered separately, as it is already contained in the current Regulation 924. Four additional options differ in terms of the scope of currencies/transactions covered. The following options will be analysed: ·Baseline: Do nothing; ·Option 1: Extending Regulation 924 to local currencies cross-border transactions; ·Option 2: Extending Regulation 924 to local currencies and euro cross-border transactions; ·Option 3: Extending Regulation 924 only to euro cross-border transactions; ·Option 4: Extending Regulation 924 to all cross-border transactions in currencies of Member States of the EU. In all cases, addressees of all options will be payment services providers. Depending on the option retained, payment services providers would need to be given more or less time to adapt to the new rules. Options 1 and 2 are presented in this order as these two options are already included as "opt-ins" in Regulation 924 under article 3.1 and 3.3. Option 3 is a variation of Option 2 that can be described as "Option 2 without Option 1". Option 4 is the most ambitious one and would eliminate all differences between transactions within a Member State and across borders, regardless of the currency used. Why are all options related to fees for domestic transactions? All options are based on an extension of Regulation 924 which uses fees charged by payment services providers for domestic payments as a benchmark. Depending on the option, the extension of Regulation 924 will equalise domestic transaction fees and fees for: cross-border transactions in local currency (option 1); local currency and euro (option 2); euro only (option 3); or all currencies of the EU (option 4). This method of aligning cross-border fees with domestic transaction fees takes account of the level of development and efficiency of local payment systems and banks (infrastructure and processes). Indeed, production costs are not the same from one country to another, and in some non-euro countries even domestic transactions can cost up to one euro. Using domestic transactions fees as a benchmark allows taking into account the specificities of each country and their payment services providers. In view of this, it did not seem appropriate to consider an alternative approach consisting in setting a maximum price for cross-border transactions for all EU countries (as was done with the Interchange Fees Regulation).

5.1.The Baseline scenario – Do nothing The baseline scenario consists in taking no further action at EU level. Fees for cross-border transactions will continue to be left to the market and regulatory interventions of individual Member States, implying no disruption of the status quo and no new costs on any of the stakeholders covered by Regulation 924. The current growth trends observed on the market will continue bringing even more revenues to payment services providers. However, it is unlikely that this growth would continue at the same rate. Member States would remain free to opt in and bring the benefits of reduced fees for cross-border payments to their citizens and businesses. Excessive prices would offer lucrative business opportunities for new market players who may be able to capture a part of the market by proposing competitive pricing compared to incumbents. While the situation might eventually improve under the baseline scenario, it will take a long time before significant progress towards the objectives will be achieved, as there have been very few signs of significant reductions in fees over recent years in spite of the arrival of FinTech providers offering cheaper ways of transferring funds across the EU. 5.2.Option 1: Extending Regulation 924 to local currencies cross-border transactions Option 1 would consist in a legislative proposal equalising fees for domestic and cross-border non-euro national currency transactions, making one of the two opt-ins foreseen in Regulation 924 mandatory. The addressees would be payment services providers and the horizon to comply could be two years from the date of entry into force of the instrument. These two years would be necessary for payment services providers to adapt to a change of legislation that would impose on them to provide a rather costly service at the price of a low-cost service. These two years should grant them sufficient time to think the question through and adapt their business processes to a changed situation. 