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COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT Accompanying the document Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on the comparability of fees related to payment accounts, payment account switching and access to payment accounts with basic features
COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT Accompanying the document Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on the comparability of fees related to payment accounts, payment account switching and access to payment accounts with basic features
COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT Accompanying the document Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on the comparability of fees related to payment accounts, payment account switching and access to payment accounts with basic features
/* SWD/2013/0164 final */
COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT Accompanying the document Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on the comparability of fees related to payment accounts, payment account switching and access to payment accounts with basic features /* SWD/2013/0164 final */
COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT Accompanying the document Proposal for a
DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on the comparability of fees
related to payment accounts, payment account switching and access to payment
accounts with basic features Table
of Contents 1........... Introduction. 5 2........... Context 7 2.1........ Policy background. 7 2.2........ Stakeholder consultation. 7 2.3........ Market overview.. 10 2.3.1..... Size of EU payment accounts market 10 2.3.2..... Payment accounts. 10 2.3.3..... Cross-border activity. 11 2.4........ Existing policy and legislative framework. 11 2.4.1..... EU level 11 2.4.2..... Member State level 13 2.5........ Procedural aspects. 15 2.5.1..... The Impact Assessment Steering Group. 15 2.5.2..... The Impact Assessment Board. 15 2.5.3..... Opinion of the IAB.. 15 3........... Problem definition. 16 3.1........ Drivers. 16 3.2........ Problems. 23 3.2.1..... Access to basic account services. 23 3.2.2..... Presentation and ease of comparison of bank fees. 33 3.2.3..... Payment account switching. 38 3.3........ Interlinks. 45 3.4........ Summary of consequences. 46 3.4.1..... Consumers. 46 3.4.2..... Effects on financial industry. 48 3.4.3..... Non-financial services/products providers. 49 3.4.4..... Public administrations. 49 3.4.5..... Wider economy. 50 4........... Objectives. 51 5........... Need for EU action. 51 5.1........ To improve the proper functioning of the internal market and avoid the
distortion of competition in the field of retail banking. 52 5.2........ To empower consumers by enabling them to make informed choices and enable
them to take advantage of the single market 53 5.3........ Allow all European citizens access to essential services and the
opportunity to benefit from the single market by promoting economic and
financial inclusion. 54 6........... Policy options. 55 6.1........ Options for access to basic account services. 55 6.2........ Options for presentation and ease of comparison of bank fees. 57 6.3........ Options for payment account switching. 60 6.4 ....... Choosing the most appropriate policy instrument 61 6.4.1..... Self-regulation. 61 6.4.2..... Non-binding measures. 61 6.4.3..... Binding measures. 62 7........... Impact analysis and comparison of policy options. 62 7.1........ Methodology. 63 7.1.1..... Access. 63 7.1.2..... Transparency of fees and switching. 64 7.2........ Costs. 64 7.3........ Benefits. 65 7.4........ Comparison of options and assessment of their impact: access to basic
account services. 66 7.5........ Comparison of options and assessment of their impact: presentation and
ease of comparison of bank fees 73 7.6........ Comparison of options and assessment of their impact: payment account
switching. 81 8........... The preferred policy option and its impact 86 8.1........ Cumulative impacts and impacts on stakeholders. 87 8.1.1..... Impacts on stakeholders. 90 8.1.2..... Geographical impacts. 91 8.1.3..... Social impacts. 93 8.1.4..... Administrative burden. 93 8.1.5..... Impact on small and medium-sized enterprises. 94 8.1.6..... Other impacts. 95 8.2........ Proportionality of the preferred options. 95 9........... Monitoring and Evaluation. 96 Annex I Policy Background. 97 Annex II Access to basic account services. 106 Annex III Presentation and ease of comparison of bank fees. 161 Annex IV Payment account switching. 193 Annex V Glossary. 217 Annex VI Assumptions and calculation bases used in determining
costs and benefits. 218 1. Introduction Every citizen of the European Union
should have the right of access to basic banking services throughout the EU,
irrespective of their nationality and/or place of residence since access has
become an essential condition for participation in economic and social life.
Such access is not available to all. Improved access to basic banking services
would enable every consumer to fully benefit from the internal market, by for
example, encouraging the free movement of persons and facilitating the purchase
of goods cross-border. Furthermore, unclear bank fee information
makes it difficult for consumers to make informed choices about which account
is best-value for them. Since offers are difficult to compare, EU consumers
tend to refrain from switching payment accounts, potentially to an account
better suited to their needs. Finally, EU consumers who seek to acquire banking
services across borders are often hindered by requirements or practices in
domestic markets that place non-residents at a disadvantage. As a consequence,
competition in the retail banking sector is hindered. Clearly, these issues and
their effects are interrelated, both for the individual and the wider economy.
This impact assessment aims to address these problems and thereby: ·
Improve the proper functioning of the
internal market and avoid the distortion of competition in retail banking. The uneven playing field between market actors results in reduced
competitive rivalry and missed opportunities within the internal market.
Without intervention, there is a risk of further fragmentation in the provision
of payment accounts, threatening long-term market integration. ·
Empower consumers by enabling them to make
informed choices. In a competitive and efficiently
functioning single market with a high level of consumer protection, EU citizens
would have all the tools necessary, and thus be empowered to search for the
best product for their needs, whether in their own or in another Member State. ·
Allow all European citizens the opportunity to
benefit from the single market by promoting economic and financial inclusion
and through EU-wide access to basic banking services. Access to basic account
services will facilitate financial inclusion enabling all consumers to
participate in and benefit from the internal market (including its digital
environment). Improving access to this key service constitutes an action of the
European Platform against Poverty and Social Exclusion (a flagship initiative
of Europe 2020), which is designed to combat social exclusion.[1] A payment account is one of the most popular
and common retail financial services. Through it, consumers conduct many
everyday functions, such as receiving salaries or social security benefits,
shopping, and paying bills. Consequently, payment accounts are generally known
as 'bank accounts' or 'current accounts'. A 'payment account' is defined in the
Payment Services Directive[2] and in the Recommendation on access to a basic payment account.[3] On 28 June 2012, as part
of the concept of the 'banking union', EU leaders at the European Council
agreed to establish a single supervisory structure
for banks in the euro area. The move towards a European 'banking union' aims to
provide a clear longer term perspective on the future of the EU's Economic and
Monetary Union. Relevant proposals were adopted in September 2012. Furthermore,
the letter from President Barroso to the President of the European Parliament
dated 12 September 2012, in relation to the 2012 State of the Union Address,
announced proposals in the area of transparency and comparability of bank fees
and bank account switching as part of the Commission Work Programme for 2013.[4] Further, the Single Market Act (SMA) II adopted in October 2012
identified a legislative initiative on bank accounts in the EU as one of the 12
priority actions to make citizens and businesses confident in using the Single
Market to their advantage. Its aim is to "give all EU citizens access
to a basic payment account, ensure bank account fees are transparent and
comparable, and make switching bank accounts easier."[5] This impact assessment
complements the move towards a banking union in the area of retail banking by: ·
Enhancing the functioning of the internal market
and strengthening the conduct of banking regime by removing the remaining
barriers to the internal market. ·
Laying the foundation for a more integrated
EU-level treatment of banks and consumers and thus creating a level playing
field for all stakeholders in relation to transparency of bank fees, switching
and access, while empowering consumers. Accordingly, this Impact Assessment
identifies specific problems in the retail banking sector, (in particular those
relating to the restricted access to a payment account, the lack of transparent
and comparable fee information and barriers to switching of payment accounts),
considers their consequences and analyses the different options for addressing
them. Other problems which may also impact on the accessibility, transparency
and mobility of payment accounts such as the tying and bundling of payment
accounts to other products, social and economic factors (e.g. labour market
changes, technological gaps, demographic changes, income inequalities, physical
disabilities), the level of banking sector development and the structure of the
EU banking industry (e.g. branch penetration) are outside the scope of this initiative. The focus of this impact assessment is on
payment accounts held by consumers. Consequently, accounts held by businesses,
even small or micro enterprises, unless held in a personal capacity, are
outside the scope of this impact assessment. Furthermore, this impact
assessment does not cover savings accounts, which may have more limited
payments functions. In line with the Commission's better
regulation approach, policy options need to be considered carefully and their
potential impact thoroughly assessed. Comprehensive and comparable pan-EU
statistical data in the field of retail financial services is scarce,
particularly in relation to payment accounts. Consequently, in order to analyse
the problems and the impacts of different options, this report draws on
information from a wide range of sources, including academic literature; pan-EU
studies (including mystery shopping exercises and the Eurobarometer survey)
undertaken on behalf of the Commission; national research by public
authorities; mystery shopping exercises and studies at the national level; and
reports by the financial services industry and consumer groups. The information
from these different sources is generally consistent; where divergences exist,
they are noted. The views on the available evidence expressed by stakeholders
are taken into account within the assessment. Difficulties in collecting and
comparing data would be addressed under the foreseen monitoring exercise (see
Chapter 9). 2. Context 2.1. Policy background European Commission Studies and Research The Commission has undertaken a thorough
review of EU payment account markets over several years. Since the 2007 report
of the Sector Inquiry into retail banking, a number of studies have been
undertaken. Please see Annex I for further information. Statements from EU
Institutions There is broad consensus that legislative
measures on payment accounts are required in order to open up and improve the
functioning of the single market for all citizens. In particular, in its Resolution on a single market for Europeans,[6] the European Parliament called
"on the Commission to submit by June 2011 a legislative proposal on
guaranteeing access to certain basic banking services and to improve the
transparency and comparability of bank charges by the end of 2011."
This was reiterated in a recent European Parliament
resolution with recommendations to the Commission on Access to Basic Banking
Services[7] which asks the Commission to put forward a legal proposal
addressing access to basic banking services by January 2013. The report
underlines that access to basic payment services is a precondition for
consumers to benefit from the internal market, reap the opportunities of
e-commerce, and it will also improve social inclusion across the EU. The March
2012 European Council similarly welcomed the Commission's intention to propose
a new round of measures on payment accounts designed to open up new growth
areas in the Single Market. Finally, the European Economic and Social Committee (EESC) has
issued several reports relating to payment accounts[8] which
state that retail financial services markets are one of the areas where the
greatest shortcomings in the operation of the Single Market have been observed.[9] See Annex I for further details. 2.2. Stakeholder consultation Since 2007, the Commission has organised
several public consultations on account services.[10] There is unanimous agreement that customer mobility and consumer
confidence in the area of payment accounts is crucial and that the accessibility of payment accounts and means of payment are vital for
fully participating in the economy and society. In the
areas covered by this impact assessment, a specific public consultation was
held in 2012.[11] More than 120 replies were received. From
consumers and financial services industry, their representative associations at
both national and European level, and authorities from half of the EU Member
States[12] and from a State of the EEA. In general, all stakeholder groups are
aware of the problems in the retail banking sector. More diverging positions
emerged on further measures and the level at which these should be positioned,
with further nuances across the three areas covered by the consultation, as
summarised below. Access to basic account services In general, the financial
services industry and a number of Member States participating in the public
consultation argue that there are no major obstacles for consumers in accessing
a basic account. They state that the financial services industry adheres to
either the EU Recommendation or similar national provisions to ensure access,
concluding that no action should be taken in this area. The financial services
industry further emphasises that if any measure were to be taken, it should be
at national level to accommodate the different legal and regulatory landscapes
across the EU. Any extension of access to basic account services to
non-residents is particularly opposed by the banking industry. On the contrary, consumers, representatives
of civil society and some Member States contend that the current situation is
unsatisfactory and that difficulties exist in accessing basic account services.
Consumers in particular would support a legislative initiative that will ensure
access to an account with a range of functionalities likely to enable them to
live a normal life. Accordingly, they argue in favour of legislative measures
at EU level, to establish an obligation for account providers to guarantee
access to a basic payment account to all consumers, albeit with some
flexibility for national circumstances. This flexibility is necessary due to
different characteristics of national markets and different levels of unbanked
consumers in the Member States.[13]
Consumer representatives have previously argued that self-regulation or a
Recommendation would be ineffective since ensuring access to a payment account
is neither a priority for the financial services industry nor for Member
States.[14] In terms of concrete impediments to access the following are cited:
consumers' financial situations (i.e. low income); high costs of account
services; consumers' lack of confidence in the banking system; unsuitability of
the products offered by banks; and insufficient financial education. Presentation
and ease of comparison of bank fees All stakeholder groups
recognise the difficulties that exist in relation to transparency and
comparability of fees. Specific causes identified
by consumer groups and several Member States include: complex and diverse
business models of banks across countries; issues linked to the offer of
packaged services; charging structures; varying terminology across banks; the
speed with which new and innovative products enter the market;
cross-subsidisation within retail banking, and lack of clear legislation in
this area. All citizens and consumer groups and a number
of Member States participating in the public consultation highlight the
importance of coordination across the border and support EU level initiatives.
Others, such as the majority of financial industry respondents and other Member
States, consider action should be conducted at national level initially. One
Member State does not see any grounds for intervention at EU level at this
stage. The majority of Member States and financial
services industry respondents consider that any measures implemented at EU
level should take into account existing national initiatives and the need for
flexibility. For one bank, while there is no need for EU action, the real issue
is the lack of a European retail financial market. Some banks are open to
considering a coordinated EU approach in specific areas (e.g. glossaries), but
stress the difficulties that such an approach would entail. Most respondents from the financial services industry stress the
need for a balance between ease of comparison and excessive standardisation
affecting differentiation, qualitative aspects and particularities of national
markets. Payment
account switching Consumers and representatives of civil
society argue that banks do not always offer
services aimed at facilitating switching. Even where such services are
provided, they do not fully comply with the provisions of the Common Principles
on bank account switching ("Common Principles").[15] However, the financial services industry considers that most
providers offer a switching service in line with the Common Principles. Public
authorities tend to fall between these two groups, stating that while most
banks across the EU offer a switching service, this service is not always
entirely compliant with the Common Principles. Several respondents highlight at
least one remaining obstacle to switching; these include the risk of direct
debits being redirected, and the possibility of mistakes occurring due to
insufficient cooperation between banks and third parties. Public authorities
note that bank staff lack awareness of switching services, often due to
insufficient training, and that consumers are provided with insufficient
information. One public authority considers the Common Principles to be a
half-way measure. Consumers, civil society and Member States
consider that the ineffective application of the Common Principles cause delays
in the switching procedure, problems with transferring direct debits, a lack of
cooperation from and charges imposed by the old bank, a lack of information on
the switching process and a lack of preparation of the bank staff. Conversely,
the financial services industry argues that the Common Principles solve most of
consumers’ problems, though it splits on whether misdirection of payments
remains an issue. The industry adds that issues with switching facilities are
not a key factor in impeding access to the market for smaller financial
services providers. There are mixed views as to whether the
Common Principles should be made compulsory. Several Member States and the
financial services industry believe that the Common Principles should remain
voluntary. Other Member States are more receptive to making the Common
Principles compulsory, as this would guarantee more effective enforcement of
the provisions. Consumers and representatives of civil society strongly believe
that the Common Principles should be made binding. Consumers are also favourable to measures on
the portability of payment account numbers and the automatic redirection of
payments. Stakeholders are split as to whether any initiative should also cover
cross-border switching. Some public authorities and consumers appear favourable
to the introduction of measures covering cross-border switching; others, in
addition to the financial services industry, do not. 2.3. Market overview Payment accounts are provided by payment services providers. While
in theory, this can cover both payments institutions (i.e. those that are not
credit institutions) and credit institutions, in practice, the majority of bank
or payment accounts are provided by credit institutions. Data on accounts
provided by payment services providers that are not credit institutions is not
available; consequently, in this analysis, the focus of the data, where
available, is on accounts provided by credit institutions. 2.3.1. Size of EU payment accounts market There are at least 368 million payment
accounts in the EU.[16] The precise figure is likely to be considerably higher; first, the
data excludes those under the age of 15 with payment accounts (though this is a
relatively small group); second, the data excludes the possibility that
consumers may have multiple payment accounts (multi-banking), which is
prevalent in, for example, the UK; third, the figures do not include many
dormant accounts. Conversely, the figure may be slightly inflated due to a
small number of jointly-held payment accounts. While there is limited data on
individuals' access, there is even less data on household access, creating a
risk that this data lacks reliability.[17] Retail banking represents over 50% of total
banking activity in the EU.[18] It remained the most important sub-sector of banking which
accounted for more than 50% of its total gross income in the EU. 2.3.2. Payment
accounts A payment account usually has a range of
different services attached to it, such as the ability to place money in an
account, to withdraw cash, to execute payment transactions, to conduct direct
debits and credit transfers as well as the provision of a payment card (see
Graph I below). Consequently, a payment account plays an important role in the
integration of consumers into the wider economy. While there has been a steady
growth of the use of card payments, credit transfers and direct debits over the
period 2000-2010, the use of cheques has fallen. Graph I: Payment
transactions in the EU (% of the number of transactions in 2010) Source: ECB data, Statistical Data Warehouse, 2010, http://sdw.ecb.europa.eu/ 2.3.3. Cross-border
activity In general terms, it is unusual for consumers
to purchase retail financial services directly cross-border; 94% of consumers
stated that they have never bought a financial product outside their home
country[19] although e-commerce means that often consumers buy abroad without
even realising it. Payment accounts are, however, the financial services
product most likely to be purchased cross-border, with 3% of EU consumers
stating that they have opened a payment account in another Member State.[20] The number of consumers
who have opened a payment account cross-border varies considerably from around
8% in Estonia and Luxembourg to 1% in Romania, Bulgaria, Greece, Malta and
France.[21] Despite generally low levels of cross-border activity, the
potential interest in opening a payment account cross-border is generally
higher across the EU. (See Graph II). Graph II: % of
consumers that have opened a payment account cross-border (actual) and who would consider
opening an account cross-border (potential) Source: Special Eurobarometer on Retail
Financial Services, European Commission, February 2012, p.30 and 35 At present,
direct cross-border provision of payment accounts is driven by the supply side
rather than the demand side. Financial services providers can supply payment
accounts cross-border in two ways: through local presence (e.g. branches,
subsidiaries, mergers and acquisitions) or through direct distribution channels
(e.g. via telephone or the internet). 2.4. Existing policy and legislative framework 2.4.1. EU level In July 2011, the
Commission adopted a Recommendation on access to a basic payment account[22] which set out principles to guarantee consumers access throughout
the EU. The Recommendation also affirmed the right of any consumer,
irrespective of his/her financial circumstances, to open and use a basic
payment account even in a Member State where s/he does not permanently reside,
provided that the consumer does not already hold a payment account in that
country. A basic account should be offered free or at a reasonable charge.