5.3.Option 2 – Extending Regulation 924 to local currencies and euro cross-border transactions Option 2 encompasses option 1 and adds a requirement to also equalise fees for cross-border transactions in euro with domestic transaction fees. For instance, making a CZK transfer from Prague to Paris or a EUR transfer from Prague to Paris would be priced by a PSP like a CZK transfer from Prague to Prague. This option is already in Regulation 924 under article 3.3. Option 2 would in effect make this opt-in mandatory. The addressees would be payment services providers and the horizon to comply would be two years for non-euro transactions and six months for euro transactions from the date of entry into force of the instrument. The shorter period of six months for euro transactions would be justified by the fact that a common infrastructure for euro transactions is already available also to PSPs in non-euro countries, allowing a quasi-immediate alignment of fees. 5.4.Option 3 – Extending Regulation 924 only to euro cross-border transactions Option 3 differs from Options 1 and 2 as it would require the equalisation of fees for domestic transactions in the national currency and cross-border transactions only for euro cross-border transactions. For instance, making a EUR transfer from Prague to Paris would be priced by a PSP as a CZK transfer from Prague to Prague. This option is equivalent to making article 3.3 of Regulation 924 mandatory while article 3.1 would remain a voluntary option (i.e. equalising the costs of domestic and cross-border transactions in the national currency). The addressees would be payment services providers and the time horizon to comply could be six months from the date of entry into force of the instrument. 5.5.Option 4 – Extending Regulation 924 to all cross-border transactions in currencies of Member States of the EU. Finally, Option 4 consists in removing all internal borders for transactions in any EU currency. It would require PSPs to align their fees for all cross-border transactions between EU countries in whatever EU currency with domestic transactions, even for transactions in currencies that are not the ones of the sending or receiving country. Currency conversion costs would still apply when the currency used is not available to the payer. For instance, in addition to Option 2, making a CZK or HUF transfer from Paris to Prague would be priced as a EUR transfer from Paris to Prague equal to a EUR transfer from Paris to Paris. The addressees would be payment services providers and the horizon to comply could be four years for non-euro transactions and six months for euro transactions from the date of entry into force of the instrument. A full change in market infrastructures to clear and settle efficiently and at low costs transactions across the EU justifies the four years. Table 10: Synthesis of each option's characteristics Options Baseline Option 1 Option 2 Option 3 Option 4 Transactions issued from N/A Non-euro MS Non-euro MS Non-euro MS All MS Scope of transactions N/A Local currency cross-border transactions Local currency and euro cross-border transactions Euro cross-border transactions All cross-border transactions in a currency of a EU MS Time horizon for improvements Long 2 years 6 months euro 2 years local currency 6 months 6 months euro 2 years local currency 4 years other currencies 5.6.Option discarded at an early stage Capping the cost of cross-border transfers at 3% in line with the UN Global Sustainable Development Goals for remittances. On 1 January 2016, the United Nation's 17 Sustainable Development Goals (SDGs) of the 2030 Agenda for Sustainable Development officially came into force . The EU has played an important role in shaping the 2030 Agenda. Among the SDGs, goal #10 calls for reduced inequality within and among countries and sets notably the following target: "By 2030, reduce to less than 3 per cent the transaction costs of migrant remittances and eliminate remittance corridors with costs higher than 5 per cent".

This option was discarded at an early stage, considering that a 3% maximum would already constitute a relatively expensive fee for cross-border transactions within the EU, except for small value transactions. In addition, fixing a smaller percentage maximum (e.g. 0.1% or 1%) that fits all EU Member States is not possible as production/internal costs vary from one country to the other. Finding a common benchmark / reference for all EU Member States on which to align prices was also not feasible as conditions differ from one country to the other. Additional alternatives were also studied (as witnessed in the Open Public Consultation) in order to further improve the capacity of achieving the objectives. An online fee-calculator for instance could help in very specific cases when the fee is expressed as a percentage of the amount of a transaction and requires calculation. However, it would be far less efficient than the alignment of domestic and cross-border fees: the utility of such calculators can be questioned when at an ATM or in a merchant shop at the point of sale. Payment services users are often faced with time pressured environments in such cases, and access to technology or internet would be required.