Member States were to ensure that at least one provider is in charge of
offering basic payment accounts in their jurisdiction and to guarantee that
providers use transparent, fair and reliable systems to verify whether
consumers already hold an account. They must, when refusing an application,
immediately inform the consumer of the grounds in writing and free of charge. The Commission invited Member States to
ensure that basic payment accounts include a number of services. These comprise
the provision of a debit card, the ability to make deposits and cash
withdrawals, and the possibility of execution of payment transactions –
including direct debits and credit transfers. In addition, access to a basic payment
account should not be made conditional on the purchase of additional services,
and the provider should not offer, explicitly or otherwise, any overdraft
facilities in conjunction with a basic payment account. Providers should make
information available to consumers about the specific features of the basic
payment accounts on offer, their associated charges and their conditions of
use. Member States were also to launch public
campaigns to raise consumer awareness about the availability of basic payment
accounts and ensure that payment service providers make information available
about the specific features of the basic payment accounts on offer, their
associated charges and their conditions of use. Finally, Member States were to
designate competent authorities to monitor effective compliance with the
principles set out in the Recommendation and to ensure that appropriate and
effective complaints and redress procedures were established for the
out-of-court settlement of disputes concerning the rights and obligations
established under the principles set out in the Recommendation. The Commission
set 21 January 2012 as a deadline for Member States to implement the
Recommendation after which the Commission committed to conduct a review.[23] Based on the information provided by Member States, the Commission
in August 2012 published a follow-up report presenting the state of
implementation of the Recommendation in each Member State.[24] The data presented in the report proved that the implementation of
the Recommendation was largely inadequate, as only three Member States broadly
complied with it and more than half the Member States had no framework in place
at all to promote the right of access. The Payment Services Directive (2007/64/EC)
introduced certain transparency obligations for EU payment service providers,
which would complement the proposed initiative. Payment service providers have
to provide certain information before a payment service is undertaken. This
includes terms and conditions; information on the payment service provider
itself; features of the payment service and its associated charges, and
additional information once the payment has been completed. The Payment
Services Directive does not, however, contain any obligations on the format of
the disclosures nor does it address non-payment related information. The
Payment Services Directive is currently subject to a formal evaluation by the
Commission and a report will be published shortly in line with Article 87 of the Payment Services Directive.[25] In August 2010, the Commission asked the
European Banking Industry Committee (EBIC) to improve the clarity,
comparability and transparency of account fees and to ensure that account fee
information is easily available to consumers. Despite significant efforts until
the end of 2011 to establish a principles-based industry self-regulatory code,
the initiative failed miserably, producing no results whatsoever. In 2007, following the sector inquiry into
retail banking[26] and as announced in the Single Market Review,[27] the Commission asked EBIC to make it easier for consumers to move
their accounts from one bank to another. An in-depth analysis of the problems
and potential solutions, alongside a preliminary involvement of the Impact
Assessment Board on this issue, underpinned the launch of a self-regulatory
initiative and in 2008, EBIC developed the Common Principles for Bank Account
Switching.[28] These apply to the switching of current accounts within a Member
State. Implementation by national banking associations was to be completed by
the end of 2009. EBIC has stated that they have been implemented by all Member
States.[29] However, research has shown that self-regulation has not achieved
the necessary results; implementation of the Common Principles is incomplete
and inadequate[30] and customer mobility and competition remain impeded.[31] 2.4.2. Member State level Access to basic account services has not improved since the
adoption of the Recommendation. Only three Member States (Belgium, France and
Italy) have a framework in place that is broadly in line with the Recommendation
and in Belgium and France it already existed prior to the adoption of the
Recommendation. While some countries have a general legal framework[32] or self-regulatory rules,[33] these
frameworks hardly comply with the Recommendation, and in almost half of Member
States,[34] there are no rules in place and few plans to introduce them. Research on account information at national
level[35] showed a range of initiatives directed at improving transparency
and comparability of bank fees related to payment accounts (Table 1). Table 1: Types of initiatives to improve
transparency and comparability of bank fees Tools for consumers || A) Glossaries B) Disclosure of information on fees C) Comparison tools D) Financial education and informative initiatives Tools for public Authorities || E) Enforcement actions F) Market studies allow identifying the need to intervene in some circumstances; || G) Combined initiatives In the public
consultation on bank accounts, several Member States referred to internal
reports, studies and surveys aimed at analysing the persisting difficulties as
regards presentation and comparability of bank account fees.[36] Despite the variety of initiatives, their application (e.g. 58% of
the initiatives on disclosure of information on fees were backed by legislation
whilst 42% were through self-regulation) and relevance to payment accounts
(e.g. none of the glossaries identified were specific to current accounts)
differ widely. Please see Annex III for further information. The Common Principles have been implemented
by national banking communities through industry codes, recommendations,
guidelines or interbank agreements. Legislative measures have only been taken
in Ireland, where a statutory Switching Code replaced the Voluntary Switching
Code on 1 October 2010.[37] Some national banking communities have applied the switching
provisions to other products or services.[38] In
order to assess how banks assist consumers with payment account switching – and
to what extent banks offer the switching service as defined in the Common
Principles – the Commission contracted a mystery shopping study[39] in 2011 which found that the large majority of consumers (80%)
faced difficulties in switching.[40] In
their response to the public consultation a number of industry representatives
have questioned the validity of the conclusions reached by this mystery
shopping exercise. The main criticisms related to the limited sample of mystery
shoppers relative to the number of holders of a payment account and its
seemingly divergent results when compared to the Eurobarometer[41] survey. The Commission has acknowledged these criticisms. However,
while the technique of mystery shopping can provide for first hand insights
into consumer experiences, it may not be feasible nor
reasonable/(cost-effective) to carry out large scale mystery shopping exercises
to achieve a statistically representative population sample.[42] This study comprised a sample of nearly 1400 enquiries across all
27 Member States and targeted mainly large market players so as to cover at
least 80% of the current account market share of each Member State. It is
therefore the single most recent assessment of the situation across Member
States on a comparable basis. Moreover, all studies providing for an assessment
of the functioning and effectiveness of the switching process performed at
national level, broadly confirm the results of the EU-wide mystery shopping
study.[43] Regarding the seeming discrepancies of
results of the mystery shopping study and the recent Eurobarometer, we would
like to clarify that even though both studies provide for valid data based on
representative EU-wide samples, the two studies assessed different issues.
Whereas the mystery shopping study aimed at a detailed assessment of the
functioning and effectiveness of the switching process and of the Common
Principles in practice, the Eurobarometer was geared at assessing the number of
consumers that would be a priori interested in switching providers (without
making any reference to the industry switching mechanism). Therefore, the
results of the two exercises are not directly comparable. 2.5. Procedural aspects 2.5.1. The Impact Assessment Steering Group An Inter-Service Impact Assessment Steering
Group (IASG) was established in February 2012. It was jointly chaired by DG
Health and Consumers and DG Internal Market and Services and included
representatives from DG
Competition, DG Economic and Financial Affairs, DG Employment, Social Affairs
and Inclusion, DG Enterprise and Industry, Joint Research Centre, DG Justice,
DG Taxation and Customs Union, the Secretariat General and the Legal Service.
It met on 2 March, 27 April, 5 July and 16 July 2012. The minutes of the last
IASG meeting were sent to the Impact Assessment Board. 2.5.2. The Impact Assessment Board The report was submitted to the Impact Assessment Board (IAB) on 27 July
2012 and discussed at the meeting of 5 September 2012. 2.5.3. Opinion of the IAB In its first opinion, the IAB asked for a
revision of the document, taking into account its main recommendations for improvement. The
following modifications were made: ·
The problem definition is improved through: a
reinforced presentation of the interlinks (Sections 3.3 and 3.4); a more
detailed and precise description of the scope of evidence generally available
in the Introduction Chapter and throughout the text; arguments demonstrating
that the problem drivers omitted from the analysis are not critical for the
envisaged outcome in Chapters 3 ("Problem definition") and 6 ("Policy
options"); aspects related to the transnational dimension of the
identified problems in Chapter 3, including a better description of the
baseline scenario on 'access', and a more comprehensive analysis of the
follow-up given to the Recommendation on access. ·
Better explanation of the subsidiarity and proportionality
questions is provided in the problem definition section and in Chapter 5
("Need for EU action"). These now cover, specifically, the reasons
why the envisaged actions must be taken at EU level in order to achieve the
general objectives; the proportionality analysis has been strengthened in the
description of policy options for each area in Chapter 6, their assessment
against criteria related to costs and benefits in Chapter 7 ("Impact
analysis and comparison of policy options") and, in particular, in Section
8.2 of Chapter 8 ("The preferred policy option and its impact"),
which is now devoted to the proportionality of the preferred set of policy
options. ·
In terms of the improved presentation of options
and expected impacts, a new Chapter 6 is fully devoted to the presentation of
the policy options; a new Chapter 7 provides a comparative analysis of the
policy options under each individual area, which determines the best approach
for the three issues covered by this report; the content of the preferred
package is now described in more detail in the introduction and the first
paragraph of the new Chapter 8, including a comparison of different
combinations of options; finally, Chapter 9 deals with the evaluation and
monitoring aspects of the preferred option. ·
References to views expressed by stakeholder
groups have been moved from Annexes (II, III and IV) to the main report,
notably in Chapter 6 and 7. New references from the public consultation have
been added, where relevant, providing a more concrete account of the
stakeholder views (e.g. magnitude of the problem). ·
Finally, the revised Impact Assessment report
includes a number of more technical comments, including a more careful and
transparent presentation of the evidence base. In its second opinion,
the IAB raised the following main points for review: i) provision of more
robust evidence of the problems in the three areas, a more in-depth analysis of
their cross-border dimension and a clearer explanation of the interlinks
between them; ii) better demonstration of subsidiarity and proportionality of
the options involving binding measures on access, fee transparency and
switching; iii) improved presentation of the elements retained in the preferred
package of options and its assessment against the baseline scenario; iv) more
explicit references to stakeholder critical views. A number of changes were
made to the Impact Assessment in response to the IAB's comments. In particular,
data and analysis of problems in the area of access (relating to table 3 in
paragraph 3.2.1) was improved to better indicate the existing regulatory
framework in this area. Cross border aspects in the problem definition for
transparency and switching were strengthened with additional examples and
references to data (paragraphs 3.2.2 and 3.2.3). A number of examples were
added in the description of the links between the problems in the three
different areas in Section 3.3. Complementary information was provided in the
subsidiarity assessment in the areas of fee comparison and switching (Chapter
5). A new Section (8.1) was introduced to improve the presentation of the
elements of the preferred package of options, including a comparison with
alternative packages assessed against the 'no action' scenario. Where relevant
the critical views expressed by stakeholders during the public consultation
were set out more clearly throughout the text, notably with respect to the
methodology used to gather evidence (mystery shopping exercises). 3. Problem
definition This chapter identifies the problems and
their drivers that create barriers to the creation of a well-functioning
internal market for payment accounts, with effects upon both consumers and
businesses. 3.1. Drivers Market failures Market failures occur when market forces fail
to lead to an optimal outcome. The two main sources of market failure in
relation to the issues covered in this report are information asymmetries and
misaligned incentives (e.g. conflicts of interest). With information asymmetries, market actors
may fail to take decisions that are in their best interests because they lack
information. An account provider is better informed than a consumer about the
account features, whereas the consumer is better informed about his own
personal and financial situation. The role of payment accounts as gateway
products also creates information asymmetries between incumbent providers and
potential new entrants. As regards misaligned incentives, providers
may seek to sell the most expensive payment account, whether or not its
features or attached services respond to a consumer's needs. A consumer may
wish to open an inexpensive account, but providers may consider them as risky
or non-profitable, and refuse them that account. Furthermore, the role of
accounts as gateway products may add to these issues: while consumers search
for a product meeting their needs, providers aim to attract consumers whom they
can sell additional products to. In some cases consumers may be prevented from
participating in the market as a consequence. The European Consumer
Organisation (BEUC) notes this problem, indicating that low income is a reason
why banks refuse consumers an account.[44] Varying regulatory framework and limitations of self-regulation Regulation is designed to address market
failures, but ill-designed, inconsistent, or ineffective regulation will not do
so. In relation to switching and fee transparency, the current regulatory
differences across Member States are exacerbated by the failure of
self-regulatory initiatives; and with regard to access, by Member States'
reluctance to implement the Recommendation. Other
factors Other factors, described below, may impact
upon payment account mobility and consumer choice, but these factors are beyond
the scope of this initiative. First, low levels of financial literacy may worsen the
information asymmetries described above.[45] Even
if enhanced financial education could help in improving financial knowledge and
confidence of consumers, it nevertheless has certain limits and is not
sufficient in increasing accessibility to financial services. It usually offers
very basic knowledge which has limited use when a consumer is confronted with
relatively complex aspects of financial products (e.g. compound interest rate)
or when, as this often is the case, there is a significant time lag between the
moment the person benefits from financial education and the time when s/he
needs to apply the taught concept when buying a financial product, or opening a
bank account. Therefore, financial education should not substitute but rather
complement simple and objective information offered by providers. Also, these
initiatives rarely reach general public focusing instead on a small group of
consumers whereas a broad lack of awareness of payment account facilities and
their conditions may in fact cause self-exclusion, particularly among
vulnerable consumers. For instance, in Belgium despite there being a legal
right to a basic account, 63% of those without an account surveyed in 2011
thought a bank would reject their application.[46] Therefore
– as stressed by users' representatives – it is essential that consumers
understand their right to access a basic payment account.[47] It is thought that improved financial
literacy is unlikely to significantly impact upon the payment account market and
would not solve consumers’ problems across the board. In any event, research[48] carried out for the Commission in 2010 concluded that it was
doubtful that the lack of financial literacy – in particular lack of knowledge
– could be effectively tackled by a policy intervention in the form of
financial education, a view supported by the 2008 UK FSA study[49] on behavioural economics and financial capability, and a US study[50] on the provision of financial literacy courses in US high schools. The Commission has nevertheless sought to improve financial
literacy amongst EU consumers. In 2007, the Commission adopted a Communication
on improving financial education.[51] The content of this Communication remains valid today and
Member States are encouraged at the European and international level (e.g.