6.What are the impacts of the policy options? This section assesses the effectiveness and efficiency of the proposed options both at aggregate level and by relevant stakeholder groups: payment services users (consumers and enterprises), payment services providers and supervisors. It will assess the benefits of both direct and indirect nature, qualitatively and quantitatively, against the general and specific objectives outlined in chapter 4. The different options will be assessed with respect to the general objectives of lifting barriers to the Single Market and putting an end to the internal discrepancy with regard to cross-border payments by comparing them with the baseline scenario and positioning them in relation to the maximum benefits and costs that can be expected from having cross-border payment fees aligned with fees for domestic payments. The benefits and costs will be rated, for each specific objective, from --- to +++, with --- representing the lowest rating against the baseline (e.g. high costs of implementation) and +++ the maximum rating (e.g. maximum scope of transactions covered). This allows assessing the options in terms of (1) how effective they are in achieving the objectives; (2) how efficient they are in view of the costs they imply; (3) how coherent they are with broader EU policies (here mainly the Monetary Union, the Single Market and the general legal EU framework for payments); and (4) how they affect key stakeholders, namely payment services users (including citizens, SMEs and companies), payment services providers and supervisors. The preferred policy option should ensure the best possible attainment of the stated objectives, while at the same time imposing the lowest costs and the best impacts on stakeholders while being coherent with broader EU policy objectives. Table 11: Linking objectives with associated benefits Problems and consequences Objective Direct regulatory benefits General problem Barriers to the Single Market and two-tier society for cross-border payments General objective Lift remaining barriers to the Single Market due to cross-border payments and provide a level-playing field across the EU Specific problem 1: expensive cross-border payments Specific objective 1: reduce the fees of cross-border payments for all ·Number of transactions covered by a fee reduction ·Number of PSUs and enterprises covered by a fee reduction ·Total savings for PSUs Specific objective 2: increase the transparency of cross-border payments ·Level of transparency of fees brought by the equalisation of fees Specific objective 3: modernised payment systems ·Incentives for PSPs to move towards modernised infrastructures ·Cost savings due to modernised infrastructures Specific problem 2: major fee differences between euro area and non-euro area MS Specific objective 4: reduce differences between euro area and non-euro area citizens & enterprises ·Reachability offered by low cost cross-border payments The cost analysis will build on the expected consequences of reaching the objectives presented above and will look at the various regulatory/administrative one-off and recurring costs that could arise for stakeholders. Table 12: Linking objectives with associated costs Objectives Costs Specific objective 1: reduce the fees of cross-border payments for all ·Substantive compliance costs for PSPs (Revenue losses - recurrent) ·Indirect costs for PSUs (Increased domestic fees – recurrent) ·Enforcement costs for supervisors (one-off and recurrent) Specific objective 2: increase the transparency of cross-border payments ·Administrative costs for PSPs (fee documentation - one-off) ·Enforcement costs (recurrent) Specific objective 3: modernised payment systems ·Indirect cost (IT costs for PSPs (one-off, recurrent)) Specific objective 4: reduce differences between euro area and non-euro area citizens & enterprises ·No measurable cost 6.1.Overview of potential benefits and costs 6.1.1.Potential benefits Specific objective 1: reduce the fees of cross-border payments for all ·The maximum benefit would be achieved if all intra-EU cross-border transactions from or to euro area Member States in a currency that is not the euro are covered, as well as all cross-border transactions from or to non-euro area Member States, in euro, local currency or other currencies of Member States of the EU. Details are provided in Annex 4. oFor credit transfers, these figures amount to 178 million transactions worth EUR 14 749 billion initiated in non-euro area Member States, in euro or local currency and 60 million transactions worth EUR 2 642 billion initiated in euro Member States. The grand total is 239 million transactions worth EUR 17 391 billion.

oFor card payments, the maximum number of transactions to cover would be 2 527 million transactions worth EUR 131 billion divided in 1944 million transactions from non-euro area Member States worth EUR 105 billion and 583 billion transactions worth EUR 26 billion from euro Member States. oFinally about 173 million cash withdrawals took place in 2016 with a total value of EUR 18 billion of which 126 million transactions amounting to EUR 11 billion are made by non-euro area cardholders, and 47 million transactions for EUR 7 billion by euro Member State cardholders. Table 13: Volumes of cross-border payments broken down by area of origin Cross-border payments in the EU by area and type of transaction Sent from 19 euro area Member States + Sweden 360 million citizens and 16,3 million enterprises 8 non-euro area Member States 150 million citizens and 6 million enterprises Type of transaction Credit transfers (millions) 60 178 Card payments (millions) 583 1944 Cash withdrawals (millions) 47 126 Total transactions (millions) 690 2248 Share of the scope that could be covered by Reg 924 23.49% 76.51% ·The greatest benefits for PSUs would occur if all EU citizens and enterprises could make cross-border transactions at the same price as they make domestic transactions. The