OECD) to make efforts to improve financial literacy. While the Commission study mentioned above stated that
policy intervention could not improve literacy, it did conclude that simple,
standardised product information could significantly improve financial
decisions.[52] In addition and given the limits of financial education, it is
considered that objective and independent financial advice could further help
in opening of the market of retail financial services, including access to bank
accounts, to consumers who are distrustful with financial institutions or do
not use financial products commonly. Second, the tying or bundling[53] of products or services to a current account may also influence
consumers' decisions relating to the opening and switching of accounts. Payment
accounts are "gateway" products through which consumers can access –
and providers can sell – other financial products. As according to the World
Bank report: "for most people, having an account serves as an entry point
into the formal financial sector. A formal account makes it easier to transfer
wages, remittances, and government payments. It can also encourage saving and
open access to credit."[54] The
most recent EU data available[55] found that there was extensive tying and bundling of current
accounts with other products. Almost all banks in Hungary, Latvia, Lithuania
and Slovakia tie current accounts to consumer and mortgage credits.[56] This is mainly caused by current account customers having regular
contact with providers, and the providers holding high levels of
customer-specific information.[57] While cross-selling, in particular bundling,
can offer consumers benefits in the form of a better price, tying significantly
limits customer mobility.[58] These practices can forcibly secure consumers' 'loyalty' to a
payment account since it may be costly or burdensome to cancel the contracts of
insurance, investment or credit products linked to the account. Low fee transparency and other barriers to mobility[59] further enshrine these practices and consumers’
reluctance to move. The most substantial impact on
mobility in the context of cross-border demand concerned those contracts where
a current account was a gateway product.[60] Tying and cross-selling
are currently being dealt with in a series of sectoral initiatives that are
subject to negotiations in the European Parliament and Council.[61] The tying and bundling of payment accounts to mortgage
credits is under discussion in the context of negotiations on the Directive on
credit agreements relating to residential property.[62] Should tying be forbidden, but bundling be permitted (as
proposed by the European Parliament and supported by the Commission), this
initiative would increase in importance: clear and understandable bank fee
information is vital for consumers to take an informed decision as to whether
to enter into a bundled contract. Third, alternatives to payment accounts may
deter some consumers from opening and even switching accounts, thus limiting
the size of the problem. Globally, e-payments and m-payments collectively
accounted for an estimated 22.5 billion transactions in 2010.[63] E-payments (online payments for e-commerce activities) are expected
to grow globally to 30.3 billion transactions from 17.9 (in 2010-13), while
m-payments are expected to grow globally to 15.3 billion transactions from 4.6
billion in the same period.[64] Analysis of the different potential
substitutes available shows that in their current
form these substitutes are imperfect and do not enable consumers to access the
payment services required. For example: The UK
Paypoint system allows consumers to manage payments in cash to a wide range of
service providers. However, some of the problems associated with the inability
to access a payment account
identified in Section 3.2.1, notably the reliance on cash (such as insecurity,
extra time and hassle, difficulties in finding a job or renting a dwelling)
would remain. ·
It is increasingly common to purchase goods or
services via mobile phone. In Finland, Luottokunta, BookIt Oy and Microsoft
have developed a service called iSMS® that enables users to pay for purchases
by mobile, domestically and abroad. As a result, 50% of Finns use their mobile
phone for payments.[65]
However, it is unclear whether such a system could work without a link to a
payment account (or at least a credit card) and whether the information stored
on a mobile phone could be recovered if the phone were lost. In some instances consumers cannot use mobile
phones to make payments as a credit contract may be required. There are also data security concerns regarding mobile phone
transactions and risks of abusive use of information about consumers'
purchasing habits.[66]
In light of these issues, it is perhaps unsurprising 100% of Finns maintain
payment accounts, illustrating the complementary rather
than substitutive nature of mobile phones as a means of payment.[67] ·
Finally, pre-paid cards permit consumers to make
certain types of electronic payments without a payment account. They do have
major drawbacks, offering a limited range of services, and many traders do not
accept them. The most common pre-paid cards do not allow their holder to
transfer money or to pay bills via direct debit or standing order. Receiving
money via a bank transfer may not always be possible. Such cards can be a
costly solution because of the top-up and usage fees applied. The cost of
loading the card can be a flat fee or a percentage of the loaded amount. It is
more expensive if done with cash (e.g. £ 1 per top up or 3% of the loaded
amount in average in the UK; EUR 3 per top up for some cards in Belgium or
1% of the loaded amount for some cards in Spain).[68] Application, maintenance and
replacement fees vary; while the Belgium pre-paid cards are obtained for free,
maintenance costs are EUR 12 per year.[69]
A card in France costs EUR 49 when applying for it and EUR 12 when
replacing it but has no maintenance costs.[70]
Transaction costs also exist. Some cards charge the user a percentage of the
purchased amount (e.g. 2.95% for an Irish prepaid card).[71] Withdrawing money from an ATM
machine will cost the user of a Belgian card EUR 1.5 per withdrawal and 2%
of the withdrawn amount to the user of a French card. Even not using it may be
expensive: Irish prepaid cards charge an inactivity fee of EUR 3.50 a month
after 2 months of no usage.[72]
Prepaid cards are both imperfect substitutes and an expensive means of payment. ·
It may be argued that in societies reliant on
cash transactions, e.g. Romania and Bulgaria, access to payments accounts is
not as essential: consumers can use cash as a substitute.[73] This situation is changing
quickly. In developed EU countries, the proportion of cash transactions has
decreased: "The evolvement of the cashless society has been increasing
in Finland in retail purchases along with other Nordic countries and along
plans by the banking industry".[74]
Similarly, in central European Member States, electronic payments have started
to prevail: "the variable costs of cash, paper-based and postal payment
instruments are so high that their substitution with electronic transactions
generally results in social savings and therefore Hungarian society can realise
savings by the shift in the direction of cash-free, electronic payments which
we have assumed."[75]
Furthermore, in some Member States there are limits in terms of the cash volume
that merchants can accept. In Slovenia, traders are unable to accept more than
EUR 15 000 in cash.[76]
Similar restrictions exist in Belgium, Italy, France and the Netherlands.[77] This shift towards electronic
payments will have increasingly significant implications for those without
access to electronic banking facilities. As demonstrated in Graph III, there are clear trends in payment methods. From
2000-2010, one can observe a steady growth of the use of card payments, credit
transfers and direct debits. Use of cheques is declining. Graph III: Number of payment transactions
per year in the EU (in million) Source: ECB payments data. Romania and Bulgaria will follow this trend
shortly. Although there is no hard data demonstrating the decreasing role of
cash in these countries, the increased use of electronic payment means, such as
debit and credit cards (substitutes for cash) suggest this is the correct
conclusion to reach. Graph IV: Number of transactions by all cards (in millions) Source: ECB payments data. There are, moreover, ongoing and planned
measures that risk further exacerbating some of the negative consequences of
remaining unbanked. These include Member States'
deficit reduction and public sector efficiency policies, anti-fraud measures,
or a combination of these. Measures to forbid payment
of salaries or social benefits in cash (e.g. Belgium[78]) and to reduce the minimum
amount that can be paid in cash (e.g. Belgium[79],
Spain[80],
Italy[81])
have been announced recently. These will render unbanked citizens' lives more
difficult in future. Consequently, the substitutes outlined are not an adequate alternative to a basic
payment account, and do not counter the problem of
economic exclusion. Fourth, stakeholders (particularly the financial
services industry) state that they may refuse to open an account for a consumer
due to anti-money laundering rules.[82] However, the Commission concludes in its analysis of the
EU anti-money laundering Directive, that the Directive in itself does not
create any barriers to opening accounts. Member States' analyses of national
money laundering rules have reached similar conclusions: anti-money laundering
provisions do not require a person who wishes to open a bank account to produce
an ID card or passport. Article 8 of Directive 2005/60/EC on the prevention of
the use of the financial system for the purpose of money laundering and
terrorist financing states that: "Customer due diligence measures shall
comprise identifying the customer and verifying the customer's identity on the
basis of documents, data or information obtained from a reliable and
independent source."[83] Similarly, a report by the Financial Action
Task Force (FATF) states that: "countries' laws or regulations
generally do not distinguish the types of customer information to be collected".[84] However, "although a passport or ID
Card is one of the methods used to verify the identity of customers in a
majority of countries, it should be noted that the FATF standards (on which the
EU anti-money laundering rules are based) does allow countries to use other
reliable, independent source documents, data or information".[85] The FATF report further emphasises that the
pursuit of financial inclusion and effective money-laundering regimes are
complementary and "measures that ensure that more clients use formal
financial services increase the reach and effectiveness of the anti-money
laundering controls."[86] The FATF report acknowledges that "a customer
lacking a government issued form of identification, for example, may result in
a financial institution using other more costly methods to verify
identification, which could be a disincentive to serve certain customers."[87] This is supported by evidence from users'
representatives who note that banks use anti-money laundering rules to reject
applications from unattractive consumers.[88] In short, it is financial institutions' internal processes
that create 'false barriers'. Fifth, it has been argued[89] that these differing levels of payment account penetration can be
linked to the level of development of banking infrastructure.[90] The underdevelopment of the banking sector in certain countries or
regions, e.g. in Romania and Bulgaria, may restrict consumer mobility and
choice. Elderly people, unfamiliar with online banking, may not open an account
when there is no local branch.[91] Therefore it can be assumed that together with economic growth of
these regions, banking infrastructure will also improve thus allowing for
easier access of consumers to bank accounts. On the other hand, studies have
been unable to demonstrate a link between account penetration and the
availability of banking facilities.[92] Thus,
despite having few bank branches per 10 000 people, Estonia, the Netherlands,
Sweden and the United Kingdom have high levels of payment account penetration.[93] However, this is partly due to the widespread use of internet by
consumers to manage their bank accounts in these countries, which limits the
importance of branch networks since almost all banking transactions and operations
can be made directly on-line or by means of a telephone operator. The
development of internet banking can substantially facilitate and improve access
to bank accounts, in particular for those consumers who have an easy access to
internet and do not find it difficult to use on-line banking applications and
software. While it can be assumed that generally such consumers do not face
access problems and can open any bank account (regular or on-line) relatively
easily, vulnerable consumers face a different reality. These are low-income
groups, elderly people or people suffering from social exclusion who have no
regular access to internet and simply would not be able to benefit from a bank
account which is available only via internet. Sixth, it can be assumed that increasing
income levels of consumers in the EU in parallel with the economic growth will
encourage even more common use of retail financial products and, as a result
the number of unbanked consumers will 'naturally' decrease. Finally,
the trust (or lack thereof) of consumers vis-à-vis the
banking sector may affect the bank-client relationship.[94]
According to a survey, 50% of European respondents admit that their confidence
toward the banking industry has decreased over the past 12 months.[95] Neither of the latter issues is within the scope of this impact
assessment. To conclude this section, it is of note that
a right of access to basic banking services is already recognised in some OECD
countries. In 2003 Canada introduced Basic Banking Services Regulations to
ensure that basic banking services are available to all individuals, including
foreigners who are legally resident in Canada.[96] In
order to open a basic payment account, a consumer is required to present at
least one identity document from a list provided by law. The bank can reject
the consumer's request based on limited and clearly specified grounds and has
to justify the reason in writing, and must inform the consumer as to how to
contact the regulator. Apart from a basic payment account, under the Basic
Banking Services Regulation, a consumer has access to basic payment means. 3.2. Problems 3.2.1. Access
to basic account services It is difficult to estimate the number of
consumers without a payment account, since much of the data available is not
comparable, though research estimates the number
of EU citizens with no payment account at between 30 and 68 million.[97] Calculations based on World Bank data put the figure at 56 million.[98] [99] These figures probably underestimate how
many citizens remain unbanked: the data is survey-based, and national data
confirms that many unbanked consumers are unlikely to participate in such
surveys. Table 2: Size of
the problem (EUR, millions, 2011 data) || Consumers with no payment account || Consumers who would like an account, but don't have one || have been refused || have been refused due to inadequate documentation || have been refused due to no regular income || have been refused for other reasons EU || 56 || 25 || 2.80 || 0.56 || 1.12 || 1.12 Of which mobile || 4 || 2 || 0.18 || 0.04 || 0.07 || 0.07 Of which vulnerable || 53 || 23 || 2.63 || 0.53 || 1.05 || 1.05 Sources: Commission calculations based on
2011 data from World Bank, Eurobarometer 2012 and Eurostat. Based on Commission calculations, there are
almost 3 million EU consumers who requested a bank account but were refused one
either due to irregular income (40% of them), inadequate documentation (20%),
or other reasons (40%) (See Table 2). There are also many unbanked consumers
(22.2 million) who would like a bank account but have not attempted to open
one. This very high figure results from the fact that many consumers, in
particular less-educated parts of society, believe a bank account is not
accessible for consumers living on a low or irregular income. They consider it
a costly and complex product and refrain from attempting to open a bank
account, even when they would like one. Some unbanked consumers are unaware
that they have the right to open a basic payment account at low cost (in some
Member States) because they are not informed about it. In Belgium, despite the
fact that there is a legal right to a basic account, 63% of those without an
account surveyed in 2011 considered that the bank would reject their
application. It is therefore essential to reach unbanked consumers with public
campaigns, as stipulated by the Recommendation on access to a basic payment
account, informing them about the availability of this product, which is
strongly advocated by consumers' representatives. The above-presented figures,
however, most likely underestimate the size of the problem as they are survey
based and many excluded consumers are unlikely to participate in such surveys.
Available national data confirms this. According to a recent UK Financial
Inclusion Task Force research, 52% of the unbanked consumers in the UK would like
to have an account. The size of the problem varies between Member States. In Romania and Bulgaria, 45%
and 53% of consumers respectively have current accounts; in Scandinavia, the
figure is close to 100% (see Graph V).[100] In
terms of volume, Italy and Romania have more than 13 million citizens aged
over 15 without payment accounts between them, while Denmark and Luxembourg
have few unbanked citizens. Although in the majority of Member States,
representatives of the financial services industry argue that a very small
percentage of consumers are unbanked, these figures can be higher in actual
terms. In Germany, while just 2% of consumers are unbanked, this equates to
almost 1.5 million people.[101] Graph V: EU
citizens with a payment account Source: Measuring Financial Inclusion, The
Global Findex Database, World Bank, April 2012. The low levels of access in Romania and Bulgaria may be caused by the broader unavailability
of basic banking services, or by consumers' preference for using cash.[102] However, as mentioned in the analysis of problem drivers above, the
share of cash in payment transactions is decreasing steadily and this downward trend is likely to continue in the
foreseeable future. In those EU countries with more developed banking systems,
such as in Scandinavia[103] or Central Europe[104], the
share of cash payment transactions is decreasing, not just for consumers'
convenience but also due to high cost of cash for providers. Some Member States
also have limits in terms of the cash volume that merchants can accept; e.g.
Slovenia, Belgium, Italy, France and the Netherlands.[105] Many of those without
a payment account say they do not need or want one.[106] These
people are predominately older: 65% of unbanked people over 55 say this, as do
69% of retired people.[107] This response is also more common among those with less education,
including 66% of people who left school aged 15 or under.[108] Many in these
groups are unaware of the potential benefits payment accounts can bring, e.g.
cheaper payments transactions, lower security risks, easier receipt of benefits
and lower risk of tax fraud. In this respect, as underlined by the recent
European Parliament Resolution, "financial education pointing out the
advantages of financial inclusion is important"[109],
as a complementary measure to tackle financial
exclusion, the view which is shared by the financial industry.[110] Psychological factors may help explain the apparent reluctance of
these groups to open an account, including perceptions about prices,
bureaucratic complications, etc. This is confirmed by World Bank data which
finds that "a formal account is not costless in most parts of the world
and may be viewed as unnecessary by a person whose income stream is small or
irregular".[111] Sharing another's payment account is a
further common reason why some consumers have no account, especially for those
who use 'household' accounts, particularly women.[112] With
the changing structure of families and family roles, this is less likely to be
the case in the future; for example, in countries such as Sweden and the
Netherlands, consumers did not report the use of shared accounts. Finally, as many as one third of 15-24 olds
believe that they are too young for an account.[113] These
consumers, despite stating that they do not want an account, could still potentially
benefit from improved access and cheaper accounts. Beyond this, managing a
payment account has an important role in promoting independence and financial
literacy. Graph VI: Reasons
for not having a payment account Source: Eurobarometer Despite a number of consumers believing that
they do not need an account, it is estimated that around half of those without
an account would like one.[114] 33% (10 million consumers; of which almost 4 million are
in Romania) of those without an account in EU12 and 55% (15 million
consumers, of which more than 7 million are in Italy) of those without an
account in the EU 15 would like one. As indicated above, 52% of the
unbanked consumers in the UK would like to have an account.[115]Accessing an account is particularly difficult for two main
population groups: 'vulnerable' consumers and 'mobile' consumers. This observation has been explicitly confirmed by the European
Consumer Organisation BEUC in their feedback to the consultation on bank
accounts.[116] ·
Vulnerable consumers. Those with few economic resources (such as people on low incomes or
the unemployed). This is a sizeable part of the EU population; in 2010, 23.4% of
the EU population was at risk of poverty or social exclusion.[117] These consumers are more likely to be financially excluded than
other groups.[118] Based on Commission calculations, there are almost 3 million EU
consumers who have requested a bank account but have been refused due to
irregular income (40%), inadequate documentation (20%), or other reasons (40%)
(see Table 2) while according to the World Bank report "Inclusive
financial systems – allowing broad access to financial services, without price
or non-price barriers to their use – are especially likely to benefit poor
people and other disadvantaged groups."[119] ·
Mobile consumers. Consumers move
cross-border for various reasons including for work, study or retirement.
Migrant workers are probably the largest mobile group. In 2010,
12.3 million EU citizens resided in another Member State, up from 11.9
million the previous year. [120] This
includes more than half a million students (of which over 210 000 are
Erasmus students)[121] who study in other Member States, (foreign students are not
normally considered residents).[122] This
population is rising, with the number of Erasmus students alone increasing
annually by 7.4%.[123] This figure also excludes all other non-resident EU migrants such
as seasonal or temporary workers. The number of non-resident migrants is
estimated at between 1.9 and 3.8 million.[124] Combined, then, the total mobile EU population is approximately
15.8 million.[125] [126]This excludes 20.2 million migrants from outside the EU.[127] ·
According to calculations by Commission
services, the mobile population with access issues amounts to 3.5 million
people, or approximately 6.25% of those without a payment account. It can be
estimated that 0.18 million mobile consumers who face difficulties in
accessing basic account services would like an account but have been refused
(See Table 2), of which around 70 000 of have been refused for reasons
other than inadequate documentation. The reasons why consumers cannot access an
account vary across the EU. The consequences of lack of access are significant
for all stakeholders and for the efficient functioning of the single market as
a whole. These consequences are described in Section 3.4 and in more detail in
Annex II. Ineffective,
inconsistent or non-existent regulatory framework The Commission asked Member States to comply
with the provisions of the Recommendation by January 2012. The Recommendation
also stated that "the Commission will monitor and assess the Measures
taken by 1 July 2012."[128] To
this end, in August 2012, the Commission published a report presenting an
overview of Member States' compliance with the Recommendation.[129] The Recommendation stated: "the Commission will propose any
necessary action, including legislative measures if needed, in order to ensure
that the objectives of this Recommendation are fully met."[130] Table 3: Size of the problem
(millions) || || No of people with no account || No of people who would like an account (but don't have one) || Response by Member States to the Recommendation || No intention to take further action || Action taken/to be taken Belgium || 0.27 || 0.19 || Law in line with Recommendation || || Bulgaria || 3.04 || 0.7 || No problem. || || Czech Republic || 1.71 || 0.58 || No problem. || || Denmark || 0 || 0 || || Partial legal framework enough but review launched. || Germany || 1.42 || 1.08 || Partial legal framework enough at present. || || Estonia || 0.03 || 0.02 || Partial legal framework enough. || || Ireland || 0.21 || 0.05 || Partial self-regulatory framework enough. || || Greece || 2.13 || 0.98 || || Partial self-regulation under consideration. || Spain || 2.74 || 1.04 || No action planned. || || France || 1.59 || 1.46 || Law in line with Recommendation || || Italy || 15.12 || 7.71 || || Law in line with Recommendation adopted 2012. || Cyprus || 0.1 || 0.03 || No problem. || || Latvia || 0.19 || 0.04 || No problem. || || Lithuania || 0.72 || 0.2 || Partial legal framework enough. || || Luxembourg || 0.02 || 0.02 || Partial legal framework enough. || || Hungary || 2.3 || 0.37 || || Partial self-regulation adopted April 2012. || Malta || 0.02 || 0.01 || No problem. || || Netherlands || 0.14 || 0.08 || Partial self-regulatory framework enough. || || Austria || 0.22 || 0.18 || No problem. || || Poland || 9.73 || 3.31 || || Partial self-regulation under consideration. || Portugal || 1.72 || 0.81 || || Guidelines exist but compliance is optional. || Romania || 9.99 || 3.99 || || || Slovenia || 0.05 || 0.02 || No problem. || || Slovakia || 0.92 || 0.23 || || Proposals for legislation forwarded to the Parliament. || Finland || 0 || 0 || Partial legal framework enough. || || Sweden || 0.08 || 0.04 || Partial self-regulatory framework enough. || || United Kingdom || 1.55 || 0.97 || Partial self-regulatory framework enough. || || EU || 56.03 || 24.65 || || || Source: Commission calculations based on data from
World Bank, 2012 Eurobarometer and Eurostat. Although representatives of the financial
services industry argue that measures have been adopted and are adequately
enforced,[131] as illustrated by reports by the European Commission and Parliament[132] as well as feedback to a public consultation[133], the Recommendation's application is far from satisfactory. A legal
framework exists to facilitate access to basic account services in Belgium,
France and Italy, while partial regulatory or self-regulatory regimes are in
place in Portugal, Denmark, Estonia, Finland, Lithuania, Luxembourg, Sweden,
Germany, Hungary, Ireland, Netherlands, and the UK. Of these countries,
Estonia, Finland, Ireland, Lithuania, Luxembourg, Netherlands, Sweden and the
UK, (who together account for about 2.8 million citizens without a payment
account – equivalent to almost 5% of the EU total), do not intend to take any
further action arguing that their partial frameworks suffice.[134] No framework exists at all in the
remaining Member States: Austria, Bulgaria, Cyprus, the Czech Republic, Latvia,
Malta, and Slovenia. These countries do not plan on taking any action in
response to the Recommendation, arguing that there is no problem, even though
they together account for about 5.3 million unbanked citizens which is
equivalent to almost 10% of the total EU population without a bank account.
Furthermore, in the Member States where only self-regulatory measures have been
or are planned to be adopted, i.e. Ireland, the Netherlands, Finland, UK,
Greece, Hungary and Poland, there are altogether as many as 16.14 million
consumers without a bank account. On the other hand, the example of Belgium
which has a legal framework on access to basic bank accounts in place since
2003 demonstrates that such an approach efficiently tackles financial
exclusion. According to the "Rapport Inclusion Financière 2011",[135] following the adoption in 2003 of the law introducing the right to
a basic bank account for every consumer who did not already hold an account,
the number of unbanked consumers fell from 40 000 to only 10 000 in 2005.
Furthermore, the number of persons who were refused basic bank accounts in the
country decreased significantly between 2007 and 2009 as presented in the table
below, demonstrating the efficiency of the measure.[136] Table 4: Number of
refusals to open a basic bank account - Belgium || 2007 || 2008 || 2009 || 2010 Number of refusals to open a basic bank account || 290 || 164 || 82 || Not available Source: Réseau Financement Alternatif, Rapport
Inclusion Financière 2011 Whilst the financial services industry
argues, (based on very heterogeneous data), that "there is no proven
correlation between the existence of a legal obligation to provide access to a
bank account and the number of bank account holders"[137], a legal framework presents the definite advantage of being
enforceable. One nevertheless needs
to acknowledge that even where a framework on access to bank accounts exists,
it is not necessarily effective.[138] In
particular, consumer and civil society representatives in the most recent
public consultation, underlined that self-regulatory initiatives have had
limited success.[139] Amongst those with a legal framework, only six countries comply
even partially with the Recommendation (France, Belgium, Italy, Luxembourg,
Portugal and Finland). Low effectiveness is caused by several factors including
consumers lacking awareness of their rights (despite information obligations
for providers and Member States under the Recommendation), inadequate,
incomplete and divergent application of the Recommendation (e.g. in Belgium,
France, Italy and Portugal the characteristics and conditions of the basic
account are defined, in others, such as Denmark, Finland, Luxembourg or Sweden
not, creating a regulatory patchwork for consumers and business alike) and
recent developments in the legal framework, e.g. Italy has only recently
implemented a legal framework in line with the Recommendation. Limited bank profitability from certain
groups of consumers Misaligned incentives between the payment
account provider and the consumer can lead to the rejection of a consumer's
application for a payment account. This is true for vulnerable consumers who
may be perceived by banks as unprofitable and for many mobile consumers on whom
there may be little information available. Current accounts are generally
offered at low cost because they are considered as a gateway product that would
allow the bank to earn additional revenues.[140] The
probable duration of vulnerable and mobile consumers' relationship with the
payment services provider is difficult to estimate; hence it is uneconomic to
make products available to them. In fact, some academics share this view.[141] Limited and more costly access to basic
financial products and services Feedback from stakeholders, in particular consumer representatives, indicates
that the cost of basic payment accounts themselves can be prohibitive.[142] BEUC reported that in Italy, five current accounts offered by banks
as an instrument of financial inclusion were more expensive than standard
online current accounts.[143] In the opinion of the World Bank, "worldwide, reducing
withdrawal charges and balance fees could make formal accounts more attractive
to more than 500 million adults who are without one."[144] Moreover, a consumer without a payment account will find it more
difficult and more expensive to purchase other financial products. Since
payment accounts are often gateway products, unbanked consumers seeking a
product such as household insurance may be unable to obtain the best value
product. The remaining services available may be easily available (e.g. SMS
loans in some EU countries) but also more expensive (e.g. high interest rates)[145] and may not provide the same level of consumer protection. Some
academics argue that access to "basic banking services….would be a
powerful protection against irresponsible lending practices and […]
overindebtedness."[146] These problems were
underlined in a recent European Parliament Resolution: "access to basic
payment services is one of the preconditions for consumers to benefit from the
internal market, notably from freedom of movement, money transfer and the
purchase of goods and services at reasonable transaction costs; whereas basic
payment services are essential for consumers to reap the benefits of
e-commerce; whereas the annual opportunity cost of not having access to a
payment account is estimated at between EUR 185 to EUR 365 per consumer;
whereas access to basic payment services is, in particular, increasingly
becoming a prerequisite for social inclusion in terms of access to employment,
healthcare and housing."[147] Low awareness of availability of basic
payment accounts In the Member States with a legal right to a
basic payment account (see Section 3.2.1), the accounts are not actively
marketed due to misaligned incentives between the payment account provider and
the consumer. Providers have an incentive to first offer more expensive
accounts to their clients.[148] In Belgium, 30% of unbanked consumers refer to the excessive price
of a payment account as the reason for not having one, despite the basic
payment account's price being legally capped at around
EUR 14 per year.[149] One
possible explanation could be that consumers are always offered the more
expensive product first.[150] In other cases, the economic advantage of having access to an
account and the means of payments associated with it may not be clear for the
consumer, particularly if high fees and penalties are charged where, for
example, overdraft facilities are used. This problem impacts primarily on
vulnerable consumers,[151] which is why consumer organisations advocate for clear, concise and
comprehensible information on basic payment account fees to be made available
to consumers.[152] Discriminatory rules on accessing payment
accounts Asymmetric information between the credit
institution and the consumer can lead to an application being rejected because
the consumer is considered riskier or because information on the client is not
readily available. The lack of information on consumers is a particular problem
if the account offers credit related services (e.g. an overdraft facility) as
access to the credit history of a foreign customer can also be challenging
and/or costly. Consumers associations state that one of the reasons for
consumers to be rejected access to an account is the absence of any regular
income.[153] As stated above, 40% of consumers who would like an account and
were refused cited this as the reason.[154] An absence of any regular income is a key
reason why banks reject applicants for payment accounts. Feedback from all
stakeholder groups, received during public consultations also identifies this
as a common problem.[155] Examples include undischarged bankrupts who are refused access to
an account by most UK banks, insufficient income, poor creditworthiness,
overdrawn bank accounts or the failure to maintain loan payments with their
main bank.[156] This problem affects both vulnerable and mobile consumers equally.
In many cases, a payment account is required in order to be provided with an
employment or rental contract. Without an account, employment or accommodation
contracts may remain unsigned. Consequently, consumers may be caught in a
vicious cycle in which they cannot enter legal employment without an account,
but they cannot open an account without a regular income – for which they must
be employed. Another common ground for refusal of mobile
consumers is non-residence. Despite increasing intra-EU migration, recent data
shows that only 3% of the EU population has opened a payment account in another
Member State[157] though this represents the number of EU nationals resident in
another Member State.[158] In Estonia, France and Austria, one
third of refusals were due to the consumer being non-resident. This figure was
just over one quarter in Belgium and one fifth in Slovakia.[159] Similarly, around 60% of Erasmus students who failed to open an
account attributed this to "not being a national resident".[160] Feedback to the Commission during public consultations also
indicate that in most cases, the legislative and self-regulatory initiatives
undertaken in Member States are mostly aimed only at residents.[161] Consequently, the residence requirement for opening an account
represents a significant barrier to the internal market by impeding or
prohibiting cross-border activity, for example, through the free movement of
persons or the free provision of goods and services by businesses. In order to open an account in some Member
States, it is necessary to present identification (e.g. ID card or passport).[162] Around half a million consumers across the EU have been refused
access to an account due to the lack of appropriate documentation. In some
cases, such refusals are attributed to anti-money laundering legislation.[163] In fact, users' representatives have
reported that banks often use anti-money laundering rules abusively to reject
applications from unattractive consumers.[164] Low consumer confidence in the financial
system A general mistrust of banks may also explain
self-exclusion. A 2010 study reported that unbanked people perceive "banks to be intimidating and untrustworthy, interested only
in making money out of people."[165] This
negative image of the financial industry further dissuades unbanked consumers. Some vulnerable consumers may
refrain from opening an account because of the risk that, if in debt, their
balance will be seized. According to a 2010 report, 10% of French poor
households had had their balance seized.[166] Restrictions on the use of basic payment
services The different characteristics of a basic
payment account in different Member States create a barrier to the internal
market. For example, in the Netherlands, a basic payment account can only
conduct 'domestic' bank transfers and use 'domestic' ATMs and 'domestic'
payment terminals.[167] The law in Belgium specifies that a basic payment account need only
permit domestic cash withdrawals and the domestic use of a debit card (when a
card is provided).[168] In Hungary, credit transfers from a basic payment account can only
be made to a Hungarian forint denominated payment account at another Hungarian
bank.[169] For mobile consumers, vulnerable consumers and those living in
border areas, this represents a significant problem. For example, a poor person
or a student living in Maastricht or Aachen would be forced to shop locally
instead of being able to travel cross-border to purchase cheaper goods or
services. Moreover, around 22% of newly banked
consumers had shopped by telephone or internet since opening their account,
with an opportunity to make considerable savings.[170] 3.2.2. Presentation
and ease of comparison of bank fees Providing clear and comparable information on
payment account offers is a prerequisite for the free operation of market
forces. The problems discussed below show an inherent level of complexity in
the features that define payment accounts as well as complex pricing
structures, which lead to information asymmetries and hinder consumer choice
and competition. Responses to the public consultation indicate
a general consensus among all stakeholder groups that bank fees are opaque and
difficult to understand. While it is difficult to measure the level of
detriment caused by non-transparent, incomparable fee information, it is
reasonable to assume that all consumers are adversely impacted by these issues.
In addition to the inherent complexity of fees, which is the root cause of this
set of problems, the available evidence collected focusses on two main aspects;
how clear and comparable is information provided to consumers and; how aware
consumers are of the fees they are charged. Action to remove barriers to competition
within the internal market should aim towards a level regulatory playing field
for credit institutions and an equal level of consumer protection for European
citizens. A wide range of services and fees Payment accounts cover a wide range of
services and therefore charging structures may be complex. Table 5 below
divides fees into four main categories and provides examples of some of those
fees. The frequency with which these fees are charged varies between one-off
fees (e.g. exceptions handling) and regular, standard charges (e.g. account
management), while other fees are charged per transaction or block of
transactions (e.g. payments and cash utilisation).[171] This
makes bank charges difficult to foresee and monitor over a given future period.
Understanding fees is vital for being able to
compare different bank offers and key for making informed decisions as to which
account is most appropriate for one's needs. The evidence indicates that this
complexity impacts upon a consumer's ability to understand what fees represent.
A study carried out by the UK Office of Fair Trading in 2008[172] concluded that consumers were unfamiliar with key prices associated
with their current account. Even when aware of prices, consumers had difficulty
understanding when and at what level they would incur fees. It also appeared
that consumers were not able to modify their behaviour when their account
offered lower than optimal value for money. More recent research conducted for the
Commission in 2012, aimed to assess how different approaches to enhance
information provided to consumers on bank offers and switching impact consumer
behaviour.[173] The study found that a quarter of respondents (25%) felt
that they were not well-informed about the cost of their current account. Even
though the majority of respondents felt they were well informed about prices,
when questioned more closely, "six out of ten (60%) never compare their
current account charges with the charges of other institutions. More
interestingly, 29% say they do not know the monthly fee on their current
account fee. A third (32%) do not know how much it costs them to use other
banks’ ATMs. A third (33%) do not know how much they pay for statements sent by
post. Seven out of ten (70%) do not know the interest rate on their authorised
overdraft and 85% do not know the unauthorized overdraft rate." Table 5: Core day-to-day banking needs and
products/services[174] Core day-to-day banking needs || Twenty-three products and services Account management || Current account Online banking Call centre Payments || Cheque Debit card Credit card Branch internal wire transfer internet internal wire transfer Branch external wire transfer internet external wire transfer Branch standing order internet standing order Direct debit internet direct debit Cash utilisation || Cash deposit at desk Cash deposit at ATM Withdrawal at desk Withdrawal at bank’s ATM Withdrawal at other banks’ ATMs Exceptions handling || Debit card stop payment Cheque stop payment Source: World Retail Banking Report, 2009 – Cap Gemini Pricing models The 2007 edition of the World Retail Banking
Report[175] defined four prevailing 'pure' pricing models for payment accounts.
The characteristics of each model are summarised in Table 6 below. Some pricing
models appear to have simpler charging structures, (e.g. package based,
indirect revenue-based) than others (transaction based, account-based).
However, these simpler pricing models – due either to a lower number of
applicable fees or a unique fee charge – are generally tied to other fee or
interest generating products as is indicated in Table 3.4, Annex III. Price structures may cater for specific
socio-demographic groups (e.g. for students). Therefore, it is not surprising
that although national markets often exhibit a prevalence of one pricing model
over others, more than one prevailing model is in use in Belgium, Spain, Latvia
and the United Kingdom. While this diversity provides a broader choice of
products – and is not a negative feature in competitive markets – it further
illustrates how charging structures may add to the complexity of choosing an
appropriate product. Table 6:
Description of 'pure' pricing models for payment accounts Account-based A range of fees is applied to account management: - Could be based on account balance to ensure relative stability or increase non-interest-bearing deposits. All other products and services are linked to the current account: - Must open a current account before getting day-to-day banking products and other financial products (savings, credit, mortgages) Product and service pricing is based on current account balance. Transaction-based Fees are applied to transactions, often including any form of: - Debit (cheque, money transfer, point-of-service purchase, ATM withdrawal) or credit (deposit at desk, deposit at an ATM, etc.) - Fees consist of a fixed amount per transaction, a percentage of the transaction amount, or both: A free-of-charge limit may exist; transactions across service channels are aggregated for each statement cycle, and when the transaction limit is exceeded, the customer is charged accordingly. Package-based Similar to account-based model, except that the bank charges an annual fee for a suite of services, rather than just an account: - Fees/commissions are directly linked to the bank’s ability to increase cross-selling rates Indirect revenue-based A majority of day-to-day banking is free of charge Income is generated by other types of products, such as credits and savings: - Interest spread on credits, as well as a commission to set up credit - Interest spread on savings, as well as fees to manage savings account Source: World Retail Banking Report, 2007 – Cap Gemini Simplicity and transparency of fees The presentation of fees and terminology used
to describe services contribute to the current complexity in the payment
account market. The terminology used to describe services is part of a broader
set of activities including branding and marketing and can differentiate a
product from those of other market participants. The use of different
terminology by banks, while referring to the same type of services, may make it
difficult to compare bank offers. A study by the European Commission published
in 2008,[176] found that while two thirds of financial institutions in the study
sample provided fee information on their websites, 69% of banks did not provide
clear information and further contact was needed to obtain clarifications on
the fees as disclosed. The difficulties in understanding fees related in part
to weak presentation. Fee terminology was complex; a coherent use of
terminology was lacking, even on a single bank's website, and information was
difficult to read or ambiguous. The lack of accurate information – including
omission of free-of-charge services, incomplete fee information, information
that was insufficiently detailed and even different tariffs quoted for the same
service – added to this difficulty. A study published by the European Commission
in 2009[177] looked into current account fee structures in banks representing
81% of the market for customer deposits across all Member States.[178] The study sought to analyse and compare current account prices and
attempted to measure two dimensions that have an impact on the ability of a
consumer to understand fees, i.e. simplicity and transparency. The analysis
indicated that only 34% of banks in the study provided sufficiently clear
public information. This confirmed the findings of the prior Commission study
referred to above where the figure stood at 31%. At country level, 56% of
Member States scored above average in terms of simplicity and transparency of
tariffs. Thirteen countries reported above average scores.[179] Graph VII below illustrates the relationship between simplicity and
transparency in Member States as measured in the study. Graph VII: Country positioning on simplicity and transparency of tariffs Source: Data collection for prices of
current accounts provided to consumers – Van Dijk Management Consultants (2009) It seems that inherent difficulties in
understanding payment account features and their price structures are
compounded by a lack of clear and comparable information on the product. Price dispersion in payment accounts within
and across Member States Wide price variations have been observed for
payment accounts[180], calling into question the degree of price
competition in the market. Apart from pure considerations about competition,
price variations also feed the perception that payment accounts are not fairly
priced, denting consumer confidence and trust in the sector. This is apparent in France where only 52% of bank clients consider
that the fees charged by their bank are competitive and 68% of clients consider
their fees to be unfair.[181] Furthermore, 73% of bank customers in France are dissatisfied with
the level of transparency of bank fees, of which 22% are very dissatisfied.[182] Bank fees are also increasingly an important factor for consumers
that are considering switching. A 2012 report found that fees ranked second in
importance (2012: 50%, 2011: 50%) after quality of service (2012: 53%, 2011:
55%) as a factor that leads customers to leave a bank.[183] The
2009 Commission study[184] compared the prices for current accounts in the 27 Member States,
finding very significant variations in prices in absolute terms within, as well
as across, Member States. Customer price discrimination Price discrimination occurs between different
customers so that their cost for a product with comparable features is
different. An example of this is the free banking model[185] in
the United Kingdom, which is partially financed through net interest income
arising from deposits, but also from fees for authorised or unauthorised
overdrafts.[186] Introductory pricing is another common form of price discrimination
that weakens the relationship between the cost of providing a payment account
and its price. It adds another barrier to clear and comparable bank offers and
makes it more difficult for a consumer to understand longer-term costs
associated with holding an account.[187] Other forms of price discrimination arise
from credit institutions seeking to modify modes of consumption, which favour
some customers and may disadvantage others both in terms of price and convenience:
"Banks appear to be using day-to-day pricing strategies to influence
consumer behaviour rather than to increase revenues; banks cut online and call
centre fees, for instance, and raised desk operation fees, pointing customers
towards automated channels for common operations."[188] For the purposes of this impact assessment
price discrimination is a factor that contributes to the complexity of bank
fees as it makes fees more difficult to understand or to compare. It also adds
another variable to the elements that determine the price of a bank account and
therefore further weakens the relationship between the cost of providing a
service and the price charged to a consumer. Ineffective, inconsistent or non-existent
regulatory framework The current regulatory framework covering
presentation requirements and the ease of comparison of fees varies widely
across Member States, in terms of their scope and depth. While Member States
have generally adopted requirements for credit institutions to provide
consumers with contractual terms and conditions when opening a payment account,
many do not mandate specific presentation requirements. Specific presentation
requirements, including standardisation of fee terms are foreseen in Belgium,
Italy and Portugal and more recently in Spain. Other Member States have
established requirements governing the provision of fee information in the form
of lists through legislation or self-regulation. These include Austria,
Denmark, Finland, Germany and Luxembourg. Ex-ante fee disclosure requirements
in the United Kingdom focus on overdrafts. Even in more highly regulated Member
States compliance seems to be problematic in some cases. A market study in
France[189], reported that up to 42% of banks within a sample of over 1 746
branches did not make fee information readily available to consumers as
required by French legislation. The approach of Member States to the
provision of ex-post information also differs widely in terms of the scope of
regulatory provision, the frequency with which information is to be provided
and the level of detail. For example in France, the banking industry has
committed to providing monthly summary statements of fees. In Austria, monthly fees are required by
legislation. Detailed annual statements are required in Belgium and Germany,
while in Denmark the frequency of summary fees statements is agreed upon
between the credit institutions and client. Meanwhile in Spain the requirement
to provide bank statements detailing transactions (not fee summaries) has been
adopted recently. In the Netherlands, there is a switching/redirection service,
but consumer information on actual fees incurred is provided as part of the
list of transactions in bank statements, rather than in summary form. No
summary fee information is required in Italy. No requirements are found in
Bulgaria, Latvia, Luxembourg or Portugal. Uncoordinated action on the part of Member States results in a non-level playing field
within the internal market and further market fragmentation in retail banking
within the EU. European citizens experience different levels of consumer
protection because of the lack of action in some Member States. Impact
of limitations to cross border mobility for both consumers and suppliers Market fragmentation in payment accounts –
and the retail banking market generally – is a barrier to the completion of the
internal market. Fragmentation across the EU prevents consumers from obtaining
the best deals and inhibits the efficiency of the retail banking market. The degree of price variation of payment
accounts across Member States is discussed above, particularly in terms of its
impact on consumer confidence. Further details about price differentials across
the EU are provided in Annex III, drawing from at least two sources indicating
that consumers pay significantly different amounts for comparable services. A
Commission study[190] also provides insight into the relationship between the cost of a
payment account and the use of electronic or manual transactions in day-to-day
banking, indicating that where over-the-counter transactions prevail, prices
tend to be more expensive. This indicates differences in preferences in modes
of banking, also points towards different degrees of development of banking
infrastructures across the EU, and highlights potential for mobility on the
supply side as well as on the demand side. Switching is the manifestation of consumer
choice. Accordingly, restrictions upon cross-border switching are closely
related to the provision of comparable bank offer information in the EU. The
problem section dedicated to switching describes mobile and non-mobile
citizens' difficulties in exercising their freedoms within the internal market.