maximum number of PSUs (consumers and enterprises) that could be covered is 510 million citizens and 22.2 million enterprises. ·The maximum overall savings for PSUs are estimated at EUR 1.48 billion/year. This is a static estimate which disregards changes in behaviour, such as people switching from moving cash across borders to electronic payments or using money remittance services. Such dynamic effects would tend to increase the savings, but they are impossible to estimate due to a lack of data. The savings estimate is thus based on the following assumptions: oThe average cost of a retail (consumers, SMEs) cross-border credit transfer varies between EUR 1.54 in Poland and EUR 20 in Bulgaria. The same national transaction would be priced from EUR 0 to EUR 2.13. Although there are fees payable also for receiving cross-border credit transfers (sometimes even when the cross-border transfer is received in local currency), this cost has been ignored in this estimate as it is marginal compared to the sending fee; also, in most countries, there are providers that do not charge at reception. It also needs to be taken into consideration that many corporates already benefit from negotiated prices and as such may not benefit from fee reductions. The savings estimate therefore excludes corporate payments, estimated to make up for 90% of all cross-border credit transfers. This results in a reduction of the number of transactions from 239 million transactions to 24 million transactions (retaining only about 10% of the total number of transactions for retail payments). A weighted average price for cross-border transactions in non-euro Member States was estimated at EUR 8, based on the volumes by country and the fees applied in non-euro Member States. The same transaction, domestically, is priced at an estimated EUR 1, so reducing fees to the level that applies to domestic transactions would lead to a EUR 7 saving per transaction. Total savings would then amount to at least EUR 167 million/year. In addition, a 10% mark-up (17 million) should be taken into account to cover receiving fees bringing the total to EUR 184 million/year. oA similar calculation is done for all cross-border card payments and cash withdrawals. The share of corporates in such cross-border card transactions is small, so they have not been excluded from the calculation. §The total potential savings for card payments are estimated at EUR 1.01 billion/year with a EUR 0.40 average fee for cross-border card payments going down to EUR 0.00 on 2.5 billion transactions. §The total potential savings for cash withdrawals are estimated at EUR 289 million/year with a EUR 2.30 average fee for cross-border cash withdrawals going down to EUR 0.63 on 173 million transactions.

Table 14: Summary of potential savings (EUR millions) by category of transaction (the last line indicates which options allow to capture these savings) Potential savings* by category of transaction Sent from From € MS in non-euro currency From non-€ MS In euro In local currency In other EU currency Credit transfers 46 114.3 9.2 13.7 Card payments 233.2 622 N/A 155.6 Cash withdrawals 79.9 171.7 N/A 42.5 Total savings 359.1 908 9.2 211.8 % of total savings 24.13% 61% 0.61% 14.23% Options associated Option 4 Options 2, 3, 4 Options 1, 2, 4 Option 4 The average saving per transactions is calculated at EUR 7 per credit transfer, EUR 0.40 per card payment and EUR 1.7 per cash withdrawal. Nevertheless, it should be clear that users in some Member States will benefit more than others – those where fees per transactions are very high such as in Bulgaria will see a bigger impact than those where fees are already low such as in Poland. Specific objective 2: increase the transparency of cross-border payments The transparency for payments could be maximised if there were a single individual fee for all transactions independent of the currency used, the country where it is sent to or received from, independently of the means of payment used (credit transfer or card payment). Such transparency – today impossible to imagine - would be translated into a pricing documentation as below. Table 15: The full transparency ideal Bank A - Transactions within the EU Payment type Fees Any transaction in the EU xxx EUR FX costs if applicable Details on how FX costs are calculated By contrast, today's pricelists are rather long differentiating incoming and outgoing transactions, domestic and cross-border, sub-divided by currencies (local, euro, other currencies of the EU, other currencies), with separate categories for credit transfers, direct debits, card payments and cash withdrawals, as below. Table 16: Typical fee information document for payment services users

Specific objective 3: modernised payment systems The lowering of fees should be achieved through the modernisation of payment systems and the ensuing efficiency gains, rather than by forcing payment services providers to cross-subsidise cross-border transactions or stop offering them altogether. The likelihood of triggering a modernisation of payments systems in the EU (infrastructures, processes, standards…) will be assessed for all options. As an example, a modern payment system would be an EU wide cross-currency clearing and settlement infrastructure with standard formats for all credit transfers and direct debits to which payment services providers are connected across the EU, directly or indirectly, at very low cost. Such a solution already exists today for euro cross-border payments. As a consequence, options only covering euro payments are unlikely to trigger such a modernisation of the payment infrastructure that is already there. It may still push the potential very few payment services providers that would not offer euro cross-border payments today to connect to such infrastructure as the use of cross-border payments in euro increases and in order to reduce their internal costs. The benefits that such a modernised environment would bring are difficult to quantify. The SEPA study conducted by CapGemini for the Commission in 2007 indicated that the switch from the legacy system to the SEPA system would reduce the operational costs of banks by EUR 49 billion over 5 years in the best scenario (see figure 8 of the study 'Delta Op Costs'). Considering the very close resemblance between the switch to SEPA and the switch that would allow fee reductions for all cross-border transactions, this amount can be used as a basis. However, the volume of payments involved is not comparable with the SEPA volumes. Option 4 for instance would cover about 90 million additional credit transfers compared to Option 3; the total number of SEPA transactions is around 200 times this volume (above 15 billion transactions per year). The benefits linked to operational costs for modernised payment systems for all transactions in the EU could then be estimated at about EUR 500 million over 5 years (retaining a conservative hypothesis of about 1% of the gains brought by SEPA). Specific objective 4: Equal access to low-cost payments for euro area and non-euro area citizens and enterprises Ensuring that all EU citizens and enterprises can benefit from low-cost cross-border transactions is the maximum reachable benefit. This would entail that any citizen or enterprise of the EU is able to any other citizen or enterprise anywhere in the EU at low costs. 6.1.2.Potential indirect benefits Moving towards these four specific objectives also brings indirect benefits of a general nature such as a more integrated EU with increased economic efficiency and prosperity thanks to lower transaction costs that should translate into an increased number of cross-border transactions compared to current trends described earlier in the 'baseline scenario'. Also, the proposal would entail reputational benefit for the EU among European citizens as the reduction of fees for cross-border payments resembles the regulation on telecoms roaming charges, one of the most popular achievements of the EU over the recent years. These reputational benefits are hard to quantify; nevertheless they increase support for the EU and may enhance the EU's capacity to tackle other policy challenges. 6.1.3.Overview of costs Specific objective 1: reduce the fees of cross-border payments for all ·Substantial compliance costs for PSPs: revenue losses for PSPs would be the exact opposite of the overall savings described before for retail payment services users, consumers and SMEs, i.e. an estimated EUR 1.47 billion/year. Indeed, the fees charged to payment services users, if reduced, will directly impact the revenues of payment services providers. In a dynamic perspective, however, these reduced fees should encourage payment services users to make more transactions and allow payment services providers to recover part of their losses through increased activity. Banks may continue to derive significant earnings from cross-border transactions. A recent article disclosed that half of one major bank's revenues from cross-border payments resulted from currency conversion margins while transaction fees accounted for about 28%. The option analysis will estimate which option is likely to have the biggest impact on payment services providers' revenues ·Indirect costs for PSUs: Banks may respond to reduced transaction fees by trying to increase domestic payments fees – the most likely scenario. However, domestic fees are well-known and any increase would not go unnoticed by consumers and SMEs, causing them to look for cheaper competitors. Payment services providers could also increase the basic fees for bank accounts or increase their margins on currency conversion. Though hard to quantify, the option analysis will estimate the likelihood of such attempts to recoup lost revenues from transaction fees. ·Enforcement costs for supervisors in charge of the correct implementation of the respective options will also be estimated as any option will trigger additional work to verify that fees applied by payment services providers are aligned with regulation. This may require the periodic review (research of data on bank websites) and analysis (comparing prices) of data/documentation provided by payment services providers. Depending on the particular Member State, the number of payment services providers to review could range from a dozen to hundreds. So even with an ex ante review of prices, enforcement does not appear particularly complex and costly . Reviews may not need to be conducted on an annual basis, but could be done in response to complaints from payment services users. The estimated maximum cost for annual reviews of fees appears to be marginal and would not exceed EUR 1 million for the 28 Member States together. While complaint and redress procedures, penalties and competent authorities are already in place under Regulation 924, some additional costs may result from an increased number of complaints

Specific objective 2: increase the transparency of cross-border payments ·Enforcement costs for supervisors: as an indirect consequence of additional transparency, supervisors will be faced with additional complaints from payment services users, justified or not, in relation to the cost of their cross-border transfers. The European Commission already deals with such complaints in the framework of the SEPA Regulation and IBAN discrimination and estimates that 0.5 FTE is the maximum cost to associate with such complaints. Based on an average junior civil servant salary of EUR 50.000, a EUR 25.000 recurrent cost is associated to this specific objective. The maximum cost incurred would be EUR 700.000 for the 28 Member States altogether which remains very limited. ·Administrative costs for PSPs: Regarding payment services providers, fee documentations would have to be changed, on their websites and on any paper documentation that would be available to payment services users. It is assumed that payment