Establishing a right to exercise these freedoms is important, and is dealt with
in the dedicated section dealing with access to basic payment services. In
particular section 3.2.1 above refers to difficulties non-residents encounter
when seeking to open a bank account. While responses to the public consultation
from the banking industry did not point towards a direct link between opaque
fee structures and the challenges banks may face when seeking to enter other EU
domestic markets, a representative from the banking industry with a significant
cross border market presence highlighted opening of account procedures as a
major obstacle to the completion of the internal market for payment accounts.
This respondent noted that opening of account procedures currently discriminate
against non-residents in many cases. It considered that the need for action in
the areas of fee comparison and switching were to be assessed once this major
barrier to cross border bank account mobility was removed. The issues restricting cross-border switching
are further discussed in detail in Section 3.2.3 below. Given the close
relationship between bank offer information and switching, the trans-national
aspects of mobility cannot be differentiated. In a fully functioning internal
market, comparable information on payment account prices across the EU would
broaden consumer choice and facilitate domestic and cross-border switching. 3.2.3. Payment account switching What is a payment account switching service? Payment account switching is a process by which a payment account user
changes/replaces his or her payment account. It involves several steps: opening
a new payment account, transferring all recurrent transactions and the
remaining account balance, and closing the old account. It is a complex process
as it involves different parties: the user, the two banks, and third parties
such as utility companies and employers. The payment account
switching service is not meant to simply enable the user to switch, but to
facilitate the process of switching by providing the user with concrete
assistance and adequate information on all steps of the switching process. This
reduces the necessity for his/her involvement by allowing him to choose the
'new' provider as primary contact and helps him/her to provide the new account
details to relevant third parties. Generally, the service aims to make the
switching a smooth, easy and less time-consuming experience to the user. This
is achieved by a clear definition of the roles of the two banks involved,
limitation of the maximum duration of the switching process and limitation of
the costs of switching-related services. Potential and
actual customer mobility creates competition between
providers encouraging them to offer better and cheaper products and services in
order to maintain or increase market share. Even though switching rates are in
themselves not an accurate measurement of customer mobility (as they only
capture actual switching), if such rates remain low despite high price (or low
product) differentiation, they can indicate restricted mobility. In
nearly all Member States, price dispersion within Member States is 'high' (i.e.
standard deviation of average price of above 20%).[191] When comparing payment accounts across borders price dispersion is
even greater, indicating the fragmentation of the EU payment account markets.
Considering this high price dispersion within and across Member States, even
satisfied consumers could benefit from switching. When comparing payment account switching
rates between providers to those in other network industries (e.g. phone,
electricity, gas) all switching rates appear comparably high and show a slight
upward trend.[192] However, when considering overall product switches (i.e. with the
same provider and between providers), payment account switching rates are
significantly lower than those in internet services and in the mobile phone
sector.[193] This could be attributed to lower
competitive pressure in the payment account markets. EU consumers typically
hold their current account for approximately 10 years with the longest being in
Finland, Denmark, Sweden and the Netherlands.[194] 7% of
EU account holders have switched accounts with ease.[195]
Consumers in Denmark, Sweden and Latvia found the switching process easiest
with 14%, 11% and 11% respectively saying that it was straightforward to
switch. In contrast, only 2% of Portuguese, 3% of the Irish, and 4% of Cypriots
and Maltese found switching easy.[196] Considering the high price dispersion within and across the Member
States, even where a consumer is 'satisfied' with their payment account
provider, they could ultimately be more satisfied with another product.
Therefore, it is important that the threat of a potential switch creates more
competitive pressure which automatically leads to greater and better product
offers for consumers. It would be insufficient to prohibit the tying
of payment accounts; rather, it is necessary to facilitate the switching
process by reducing/eliminating the obstacles set out below. Many of these
obstacles have been recognised by the banking industry and included within
their self-regulatory "Common Principles on bank account switching".
While representatives of the financial services industry indicate that they
have complied with the Common Principles, consumer and civil society
representatives argue that the service provided in practice remains ineffective.[197] Inadequate information The Common Principles require the provision
of information on the switching process. In practice this information is not
always provided. An extensive Europe-wide mystery shopping exercise conducted
in 2011[198] found that in 86% of cases, information on the existence or content
of the switching service was provided either in a branch, online or by
telephone,[199] but the level of information varied widely. In one third of
enquiries, no information on switching was available on the bank’s website. In
45% of cases, insufficiently detailed information on the process was provided
online and no explanatory documentation was provided in 80% of cases. Even
where information was available, it was incomplete in outlining the roles of the
two banks, the fees to be paid, and the duration of the process. In a majority
of cases, the new bank did not provide any explanation as to how recurrent
payments would be transmitted to them (57%), how payments would be cancelled by
the old bank (68%), and that the new bank would request the old bank to
transfer the balance of the account (65%). Results from studies conducted independently
at national level confirm these findings. In France, a survey[200] found that only 14% of branches had information on switching freely
available and information was provided without specific request in only 35% of
cases where the client expressed a wish to change bank. Insufficient
information was also a common problem identified by civil society and Member
States in the recent public consultation on bank accounts.[201] Complexity
of switching process ·
Fear of and errors resulting in delay or
non-execution of recurrent payments, in particular direct debits. Difficulties transferring standing orders and
direct debits represent one of the major barriers to account mobility. The
Common Principles aim to make the process of transfer of recurrent payments
easier, yet research shows that processing errors remain a key problem. Surveys
have found that fear of these problems are one of the main reasons why
consumers do not switch. The 2011 Commission mystery shopping study mentioned
above[202] found that in two thirds of cases, consumers were told that the
bank could not assist them with the transfer of standing orders. Only 19%
successfully switched their payment account including a standing order. While
the data for Member States differs significantly the overall low success rate
must be attributable to a widespread problem. Graph VIII:
Overview: % of successful switches including the transfer of a standing order Source: EU-wide mystery shopping exercise on
behalf of European Commission[203] The problem of potential misdirection of
payments has been identified as the most prominent inconvenience by all
stakeholders.[204] This is also reflected in the results of national studies/surveys.
In France, a 2010 survey[205] found that 61% of banks do not take charge of the entire process;
26% of banks stated that the consumer is responsible for transferring direct
debits; and in 60% of cases, the new bank stated that it could not retrieve the
list of recurrent payments from the old bank. In the UK, on average around 8.5%
of direct debits that are switched go to the wrong bank. There is, therefore, a
46% chance that at least one direct debit will be misdirected.[206] Along with the high direct costs of switching, problematic direct
debit transfers have been identified among the major obstacles for switching
payment account providers in the United States.[207] ·
Administrative burden of switching Although the Common
Principles limit customer interaction with the old bank and allow the consumer
to deal primarily with new bank, saving time and effort, their application is
not uniform. For example, one French survey[208] found
that customers wishing to switch were not informed about the switching process
by the new bank at their first visit and in nearly two-thirds of cases, they
had to make an appointment with a specialist agent of the new provider.
Similarly, a recent mystery shopping exercise in Ireland[209] showed that one fifth of the mystery shoppers seeking to switch
account were asked to make an appointment with a specific staff member. In
responses to the Commission public consultation, inadequate training of bank
staff was listed as an obstacle to switching by public authorities and civil
society.[210] It is estimated that in 2009 around 21
million European citizens did not switch current account due to the cost and
effort involved.[211] ·
Uncertainty in the duration of the switching
process Due to the involvement of several parties in
the switching process, it is often unclear how long the process will take. The
Common Principles set clear deadlines for the parties to complete their
respective tasks: the whole process should not last longer than 14 banking
days. However, research demonstrates that in practice these deadlines are often
not respected. EU research[212] concluded that information on the duration of the switching process
was not provided 79% of the time and, in many cases, the information provided
did not comply with the Common Principles. For nearly a quarter of those who
switched, the process took longer than 14 days. The situation across Member
States differed, but in nearly half of the Member States, there were cases
where the deadlines were not respected. Findings of national surveys/studies
confirm these results. In France,[213] the
switching process took longer than two weeks in the large majority of cases
and, in more than 40% of cases, the switching process lasted for more than one
month. In Austria,[214] the time needed to transfer recurring payments ranged from 4 to 21
banking days. The length of switching processes, including protracted
procedures for closing an account (for example on average 35 days in Italy),
were criticised by consumer and civil society stakeholders in the Commission
public consultation.[215] Direct
financial costs Consumers switching current accounts also
bear direct financial costs. Correspondence costs depend on the number of third
parties the consumer has to inform (exceptions are the Netherlands and, as of
September 2013, the UK, where parties will be informed via an automatic
redirection service). Consumers also face the cost of maintaining two payment accounts for the duration of the
switching process, including the payment of an account management fee, where applicable.
This cost is directly proportional to the length of the switching process. A
final direct cost that may be incurred is an account balance transfer fee. In
France, a transfer of balance fee is charged by 40% of banks.[216] The costs can deter consumers from
switching especially where consumers' view the potential benefits of switching
to be relatively low. In 2009, 8% of the consumers who did not switch current
account stated that they felt the amount that could be saved by switching was
too small.[217] Psychological
factors Consumer perceptions can deter switching. In the Netherlands, switching rates are low,
despite there having been an account redirection system since 2004. One
possible explanation is the perception that the process remains difficult, even
though those who have used the service found it easy.[218]
Moreover, many consumers believe that there is no significant advantage in
switching. One UK survey found that only 10% of consumers have considered
switching their personal payment account provider within the last year. This
survey notes that the main reason for not considering switching was consumer
satisfaction with their existing provider's product.[219] In
this context, the widespread (75% of the UK personal payment account market)
use of free-if-in-credit accounts contributed to the perception that all
personal payment accounts were the same. Restricted
cross-border switching The self-regulatory Common Principles did not
introduce any cross-border switching services. There is
therefore no common framework in place aiming to
facilitate cross-border switching of payment accounts. Although there is a
significant potential demand for cross-border switching, consumers may be
deterred by the complexity of the process in practice. Cross-border demand for payment accounts
arises when individuals use their mobility rights and move temporarily or
permanently to another Member State. Currently, there are about 12.3 million EU
citizens above the age of 15 that reside permanently in another Member State.[220] However, since the establishment of the
Single European Payment Area (SEPA), the mobile citizens are not the only
driver for cross-border demand for payment accounts. The introduction of
standardised payment instruments (transfers, direct debits) by SEPA marked a
significant step towards integrated financial markets. The SEPA vision is that
consumers should be able to operate in the European market as easily as in
their domestic market. Therefore, the cross-border switching is also of high
interest to the non-mobile citizens who could then easily accede to better
products offered in another Member State. Considering the high price dispersion of
payment accounts in different Member States, consumers could significantly
benefit from switching their payment account cross-border. Table 7: Average prices for bank
account services in the EU in 2007 (four consumer profiles, prices in
euro/year) Member State || Payment service user profile (average prices in EUR/year) Average || Basic || Passive || Active Austria || 140.47 || 83.95 || 99.54 || 197.46 Belgium || 58.15 || 16.28 || 29.05 || 82.07 Bulgaria || 26.94 || 9.30 || 17.14 || 42.83 Cyprus || 84.59 || 48.74 || 6.52 || 184.99 Czech Republic || 95.37 || 54.81 || 39.65 || 156.52 Denmark || 74.27 || 38.91 || 37.92 || 128.41 Estonia || 50.51 || 46.98 || 25.57 || 93.08 Finland || 104.42 || 94.04 || 44.65 || 206.56 France || 154.11 || 91.21 || 91.35 || 232.15 Germany || 89.13 || 78.92 || 62.85 || 114.71 Greece || 53.98 || 45.06 || 14.81 || 111.67 Hungary || 76.20 || 64.08 || 28.39 || 144.42 Ireland || 81.85 || 37.17 || 56.40 || 118.39 Italy || 253.14 || 143.19 || 134.99 || 401.72 Latvia || 115.24 || 107.33 || 63.26 || 192.28 Lithuania || 34.76 || 14.69 || 11.20 || 112.92 Luxembourg || 56.64 || 25.64 || 40.37 || 95.99 Malta || 71.85 || 45.38 || 53.21 || 99.47 Netherlands || 45.95 || 28.85 || 30.13 || 55.60 Poland || 73.21 || 50.55 || 45.97 || 114.01 Portugal || 44.89 || 13.19 || 26.01 || 81.97 Romania || 82.59 || 69.79 || 30.28 || 141.90 Slovakia || 73.68 || 55.59 || 44.49 || 125.08 Slovenia || 100.40 || 70.13 || 43.50 || 200.76 Spain || 178.21 || 134.06 || 104.72 || 303.57 Sweden || 61.84 || 53.35 || 25.16 || 128.21 United Kingdom || 103.20 || 28.34 || 94.99 || 111.40 EU27 || 111.62 || 61.47 || 74.41 || 159.18 Source: Van Dijk Management Consultants
study for the European Commission, 2009 Since the SEPA provisions refer to payments
in euros, this would mostly concern payment accounts within the Euro area, but
would also apply to accounts in euros in any EU Member State. As can be
inferred from the table above, Italian consumers, for example, paying on
average EUR 250 yearly fee could save around EUR 100 a year when
switching to a French account and more than EUR 200 by switching to a
provider in the Netherlands.[221] For active account users these savings would be even more
important. An active Italian account holder could save EUR 170 per annum by
switching to a comparable account offered in France a EUR 346 per annum by
switching to a provider in the Netherlands. As consumers may prefer to have their account
with a provider with local presence, the cross-border demand may be strongest
in border regions, where citizens are prone to shop abroad.[222] However, given that the functionality is to be the same and the
fact that consumers are increasingly using internet banking, it is reasonable
to expect that facilitation of switching payment accounts cross-border would
significantly increase the cross-border mobility in medium term. Due to the fact that there is no cross-border
switching service, the process continues to be characterised by separate "opening
and closing" procedures rather than "switching" of payment
accounts. Consumers may be deterred from switching account providers
cross-border as the obstacles to switching, described in the previous
sub-sections are even more important in such context. This is in particular
true for the transaction costs arising from the switching process. In a purely
domestic context, transaction costs in the absence of a well-functioning
switching service are conservatively estimated at EUR 135 per switch.[223] They relate to administrative costs (time spent to contact the
providers, money spent on correspondence to creditors and debtors to inform
them on the new account details) and to costs linked to payment defaults
(resulting from a lack of coordination between providers that may lead to
errors linked to payment instruments, such as stopping a direct debit's
payment, a payment refusal for lack of funds or an overdraft due to an
unforeseen debit). In the case of cross-border switching, due to
the potential geographical distance of the two providers, the consumer may need
much more time and potentially incur significant travel costs to open the new
account, carry out the transfer of all necessary payment transactions and the
account balance and close the old account. With regard to the information of
third parties about the new account details for recurrent payment transactions,
consumers are likely to incur higher correspondence costs and bear higher costs
resulting for delayed/missed recurrent payments as the coordination of the two
providers may be more burdensome in the cross-border context. Assuming that
these additional costs would lead to an overall increase of 30% of the
transaction costs, consumers would need to pay/forego on average around EUR 175
to switch payment account providers. Not only do the Common Principles not provide
for a cross-border switching service, there is also substantial divergence in
the application of the Common Principles by Member States and national banking
communities. The Common Principles have been implemented through industry
codes, recommendations, guidelines or interbank agreements.[224] Legislative measures have only been taken in Ireland.[225] The result is that not all account providers comply with the Common
Principles. For example, adoption of the Common Principles is restricted to
members of the national banking association in the Czech Republic.[226] In Belgium, the transfer of payment cards and memo orders was
included[227] and the future UK redirection service is expected to cover direct credits,
direct debits, standing orders and regular card payments. This creates an
obstacle to efficient internal market for consumers and providers alike. For
providers operating in more than one Member State, the differences across Member States often
impose direct costs and costs in the form of foregone economies of scale,
diminishing competitiveness. Due to the consolidation of the European banking
industry in recent decades, providers operating in more than one Member State
service a significant share of the market for payment accounts.[228] An introduction of cross-border switching
service would reduce the complexity and uncertainty of the switching process,
make it less costly to the consumers and thereby facilitate their mobility. All
consumers – mobile and non-mobile – would also have the opportunity to shop
around and open a payment account in another Member State. The increased
consumer mobility would increase competitive pressure in the retail banking
markets. This would benefit consumers and providers who will be able to provide
better/more suitable products and a better service, i.e. deliver value for the
money to their clients. In this respect, it has been acknowledged by industry
experts as well as academics, that "in order to maximise the potential
benefits of SEPA, it is necessary to address the barriers to the cross-border
opening and switching of bank accounts."[229] 3.3. Interlinks Access to a
payment account is essential in the modern economy. In a truly functioning
internal market, access should be available across domestic borders, anywhere
in the EU. If an EU citizen from Poland moves to the UK, but is unable to open
an account, transparent information on fees and an effective switching process
will be of no value to them. All EU citizens should be able to fully
participate in economic life and benefit from shopping around for a payment
account that best suits their needs. To shop around effectively and
efficiently, it is necessary to be able to easily compare and switch products.
Thus, efforts have to be made to facilitate customer mobility and consequently,
competition. The Commission inquiry into the retail
banking sector[230] found that low levels of customer mobility was directly related to
higher bank profitability and that the impact of customer mobility in the
payment account market on market power, (measured on total retail banking
profitability), was such that a 1% increase in market churn[231] gave rise to a corresponding similar decrease in banks' pre-tax
profitability ratio. While the relationships found in the inquiry do not take
account of a certain number of variables that influence both levels of
switching and bank performance,[232] they
indicate that customer mobility impacts market performance and the structure of
the market in ways which encourages competitive rivalry. Opaque fee structures raise barriers to
choice, affecting the extent to which consumers switch providers. This is true
when comparing offers within domestic markets as well as across borders. The
actual switching of accounts can only take place once the consumer has made a
choice of product, based on transparent and easy to understand fee and service
information. Barriers to switching resulting from difficulties in the switching
process itself can therefore be the final straw for many consumers at the end
of a long process. However, cross-border fee
transparency and/or switching mechanisms cannot be truly effective unless
barriers to accessing markets across borders are removed for consumers, meaning
that consumers are no longer restricted to opening a payment account in another
Member State, due for example, limitations imposed on non-residents. Combined,
the problems identified in these three areas inhibit consumer mobility,
potentially affecting competition and efficiency in the payment accounts
market. In particular, where commercial practices or regulation hinder an EU
citizen from acquiring an account cross border, any action to render bank
offers more comparable by establishing common presentation requirements across
the EU cannot be effective. Similarly action to improve the process of
switching between providers within the EU cannot have a positive effect as long
as access to providers situated in another Member State is restricted. Further, serious problems arise in terms of
time, effort and financial costs for consumers and industry alike when seeking
to move across the EU, due to fragmented markets resulting among other things,
from different customer information requirements and procedures. All consumers,
both domestic (not just vulnerable) and mobile, who are unable to easily shop
around may end up with products that are unsuitable for their needs and/or at a
higher price. All consumers would be restricted to their domestic markets
raising the risk of market capture. The financial services industry is equally
restricted in its behaviour. Facing 27 different rules on fee transparency and
domestic switching mechanisms, certain financial institutions may decide that
cross-border activity is simply not worth the sunk costs, particularly given
the limited customer mobility. The wider economy would also be affected.
Enterprises offering their goods and services would be unable to sell their
products to consumers with inadequate means of payment. This is true for
vulnerable consumers in domestic markets but has a larger impact when
considering the potential of the single market for e-commerce. However, they also create very practical
problems in terms of time, effort and financial costs for consumers and
industry alike seeking to move across the EU, creating impediments to growth
and undermining the flexibility of the economy. 3.4. Summary of consequences The problems identified above and the way
they interact impact on the way all relevant categories of stakeholder
(including consumers, financial services providers, Member States and the
economy in general) operate at both a national and EU level in the retail
banking sector. These impacts are summarised below. 3.4.1. Consumers Inability to choose the best account for
their needs Potential and actual customer mobility exerts
a competitive pressure on existing and potential account providers to improve
product quality and reduce prices. The lack of clear and comparable information
on bank fees means that consumers do not understand how much they are charged
for their account and results in them being unable to compare offers and
potentially switch providers for a better deal. The direct and indirect
financial costs of actually switching create an opportunity cost, dissuading
consumers from switching to a better product for their needs. These
consequences may be even higher when viewed in a cross-border context, where
the benefits of a larger market and more competition in terms of product
diversity and potentially lower prices could be even greater for consumers. Restricted choice of products and services Online shopping offers a wider choice and
potentially lower prices for products and services; it also opens the potential of shopping throughout the
internal market for consumers that may remain geographically local. Consumers
without a payment account have very limited opportunities to make use of
e-commerce as the majority of transactions require a credit card or bank
transfer. While other means of payment can also be used, these are usually more
expensive and inconvenient.[233] For instance, pre-paid cards can be used over the internet but the
fee structure behind them is not transparent and access channels are limited.[234] A report on access to retail banking services for the European Parliament
referred to this as "the 'poverty premium', i.e. the higher price
poorer families have to pay for goods and services because they cannot access
the online deals that are available to households with payment means accepted
for e-commerce."[235] Although it may appear unlikely that
poor consumers, even if equipped with an account, would massively turn to
online shopping, one UK study on the experiences of newly banked consumers
found that 22% had shopped by telephone or internet since opening their account.[236] Problematically, even where a consumer is able to access a basic
payment account, its payment features may be restricted to the domestic market.
This is the case, for example, in the Netherlands, Belgium and Hungary. Higher costs Restricted customer mobility through barriers
to switching has an adverse impact on consumers; 'locked-in' customers
experience higher prices and a reduced level of services. Moreover, errors in
the switching process have a short/medium term direct impact: bills may go unpaid
during the switching process and the customer might have to bear extra costs
and spend extra time trying to find out about missed payments. The potential
long term indirect impact of such errors is equally important. Consumers may
incur a black mark on their credit history, restricting their access to credit
or certain services, e.g. rental accommodation. In addition to the 'poverty premium'
described above that leads to consumers paying more because of the smaller
market that they can access, unbanked consumers also face several direct costs.
First, having a payment account gives consumers access to potential discounts,
e.g. those offered by utilities companies when payments are made by direct
debit or those provided through a bundle of products or services with the same
provider. A 2011 report in the UK concluded that unbanked families pay £253 per
year extra in gas and electricity bills[237]
compared to families that pay by direct debit while an average annual income
per employee in the UK was about £24,000 in 2011.[238]
Second, the use of cash rather than alternative means of payment can provide a
direct cost. For example, in Germany, those in receipt of social security
benefits without a payment account receive a cheque which can be cashed at a
post office.[239] In 2010, the average amount of benefit paid in Germany was EUR 380,
and the recipient was charged EUR 7 for the processing of the payment; costing
an average of EUR 85 per recipient per year.[240]
Similarly, buying an airline ticket face to face in cash rather than over the
internet entails additional costs. Finally, cash can create a significant risk
in terms of theft. Economic exclusion Unbanked consumers may also face difficulties
in relation to employment or renting property. For example, at some German
universities students need a payment account since rent for student halls is
paid by standing order.[241] Regarding employment, having a payment account may not be a legal requirement to take up a position.
However, in some cases, "paying out salaries in cash or by cheque may
simply no longer be possible."[242] A
2010 study reported that "having an account was perceived to be a
necessity for securing employment among the unbanked."[243] It is a frequent difficulty for migrant workers travelling, for
instance, from new Member States to Western EU countries. The difficulties in
accessing a payment account may actually prevent many migrant workers from
seeking employment abroad thus creating an important barrier to the free
movement of persons. Low consumer
confidence Insufficient information on bank fees
together with insufficient information on switching reduces consumer confidence
in seeking an account more suited to their needs. As a consequence, consumers
cannot reap the benefits of an efficient and competitive market, which are even
greater in the context of cross-border shopping around. 3.4.2. Effects
on financial industry Restricted market entry/expansion Different regulatory frameworks and bank
infrastructures established along national boundaries contribute to the fragmentation
of the market and raise barriers to entry. Further, existing credit
institutions face difficulties expanding their existing client base. In
general, green-field market entry into another Member State's banking market
tends to be more risky and less successful than entry through M&A.[244] Low customer mobility could be one explanation. Since retail
banking customers are relatively immobile it is difficult for a green-field
operation to win large numbers of customers through price competition and thus acquire
significant scale in a commercially viable time-frame.[245]
Effective switching regimes are an important factor in deciding whether to
enter retail banking markets in other Member States. Furthermore, the low levels of cross-border
switching can also endanger efforts to improve cross-border payments; according
to industry experts, removing the barriers to cross-border switching is
essential to maximise the benefits of SEPA.[246] The different regulatory frameworks for
access to and switching of payment accounts also create a significant barrier
to cross-border entry. Credit institutions who offer their services in more
than one Member State will need to create and/or integrate their systems into
different switching regimes for each market in which they operate. This is
expensive and time consuming, raising sunk costs and preventing economies of
scale, hindering cross-border business and the realisation of a single market.
Alternatively, should the cross-border provider decide against investing in the
creation of a switching service (for instance, where the switching service is
subject to self-regulation or access is conditional on being a member of the
national bank association), they would face the same problems described above
in terms of attracting new customers. They would therefore be faced with
competing against domestic providers on an uneven playing field, distorting
competition. 3.4.3. Non-financial
services/products providers Higher administrative costs Consumers lacking a payment account impose higher
costs on enterprises, as they face the administrative and security cost of
paying salaries in cash or by cheque. Enterprises have to insure the cash held
and spend time depositing and collecting cash from a bank; they also face an
increased risk of fraud through money laundering, fake notes and coins, etc.
Accordingly, hiring employees without a payment account may be more expensive.
To offset these costs, enterprises may increase their
prices, but this restricts competitiveness and growth. Higher
administrative costs lead to lower profits, less money to invest, and missed
opportunities. Bringing consumers into the financial system
can also support efforts to fight corruption and the black economy. Broader
access to means of electronic payments is a natural complement to anti-fraud
measures. This was a reason why Italy introduced an obligation for all
consumers to hold a bank account.[247] Enterprises encounter costs when direct
credits and direct debits are misdirected during a switch of their clients or
employees. Missed business opportunities Restrictions on consumer access to payment accounts affect enterprises in other ways. There
is a market for goods and services that they either cannot, or find it
difficult to, sell their goods and services to. The European market as a whole
may suffer from restrictions on account services that limit users of payment
accounts to 'domestic' transactions, particularly in the context of online
sales. Small- and medium-sized online enterprises
develop rapidly, contributing to economic growth. They could grow even faster
if more consumers had access to basic banking services. With the internet
easily available (and commonly used on mobile phones), online enterprises have
huge growth potential. Many small- and medium-sized enterprises offer products
or services online while acting as intermediaries for larger ones (e.g.
websites offering clothes of different brands, or others selling travel
arrangements). Increased access to online payment mechanisms could increase
sales for all enterprises. 3.4.4. Public administrations Higher administrative costs Member States' administrations face higher
costs due to the need to use cash to pay consumers who do not have a payment
account, e.g. when paying benefits. Therefore, almost all of them recognise
that it is crucial for consumers to be able to access a payment account.[248] In a number of countries, the payment of social benefits into a
payment account has been made compulsory (e.g. Denmark, France) or payments
made in cash are charged extra (e.g. Germany). Partly as a consequence of this,
payment account penetration is close to 100% in these countries. However, in
others, such as Ireland, only 40% of social benefits payments are made through
a payment account, while 52% are made through a post office.[249] In Ireland, the cost of using non-electronic payments systems was
estimated at EUR 1 billion in 2007.[250] In
Hungary, approximately 50% of pension payments are made by money orders and not
by credit transfer. If these payments could be made by transfer, approximately
HUF 6.5 billion could be saved annually.[251] More
widespread use of electronic means of payment, instead of cash, would be very
beneficial for public finances in Member States, especially in the current
economic climate, and could further contribute to economic growth in the EU. 3.4.5. Wider
economy A reliance on cash causes the unbanked
population to impact upon the wider economy. Studies undertaken by the payment
industry[252] suggest that the cost of cash in the EU for all currencies could be
as high as EUR 84 billion per annum or EUR 130 per inhabitant. For the euro
area alone this is estimated at EUR 40 to 45 billion, equivalent to around 0.4%
of GDP. According to the World Payments Report[253], an
increase in the use of electronic means of payment and reduction of the euro
cash in circulation to the level comparable with the USA would bring about
savings of around EUR 20 billion annually in the euro area economies. In Hungary, a recent study estimated that the
complete phasing out of paper-based orders for welfare payments could produce
savings of approximately HUF 85 billion annually.[254] Encouraging electronic transactions would
also support efforts to fight corruption and the black economy: transactions in
cash are almost untraceable. This would help a number of Member States who are
currently trying to improve their public accounts.[255] An
increased use of electronic means of payments, including the exchange of
information and traceability, would complement EU efforts to improve tax
compliance, thus contributing to healthier public finances and economic growth. Increased access to basic banking services
may also help combat unemployment in the EU as it would facilitate and
encourage mobile workers to travel to other Member States. Moreover, some
employers would find it easier and cheaper to pay salaries by bank transfer
instead of via cash or cheque. 4. Objectives The over-arching objective of this initiative is to create an
efficient and competitive Single Market (Article 114.1 of the Treaty) with a
high level of consumer protection (Article 114.3 of the Treaty) that promotes
economic growth and financial inclusion. The general objectives of the three
problem areas are to enhance consumer confidence; to improve consumer choice,
both in terms of the quality and the price of products available; to facilitate
customer mobility; to facilitate the cross-border activity of payment account
providers; and to ensure a level playing field between market actors. This will also contribute to achieving
the objectives of the Banking Union by enhancing the functioning of the
internal market and strengthening the banking conduct regime by removing the
remaining barriers to the internal market. As national measures vary
significantly in all areas, the proposal lays the foundation for a more
integrated EU-level treatment of banks and consumers and thus seeks to create a
more level playing field for all stakeholders in relation to transparency of
bank fees, switching and access, while enhancing consumer confidence. The
objectives of this IA are described in Table 8 below. Table 8: Overview of objectives General objectives To enhance consumer confidence To broaden consumer choice both in terms of the quality of the products available and in terms of price reductions To facilitate financial inclusion and thereafter customer mobility To facilitate the cross-border activity of payment account providers To ensure a level playing field between market actors Specific objectives || Operational objectives Access to basic account services To facilitate access to basic account services (not oblige everyone to have a payment account) || § Reduce the number of unbanked Europeans by 6.4 million by 2020[256] § Ensure access to all basic payment means for all consumers with basic payment accounts § Facilitate cross-border access to basic banking services for 3.5 million consumers by 2020[257] § Improve consumers' awareness on basic payment accounts Ease of comparison of bank fees and requirements covering presentation To ensure that EU consumers receive clear, complete and comparable information on bank fees || § Consumers are able to understand bank offers and assess value for money § Payment account offers are easily comparable § Help consumers choosing the offer best matching their needs § Increase consumers awareness of charges actually paid § The burden of switching to consumers is reduced Switching of payment accounts To ensure that EU consumers are able to switch payment accounts with ease and in a timely manner. || § Switching is a smooth and easy process § Consumers are assisted and informed of the switching process in an adequate manner § The number of misdirected/missed payments during switching process is reduced to less than 5% of recurrent transactions § The direct financial costs of switching to consumers is reduced § The duration of switching process is maximum 14 days § The mobility of payment account users is increased 5. Need for EU action Payment accounts represent the
financial services product most likely to be purchased cross-border.[258] Yet persisting barriers to access, whereby mobile and vulnerable
consumers cannot open an account, problems with the transparency and
comparability of payment account fees and charges, and difficulties with the
switching process, deprive stakeholders of some opportunities offered by a
fully-functioning internal market for payment accounts. The impact upon
consumers, business and the wider economy is significant. The fragmented market that flourishes
in the absence of transparent and comparable information, effective switching mechanisms
and the right of access, distorts competition within the internal market.
Consumers experience higher prices, inferior products, and limited services –
including accounts restricted to use in domestic markets – accordingly, they
have low confidence in their banks. Moreover, a fragmented market of this
nature makes it more difficult for citizens to move to other Member States.
Solving these problems is, therefore, crucial for consumers, business and the
European economy. Since 2006, the Commission has
repeatedly tried to improve the functioning of the payment account market, by
promoting self-regulatory initiatives for account switching (the Common
Principles[259]), account transparency and comparability, and by adopting a
Recommendation to facilitate access to a basic payment account.[260] Since these initiatives have failed to address the problems, the
Commission considers it necessary to act.[261] The
Single Market Act (SMA) II adopted on 3 October 2012 identified a legislative
initiative on bank accounts in the EU as one of the 12 priority actions to
generate real effects on the ground and make citizens and businesses confident
to use the single market to their advantage. According to the principle of
subsidiarity, Community action may only be taken if the envisaged aims cannot
be achieved by Member States alone. Whilst it may be the case that EU
intervention cannot easily address some of the more intangible features of
cross-border take-up of banking services, such as language or distance,
nevertheless, EU intervention can be justified to achieve the outlined
objectives for several reasons: 5.1. To improve the proper functioning of the internal market and avoid
the distortion of competition in the field of retail banking Different regulatory frameworks, or the
lack thereof, raise barriers to entry across borders. An EU initiative will
better address factors that prevent the pursuit of business or raise the cost
of doing business in another Member State relative to the costs faced by
domestic providers. Credit institutions that seek to operate across borders not
only need to meet differing requirements but are also prevented from making
full use of economies of scale in developing processes and in operations in
areas such as back office activities. ·
Low customer mobility in general and inefficient
switching mechanisms in particular, create obstacles to market entrants to gain
new clients. Moreover, the low levels of cross-border switching can endanger
the development of cross-border payments in general, as raised by industry
experts. The non-level playing field between market actors results in reduced
competitive rivalry and missed opportunities within the internal market. ·
Inaction or action from Member States alone is
likely to result in different sets of rules, leading to uncompetitive markets
and unequal levels of consumer protection in the EU. Market fragmentation in
retail banking would persist or become further entrenched threatening long-term
market integration. This may take the form of
significant investment in domestic redirection services that are technically
difficult to connect with schemes in other Member States, or increasingly
divergent national approaches to the development of payment account fees. ·
Common criteria established at EU level for the
functioning of the retail banking sector would provide consumers with the
necessary information required to make informed choices. This will contribute
to the strengthening of competition and to the efficient allocation of
resources within the EU financial retail market to the benefit of businesses
and consumers. Consequently, common criteria would reduce sunk costs on the
part of the financial services industry. Easy-to-understand fees and switching
possibilities combined with the right of access to basic account service will
allow EU citizens to move and shop around more easily within the Union. It will
also allow all consumers to fully benefit from the internal market (for example
by participating in e-commerce and, therefore, in the digital market, including
more competitive cross-border goods and services). ·
Initiatives to establish common presentation
requirements and encourage fee comparability across borders cannot be
distinguished from those in domestic markets without creating fragmentation
between domestic and cross-border markets. To be effective, minimum
requirements aimed at lowering the barriers to cross border mobility are
needed. However general requirements regarding the presentation of payment
account fees that only target cross border offers would not eliminate
difficulties in comparing information domestically due to different national
requirements. In this sense, bank offers from providers in the consumers'
country of residence may not be easily comparable with offers from providers
set up in other Member States. 5.2. To empower consumers by enabling them to make informed choices and
enable them to take advantage of the single market ·
Around 56 million consumers in the EU do not
have a bank account and cannot therefore fully enjoy the benefits of the single
market.[262] Around 10% of those unbanked persons, i.e. about 6 million adults
have tried to open an account and have been refused. These unbanked people are
missing out on several benefits such as greater safety, cheaper electronic
payments, and easier access to less expensive products and services online. It
has also been estimated that thanks to the realisation of the Single Euro
Payments Area (SEPA), from 2006-2012, that EU consumers using electronic
payments will have saved on average EUR 129[263] on
payment transactions. The single market will only be truly inclusive if it
benefits every EU citizen. ·
The lack of clear and comparable information on
bank fees results in consumers not fully understanding charges incurred. In a
competitive and efficiently-functioning single market with a high level of
consumer protection, all EU citizens would be able to search for the best
product offered for their needs, be it in their own country or in another
Member State. Customer mobility, and the possibility of easy switching, exerts
a competitive pressure on payment account providers to improve quality and
reduce prices. Without EU action, the identified problems related to the lack
of an EU-wide market will continue to lead to consumer detriment. 5.3. Allow all European citizens access to essential services and the
opportunity to benefit from the single market by promoting economic and
financial inclusion ·
Without EU action it will be difficult to bring
the advantages of the single market to all EU citizens. ·
The need to balance increased competition and
the use of market mechanisms with the need to guarantee that every citizen
continues to have access to essential services of high quality at prices that
they can afford. ·
A level playing field at EU level will help
consumers reap the full benefits of the integration of the European financial
sector by facilitating financial inclusion enabling all consumers to fully
benefit from the internal market (for example by participating in e-commerce
and, therefore, in the digital market, including more competitive cross-border
goods and services). ·
Access to essential services including basic
account services[264] contribute to active inclusion strategies aimed at the
reintegration of the people furthest from the labour market. Therefore, it
forms part of the delivering actions identified by the European Platform
against Poverty and Social Exclusion, one of the flagship initiatives of Europe
2020 aimed at achieving inclusive growth in the EU. Society at large (including
public administration and non-financial services/product providers) would
benefit from the improved conditions of the functioning of the internal market
of retail financial services, thus contributing to the objectives of financial
inclusion. ·
An initiative on bank accounts has also long
been cited by all EU institutions as an important element to improve the
functioning of the single market. The 2012 March European Council welcomed the
Commission’s intention to propose a new round of measures to open up new growth
areas in the Single Market. Similarly, a recent European Parliament report with
recommendations to the Commission on Access to Basic Banking Services[265] asks the Commission to come forward with a legal proposal
addressing access to basic banking services by January 2013. Most recently, the
Commission underlined the importance of an initiative to improve the payment
account market in the Single Market Act II,[266] and
announced proposals in the area of transparency and comparability of bank fees
and bank account switching as part of the Commission Work Programme for 2013.[267] What will happen if no EU action is
taken? If no action is taken at EU level,
market fragmentation will persist in payment account services. Since it is
unlikely that member States will implement the Access Recommendation in full,
basic payment accounts will be restricted to use in domestic markets,
restricting access across borders. Moreover, significant future investment in
domestic redirection services that are technically difficult to connect with
schemes in other Member States, or increased diverging national approaches on
the development of payment account fees will result in market fragmentation
becoming further entrenched, threatening long-term market integration. Against this background, and as
described in previous chapters, action from Member States alone is likely to
result in different sets of rules, which may undermine or create new obstacles
to the proper functioning of the internal market and create unequal levels of
consumer protection in the EU. For example, a law on basic account services
currently being prepared in Slovakia will restrict the use of those services to
Slovakia alone.[268] Common standards at EU level are therefore necessary to promote
efficient and competitive conditions in the retail banking sector for the
benefit of EU consumers and businesses. EU intervention will result in the
smoother functioning of the internal market, with consumers and the banking
industry benefiting from enhanced information on payment account fees, improved
mobility and universal access to payment accounts. Is there a legal basis? The Treaty provides for action to
ensure the establishment and functioning of an internal market with a high
level of consumer protection and the free provision of services. Such a market
for payment accounts is far from completion as several obstacles exist to the
free provision of services and the creation of an internal market. These
obstacles restrict the level of cross-border activity on the supply and demand
sides, reducing competition. Payment account providers may be less efficient
than they could be and consumers may suffer. The legal basis for action is in
Article 114 of the Treaty. Article 114 allows for the adoption of "measures
for the approximation of the provisions laid down by law, regulation or
administrative action in Member States which have as their object the
establishment and functioning of the internal market." In doing this,
according to the Treaty, the Commission will take a high level of consumer
protection as a basis for action. A payment accounts initiative based on
Article 114 of the TFEU represents a step towards the establishment of a
properly-functioning internal market and avoids distortion of competition in
retail banking. The measure will respect the principles
of subsidiarity. For the reasons set out above the envisaged aims cannot be
achieved by Member States alone. Moreover, and as explained in this section,
the Commission has, without success, previously attempted a 'light touch' approach
through self-regulatory initiatives and Recommendations. EU intervention in the
areas of payment accounts is therefore justified on this basis. 6. Policy options Although directly interlinked, this chapter describes the policy
options for each of the three areas analysed in this impact assessment
separately, in order to address the problems identified in Chapter 3. The
policy options are not necessarily mutually exclusive and should not therefore
automatically be viewed as alternatives. Their separate presentation allows
analysis and comparison of the Options in greater detail. Importantly, to
meet the objectives identified in Chapter 4, a combination of Options across
the three areas is needed. Chapter 8 concludes that a bank account package
combining the preferred sets of Options in each of the three areas would better
ensure a coherent approach to the problems. 6.1. Options for access to basic
account services Several policies
can be considered to address the problems identified and achieve the set
objectives. 6.1.1. Option
1: No action No further action
is taken at EU level. Member
States would still be encouraged to implement the Recommendation and the
Commission would continue to monitor implementation. 6.1.2. Option
2: Ensure application of the provisions of the Recommendation This would ensure
that the provisions of the Recommendation are applied either through an
enhancement of the regular monitoring of the implementation and application of
the Recommendation in Member States by the European Commission (e.g.
scoreboard) or by requesting Member States to adopt binding rules based on the
Recommendation. Option 2 may be combined with the variants of Option 3 and 4. 6.1.3. Option
3: Modify the provisions of the Recommendation relative to the beneficiaries This Option may be
combined with Option 2 and 4. ·
Variant A: Introduce a universal basic payment
account This would introduce a universal right for
every EU citizen to open a basic payment account in any EU bank. The basic
payment account would have the features provided for in the Recommendation,
other than the condition that the consumer must not already have a basic
payment account in that Member State, which will not be retained. ·
Variant B: Introduce a right to a basic payment
account at least for national residents This Option is based on Option 2 but would,
additionally, introduce a right to open a basic payment account for at least
national residents. Providers (all or some depending on the approach chosen by
Member States) would be obliged to offer a basic payment account even if the
consumer already had another account in that Member State and regardless of his
financial situation. The basic payment account would have the other features
provided for in the Recommendation. ·
Variant C: Introduce a right to a basic payment
account at least to those non-residents with a link to the country where they
wish to open an account This is based on Option 2 but would,
additionally, introduce a right to open a basic payment account for
non-residents. They would need to demonstrate a link with the country where
they would like to open a basic payment account. This would require the
definition of a list of criteria. Such a list could be developed through
delegating powers to the European Banking Authority. The basic payment account
would have the other features provided for in the Recommendation. 6.1.4. 6.1.4 Option
4: Improve the features of payment accounts These variants may
be combined with one another and those of Option 2 and 3. ·
Variant A: Enlarge the list of basic payment
services to include internet banking and online purchasing This is based on Option 2 but would also expand
the list of basic account services. This list of basic account services would
include a possibility for the consumer to use internet banking and to make
online purchases. ·
Variant B: Enlarge the list of basic services to
include a small overdraft or a 'buffer' facility This is based on Option 2 but would add to the
features of a basic payment account, e.g. small overdraft or a 'buffer'
facility (the consumer could withdraw a minimum allowed sum even if the balance
on his account was insufficient). ·
Variant C: indicate a minimum account balance
that cannot be seized Member States would be required to introduce an
indication of a minimum balance which could not be seized by any creditor. This
would provide indebted consumers with access to a very limited amount of money
allowing them to pay for the most basic needs. ·
Variant D: Ensure that the features of the
payment account are not of a discriminatory nature This is based on Option 2 but would,
additionally, ensure that the features of the basic payment account cannot be
applied in a discriminatory manner, i.e. by limiting the use of a debit card to
the country where the account was opened. 6.1.5. Other options not retained Articles 20 and 21
of TFEU ensure the right of all European citizens to move between Member
States, which Court of Justice interprets as meaning that everyone should be
treated the same, irrespective of their nationality. In theory, it would be
possible to introduce an infringement procedure against Member States which
have implemented laws on access allowing providers to discriminate against
consumers for non-residence and to offer discriminatory payment instruments. Nevertheless,
infringements can only be launched against Member States which have laws in
place causing or permitting discrimination against non-residents, contrary to
the Treaty, which are very few in the area of access to basic payment accounts.
This approach would therefore penalise those Member States which had acted
(albeit in a nationally-focused manner), whilst many others, which have not
implemented any measures at all in this area, would be unchallenged.
Consequently, this Option is ruled out at this stage. 6.2. Options for presentation and ease of comparison of bank fees Several policies
can be considered to address the problems identified and achieve the set
objectives. 6.2.1. Option
1: No action No EU action is taken to address presentation requirements
and enhance comparability of bank fees. 6.2.2. Option 2: A standard price list to be provided as part of account opening
procedures Fees common to all
Member States would be identified at EU level and supplemented nationally to
cover the 20 most representative fees or at least 80% of key charges incurred.
Common presentation requirements, which could include the introduction of a
single form for ex-ante disclosure of payment account fees, and requirements
regarding availability of fee information and selection criteria for the most
common fees, would be established at EU level. Credit institutions would need
to ensure that fee information was readily available to the public and
specifically to prospective customers during the pre-contractual stage. 6.2.3. Option 3: Introduce the requirement to develop glossaries for bank fee
terms Member States would
be required to develop glossaries for payment fee terms at national level.
These would aim to provide consumers with the tools to overcome possible difficulties
in understanding the terminology used in contractual texts relating to the
provision of payment accounts by credit institutions. ·
Variant A: Glossaries containing non-harmonised
terminology Member States would set up a
glossary comprising payment account fee terminology in use by retail banks in
their territory, maintained by a designated competent public authority. Credit
institutions would be required to inform and update the competent authority of
their own fee terminology. ·
Variant B: Glossaries not based on fully
harmonised terminology Member States would develop single definitions for services and related fees in a
glossary. While credit institutions would not be required to make use of
standard terminology as part of marketing and operations, they would be
required to provide references between terminology used for commercial terms
and the standard terminology contained in the glossary. 6.2.4. Option 4: Introduce the requirement to set up independent fee comparison
websites at Member State level This foresees the use of independent fee
comparison tools as a means to promote comparability and enhance common
presentation requirements for payment account offers. ·
Variant A: a single official website within each
Member State managed by a competent authority In each Member State one comparison site shall fulfil this requirement under the
supervision of the EU. This website could be run and funded by a public body,
who would define requirements on the frequency with which credit institutions
would need to provide up-to-date fee information. ·
Variant B: Comparison sites licensed under an
accreditation scheme The development of accreditation schemes set up by Member States under the
supervision of the EU. Accreditation schemes will set out standards for operators
of comparison websites and will include a quality charter defining rules
concerning the completeness and timeliness of fee information that credit
institutions would have to provide. Member States will nominate competent
public authorities to monitor the compliance of website operators and credit
institutions. 6.2.5. Option 5: Introduce the requirement to provide representative examples of
the cost of holding a payment account Requirements would
be established to provide representative examples when advertising payment
accounts which would present
major fees associated with an account and the main conditions that influence
the cost of holding an account. They would be tailored to different usage
patterns, which may be subject to differing degrees of standardisation as
described in the variants below. ·
Variant A: Banks set up own representative
examples This variant would not prescribe specific usage profiles, although minimum
requirements on the variables to include would be harmonised at EU level. ·
Variant B: Member States prescribe
representative examples Under this variant, a number of usage profiles for banks will be predetermined at
Member State level. Member States will be able to add specificities that would
render examples more representative of usage profiles in national contexts. 6.2.6. Option
6: Set up customer usage profiles and provide a cost simulation to prospective
personal current account holders This Option would provide an annual cost estimate to a
customer seeking to open a payment account at the pre-contractual stage, though
a simulator, based on the information provided by the customer on usage
patterns. The aim of this Option is to provide a means of comparing bank offers
in a single monetary value estimate understandable by the average customer.
Common presentation and structural requirements would accompany this Option,
together with the requirement to provide an itemised cost simulation, including
estimated information on transaction/service level volumes in a paper or
downloadable format. ·
Variant A: Banks set up own customer profiles This variant does not prescribe specific usage
profiles when setting up cost simulations. ·
Variant B: Member State prescribe customer
profiles Under this variant, a number of usage profiles for banks will be pre-determined. 6.2.7. Option
7: Introduce EU standardised forms for the provision of ex-ante information on
fees The introduction of
a single form for ex-ante disclosure of all personal payment account fees,
developed at EU level (similar to the Standard European Consumer Credit
Information). 6.2.8. Option 8: Introduce an
obligation to provide ex-post information on fees incurred It would be
mandatory for banks to provide
consumers with ex-post information on fees incurred. The ex-post information
would cover the same fee items as the ex-ante information. If this were
combined with Option 2, it would allow consumers to verify and analyse the
actual charges applied to their payment account and see where savings can be
made. Ex-post information would be provided on a quarterly / bi-annual / annual
basis. As with Option 2, common presentation requirements, which could include
the introduction of a single form for ex-post disclosure of payment account
fees, would be established at EU level. 6.2.9. Option
9: Introduce EU standardised
forms for the provision of ex-post information on fees Credit institutions
would provide consumers with a
monthly, bi-annual or annual summary of the cost of all personal payment
account fees developed at an EU level, using a standardised form. The form
would be designed to provide an easy to understand analysis of the charges and
interest rates that have been applied to the consumer's personal current
accounts. The charges incurred would be broken down into categories so consumers
can see where savings could be made. The form would be developed by the
European Commission on the basis of market testing and in consultation with
industry and consumer organisations. 6.2.10. Other
options not retained The list of Options
does not include policy initiatives aimed at enhancing financial literacy. The Commission has already sought[269] to assist stakeholders improve financial education by raising
awareness of low financial literacy; by encouraging and promoting the provision
of high-quality financial education within the EU, including the sharing of
best practice; and by developing certain practical tools. As indicated in
Section 3.1 above, improved financial literacy is unlikely to significantly
impact upon the payment account market and would not solve consumers’ problems. 6.3. Options for payment account
switching Several policies
can be considered to address the problems identified and achieve the set
objectives. 6.3.1. Option
1: No action No further action
is taken at EU level. Credit institutions should still apply the EBIC Common
Principles on bank account switching but would not need to take any further
measures to improve their functioning and/or quality. 6.3.2. Option
2: Ensure that switching services follow the Common Principles This would ensure
that the Common Principles are applied by all payment account providers across
the EU. This could serve as a basis for Option 3 and could be combined with
Option 4. 6.3.3. Option
3: Improve the effectiveness of the Common Principles These variants
could be combined with Options 2 and 4. ·
Variant A: Improve the existing Common
Principles at domestic level The requirements of this Option would be based on the Common Principles, but the
Common Principles would be improved by introducing provisions to improve
information on the existence of switching services (e.g. obligatory display on bank websites and
provisions to ensure that staff are adequately trained). This variant of Option
3 could be combined with Option 2 and Variant A of Option 4. ·
Variant B: Broaden the scope of the Common
Principles to EU-wide cross-border switching The process would be based on either the existing Common Principles or the 'improved'
Common Principles as defined in Variant A of this Option. The Common Principles
would additionally apply to cross-border switching, including the
standardisation of the time-periods set for the 'new' and the 'old' bank to
perform their respective tasks and inclusion of provisions to facilitate
cross-border switching (for example, by applying the rules established in the
home Member State of the 'new' bank to the whole switching process). This
variant of Option 3 could theoretically be combined with Option 2 and Variant B
of Option 4. 6.3.4. Option
4: Set up an automatic redirection service for all receipts and payments from
an old to a new account All receipts and payments routed to the
old account would be redirected to the new account. The redirection service
would be temporary, following the switch, but would need to operate for a
sufficient period of time to capture annual payments. The redirection service
would provide the parties whose payments have been redirected with the new bank
information of the customer (where possible). This could be combined with
Options 2 and 3. ·
Variant A: Introduce a domestic automatic
redirection service This service would apply when
both the old and new account provider were in the same Member State. ·
Variant B: Introduce an automatic EU-wide
redirection service This service would apply when both the old and new account provider were in the
same or different Member States. 6.3.5. Option
5: Introduce payment account portability This option could be combined with Options 2 and
4. ·
Variant A: Domestic payment account portability Consumers could
transfer their account to a new bank in the same Member State as their old
account and retain the same
account number. ·
Variant B: EU payment account portability Consumers could transfer their account to the new bank, which may be established
either in the same Member State as the old account or in another Member State,
and retain the same account number. 6.4. Choosing the most appropriate policy instrument Action at the EU
level must respect the principle of proportionality. The proportionality of a
proposed measure depends upon the following considerations: ·
The choice of instrument. It is crucial to find
an appropriate balance between EU-level action and national action. The
proportionality of the measures will depend upon whether a Regulation,
Directive, Recommendation or self-regulation is preferred. ·
The combination of measures. If a legislative
instrument (Directive or Regulation) is favoured, the right combination of
principles-based measures and more specific requirements must be chosen. ·
It is vital to ensure, to the largest extent
possible, that consumer protection is not reduced. For each policy
option, a wide range of potential policy instruments were considered. These
include self-regulation, non-binding measures (Communication and
Recommendation) and binding measures (Directive or Regulation). A Communication is
a tool used to promote measures or behaviour to Member States. Legal
instruments by contrast make it compulsory for Member States and market
participants to comply. The idea of a Communication was discarded at an early
stage for all policy options. 6.4.1. Self-regulation As indicated in
Section 2.4 above, attempts of EU level self-regulation to improve the clarity,
comparability and transparency of account fees and to ensure that account fee
information is easily available to consumers have failed. Moreover, the 2008
Common Principles for payment account switching, were implemented in the Member
States to varying degrees. Generally, the application of the Common Principles
was evidenced to be unsatisfactory, which may, to a large degree, be the result
of a lack of monitoring and enforcement measures contained within a
self-regulatory approach. Given that
transparency and switching have been the subject of unsuccessful
self-regulatory measures in the past, further self-regulation would not be
effective. 6.4.2. Non-binding measures The Commission's
Recommendation on access to a basic payment account was adopted in July 2011.
Member States were asked to "take the necessary measures to ensure the
application of this Recommendation at the latest 6 months after its publication."
The Commission would "assess the measures taken by 1 July 2012"
and on that basis, "propose any necessary action, including legislative
measures if needed, in order to ensure that the objectives of this
Recommendation are fully met". The Commission services assessment of
the measures taken by Member States to comply with the Recommendation[270] confirms that many Member States took insufficient steps to ensure
its implementation. Furthermore, it is clear that the short time frame
permitted to comply with the Recommendation is not the reason why Member States
have not yet acted: in reporting to the Commission, several Member States
specifically stated that they do not intend to take any measures to comply at
national level. In any event, the Recommendation fails to address all the
problems outlined in this analysis. Whilst the
Recommendation could be broadened to address all identified problems, a
non-binding instrument does not guarantee adequate implementation at national
level. Member States may express the same reluctance as previously, or be
prevented from taking action by the existence of contravening national
provisions and a lack of domestic political will to amend and/or abolish them.
EU level non-binding measures, such as a Recommendation, could be used also in
the field of transparency and comparability of fees or to promote a smooth
payment account switching process in the single market. This approach, however,
would leave discretion to Member States and market operators as to whether and
how to intervene, if at all. 6.4.3. Binding measures The introduction of
a binding measure is the most effective and efficient way of achieving the set
objectives. Binding EU measures such as EU legislation in the form of a
Regulation or Directive could be established to different degrees:
harmonisation or setting of specific and directly applicable measures. Only a binding
legislative instrument can guarantee that the policy options are introduced in
all 27 Member States and that the rules are enforceable. For example, an
analysis of the data on average account penetration shows that in those Member
States where there is no framework in place, weighted average account
penetration is 70% (27% in Romania and Bulgaria; 80% in other Member States)
compared with 88% in those Member States which have industry based charters and
96% in those Member States with a legal framework in place.[271] 7. Impact analysis and comparison of policy options The preferred set
of policy options for each of
the three areas is indicated in bold. The tables
illustrate how each of the policy options contributes to meeting the objectives
and their cost-effectiveness in doing so when compared to the 'no action'
option. The following scoring is used: üüü (strong positive
contribution), üü (moderate positive contribution), ü (weak positive
contribution), ûûû (strong negative contribution), ûû (moderate negative
contribution), û (weak negative contribution) and ≈ (neutral contribution). The impact on stakeholders follows a
similar approach. For the purposes of this assessment,
the same methodology had been used to assess costs and benefits in relation to
the ease of comparison and presentation requirements for fees and payment account switching. The analysis of
the access to a basic payment account uses the methodology developed in an
external cost-benefit analysis in 2010.[272] After analysing different options per
area in Sections 7.4 to 7.6 below, the preferred sets of options are analysed
on a cumulative basis in Chapter 8. This chapter addresses the impacts of
different combinations of options on a package basis in order to identify the
best overall approach to addressing the objectives in this initiative. 7.1. Methodology Quantitative data on retail financial services, particularly
data that is comparable on a pan-EU basis, is often difficult to find. The
report draws on a wealth of data sources including pan-EU studies conducted on
behalf of the Commission (e.g. external reports,[273]
Eurobarometers,[274] mystery shopping exercise[275]) as
well as national sources (e.g. studies[276] and
surveys[277]) when considering the costs and benefits. The data on costs and
benefits provided in this impact assessment and the methodology used for
calculating them are based on two external studies: the Study on the costs and benefits of policy actions in the field of
ensuring access to basic account – Final Report by
the Centre for Strategy and Evaluation Services[278] and Quantification
of the economic impacts of EU action to improve fee transparency, comparability
and mobility in the internal market for bank personal current accounts by
GHK Consulting Limited. Both studies used desk research and surveys of all
relevant stakeholders, e.g. the financial service industry, to establish the
regulatory and market baselines, qualitatively identify the relevant costs and
benefits, and calculate where possible appropriate monetary estimates. The
methodologies used to assess the efficiency of options consider both quantified
and non-quantified costs and benefits to stakeholders. Annex VI provides a
detailed summary of the calculation of costs and benefits, the assumptions used
in calculations and a detailed cost and benefit table per option. 7.1.1. Access The methodology used is based on that
developed in the Study on the costs and benefits of
policy actions in the field of ensuring access to basic account – Final Report.[279] This report was produced for the Impact Assessment on the
Recommendation on access to basic payment services.[280] This
provides consistency and comparability with the aforementioned Impact
Assessment. Where possible, new data has been
incorporated into this document. First, the affected consumer population is
established (i.e. how many consumers could potentially benefit from each policy
option). This calculation is based on 3 potential baseline scenarios: an
optimistic scenario (10 million consumers open an account), a realistic
scenario (6.4 million consumers open an account) and a pessimistic scenario (2
million consumers open an account). Consequently, a range of costs and benefits
are presented in this report; the lower range corresponds to the pessimistic
scenario and the top of the range corresponds to the most optimistic scenario.
For certain policy options, e.g. Options 3B and 4B, the baselines for the
potential number of consumers affected are reduced according to the potentially
affected population (e.g. the population of consumers impacted under Option 3B
would be smaller, therefore the baselines are adjusted accordingly). Second,
the costs and benefits for each stakeholder under each option are established.
For example, the cost for consumers of the annual management fee is identified.
Third, these costs and benefits are multiplied by the estimated costs/benefits
to achieve a total. Finally, the results are discounted to take into account
whether all Member States would be affected or whether some Member States
already apply the policy option. 7.1.2. Transparency of fees and switching The study Quantification of the
economic impacts of EU action to improve fee transparency, comparability and
mobility in the internal market for bank personal current accounts aimed to
establish a baseline scenario
that would comprise current regulatory and market conditions. This baseline
scenario was to serve as a basis to assess the impact of the policy options
considered in this Impact Assessment on stakeholders. It was necessary for the study to reflect the gradual nature of impacts expected
from policy action designed to create a coherent framework for the provision of
information on bank account fees and for consumer mobility within the EU. For
this purpose, the study builds the baseline scenario over a period of 10 years.
Similarly, monetised costs and benefits are expressed over a 10 year timeframe. Monetised costs and benefits are expressed as incremental amounts attributable to
EU action under the assessed options. In order to isolate incremental costs the
study applied a discount factor to the amounts computed, to reflect the
distance between the aggregate of regulatory and market frameworks within
Member States and the proposed action within each option. The study fieldwork made use of desk research, stakeholder surveys and a standing
expert panel. It covered 16 Member States.[281] As the above mentioned study did not
provide cost estimates for two switching options (introduction of a redirection
service and payment account portability), these were estimated by Commission
staff based on other available studies, as indicated in the methodological
annex (Annex VI). 7.2. Costs The costs considered are those incurred by payment services providers (mainly credit
institutions), Member States and consumers. Payment services providers Since the options under consideration
generate new information requirements and services, the main cost to account
providers in the form of one-off costs adapting IT systems and internal
processes to fulfil such requirements, in addition to changes to marketing and
promotional material, management time spent reviewing pricing strategies and
internal communication, and staff training. These cost items are common to most
options but generate varying cost estimates depending on the time and resources
considered necessary to implement an option and on the nature of acquisition
costs, e.g. in reconfiguring IT systems to collect or extract new information.
For improved access to account services there would be the recurring costs of
managing new accounts, a proportion of which may be recuperated through account
management fees. Providers would also potentially face lost revenue from
consumers switching to cheaper or more appropriate accounts, although this may
be offset by consumers switching in their favour. Non-quantifiable costs for
providers include the costs of staff managing accounts that run into overdraft
accidentally and an increased risk of fraud. Member States Generally, overall costs to Member
States are expected to be less significant than costs to credit institutions.
Member States would face one-off costs for introducing the policy options and
for monitoring compliance, the size of which would depend on the instrument
chosen. Additionally, a number of options would result in specific costs to
public authorities, such as operating a comparison website under
transparency/comparability Option 4A. Other initial outlay for Member States
could involve developing standard pre-defined bank usage profiles or
standardised price lists. Where Member States must incur set-up and development
costs, credit institutions (or their representative organisations) generally
contribute to the development process and bear a significant proportion of the
costs, as stated above. Consumers Possible costs to consumers have not
generally been quantified for switching and fee transparency. For options
relating to access, it is assumed that consumers will pay a 'reasonable' annual
(recurring) account management fee. In line with our individual assessment,
'no action' in each of the three areas is not considered to contribute towards
achieving the objectives set out in this initiative. As a result, no financial
costs associated with the 'no action' scenario were identified. 7.3. Benefits Payment
services providers Financial services providers would benefit from improved access to payment services as
a result of a reduced reliance on cash and a move towards cheaper payment
services. Non-quantifiable benefits include the potential benefits of being
able to market other goods and services to a broader customer base, the reduced
costs of managing cash, an increase in their capital base, and wider
reputational benefits. Member
States/society For access, the benefits to Member
States would arise from government and public authority savings in terms of
improved efficiency in the management and distribution of social security
payments, using bank transfers rather than sending cheques in the post.
Non-quantifiable benefits include reduced benefit and tax fraud. Enterprises would also be able to use
cheaper means of payments, for example, utility companies would more easily be
able to collect payments via direct debits rather than rely on cash or cheque
payments. Enterprises would also face non-quantifiable benefits from being able
to sell their goods and services to consumers with basic accounts in another
Member State through electronic payments, and from any consequent growth in the
market. The benefits to society at large would
result from increased awareness about bank fees alongside the potential to
switch easily. This would increase competitive rivalry among credit
institutions, leading to a gradual convergence in prices for payment accounts
within the internal market. Although not quantified for the purposes of this
impact assessment, this is a broad, long-term impact that should affect the
majority of consumers who are less active in seeking information about the cost
of their payment account. Consumers Consumers would benefit from savings made due to the
reduction of errors in the switching process; from the reduced direct cost of
switching; from the use of cheaper means of payment; from discounts by using
electronic payments; and from online savings through purchases of other goods
and services, where relevant. Further benefits include changes to
consumer switching behaviour and, where relevant, better account management. The impact of benefits accruing
to consumers through better account management is calculated for the options
covering ex-post bank fee information requirements. This benefit is assumed to
accrue due to availability of better information for consumers about charges
incurred; this could change consumption patterns and bring about cost savings. The impact of a possible convergence in
prices within the EU caused by increased transparency in payment account pricing – and thus increased
competition – could not be included into the framework of quantified benefits
without considering the possible impact of price changes to other financial
services products. Such knock-on effects on prices
could not be quantified. Other non-quantifiable
benefits for consumers include more accessible funds, a reduced risk of theft,
access to a broader range of products and services, more easily accessible
accommodation and/or employment, and improved consumer confidence. In line with our individual assessment, the impacts of the
'no action' option in all three areas are not considered to contribute towards
achieving the objectives set out in this initiative. As a result no benefits
associated to the 'no action' scenario were identified. 7.4. Comparison of options and assessment of their impact: access to
basic account services While Table 9 assesses the effectiveness and efficiency of the individual policy options,
it is important to underline that the options are not necessarily mutually
exclusive: some may be combined to create an effective and efficient set of
measures that addresses the problems outlined and objectives set. It is equally
important to assess which policy instrument would best achieve the objectives. Table 9: effectiveness of the policy options
for access to account services || Specific objectives || Effectiveness in achieving the objectives below || Efficiency (cost effectiveness) in achieving all listed objectives Efficient and competitive Single Market with a high level of consumer protection Facilitating access to payment accounts || Reduce the number of unbanked || Access to payment means || Cross-border activity || Improved awareness 1. No action || 0 || 0 || 0 || 0 || 0 || 0 2. Ensure application of the provisions of the Recommendation || ü || üü || ü || ü || ü || üü 3. Modify the provisions of the Recommendation relative to the beneficiaries || || || || || || 3(A) Introduce a universal right to a basic payment account || üüü || üü || ü || üüü || üü || ûûû 3(B) Introduce a right to a basic payment account at least for national residents || ü || ü || û || ûû || û || ü 3(C) Introduce a right to a basic payment account at least to those non-residents with a link to the country where they wish to open an account || üü || ü || ü || üü || ü || ü 4. Improve the features of the basic payment account || || || || || || 4(A) Enlarge the list of basic services to include internet banking and online purchasing || üü || üü || üüü || üü || üü || üü 4(B) Enlarge the list of basic services to include a small overdraft or a 'buffer' facility || üü || üü || ü || ü || ü || û 4(C) Indicate a minimum account balance that cannot be seized || üü || üü || ü || ü || û || ûû 4(D) Ensure that the features of the account are not of a discriminatory nature. || üü || üü || üü || üüü || üü || üü Impact on
effectiveness and efficiency compared to the situation today,
üüü (Strong) – üü (Moderate) – ü
(Weak) positive contribution
ûûû (Strong) – ûû (Moderate) – û
(Weak) negative contribution – ≈ neutral contribution It is crucial to ensure the right of access to a basic
payment account to all EU citizens. Option 1 assumes that, potentially, a few
additional Member States may implement the Recommendation on access and the
Commission would continue to monitor implementation. Since the adoption of the
Recommendation by the Commission in July 2011, only one Member State (Italy)
has taken measures to comply with the Recommendation, while two other Member
States had already introduced measures (Belgium and France). Almost half of the
Member States have failed to take any measures at all despite not having a
framework in place (Austria, Bulgaria, Czech Republic, Cyprus, Greece, Latvia,
Malta, Poland, Romania, Slovakia, Slovenia and Spain) and some have stated that it is unnecessary to take any action in
the near future (Austria, Bulgaria, Czech Republic, Cyprus, Spain, Latvia and
Malta) despite the fact that the Recommendation invited them to do so by the
end of 2011. Consequently, it is unlikely that many Member States will
implement the Recommendation. Furthermore, the potential alternative means of
payment to a basic payment account, e.g. pre-paid cards, have proven to be
insufficient since they lack features (such as access to certain payment
services, like credit transfers) and are more expensive than a basic payment
account (see Section 3.1). Option 1 would therefore be ineffective in ensuring
better access to accounts for vulnerable and mobile consumers. In terms of reducing the number of
unbanked consumers across the EU, Options 2 and 3A would be equally effective:
they would both ensure that residents and non-residents alike had the right to
open a basic payment account. Public authorities are
divided about the merits of this approach; on the one hand, some feel that any
initiative to ensure access to a basic payment account should address both
residents and non-residents, on the other hand, other public authorities argue
that the initial emphasis should be ensuring the right of access to residents of
that Member State, as cross-border access is not significant to those currently
without an account.[282] This opinion is not shared by consumers' representatives who find
it equally important to provide mobile consumers with a basic payment account.[283] However, as regards access, Options 3B and
3C would not be as effective since both would limit the availability of a basic
payment account compared to Options 2 and 3A; further, Option 3B excludes
non-residents, and Option 3C excludes migrants who do not have any link with
the country where they apply for an account. According to the European Savings
Banks Group migrant consumers should be required to demonstrate "at
least an objective economic link with the country in which they want to open an
account".[284] The effectiveness of these options would depend on the policy instrument chosen.
Consumer representatives argue that soft law, including a Recommendation, would
not help solve the problem of financial exclusion – a view supported by the
inaction of the industry and Member States as illustrated in Section 3.2.1. The
financial services industry considers that non-binding measures are sufficient
and that the problem is better addressed at national level to take into account
specificities of domestic markets. If an EU-measure is to be adopted, in the
view of the European Association of Public Banks, it "should be kept as
general as possible."[285] Therefore an alternative relevant solution would be a legally
binding instrument, e.g. a Directive, which would provide Member States with a
certain degree of flexibility, thus recognising differences at national level,
while at the same time ensuring action. Member States could, for instance, set
a limit for the price of a basic payment account; choose whether or not to
designate selected or all providers to offer basic payment accounts; and decide
on the content and target of campaigns informing the public about access rights
(as foreseen by the Recommendation). This flexibility is particularly necessary
given the unequal degree of development of the banking sector and varying price
levels of banking services in Member States; due to different banking
traditions (e.g. strong credit unions or regional banks in some Member States);
and because of divergent levels of payment account penetration across the EU.
For example, Option 3A obliges all the banks to provide basic payment accounts
whereas under Option 2, Member States could decide who should provide the
accounts. Similarly, under Option 3C, Member States would need more flexibility
because they would need to decide on the criteria or documents necessary to
recognise the non-residents' link with that country. Such criteria are likely to vary across the EU and it
is not appropriate to standardise them. It is assumed that Options 4A, 4B and
4C could attract a number of unbanked consumers because of useful additional
features they would offer. Option 4D would attract many unbanked consumers, in
particular mobile consumers, since it would allow for an account to be used
identically across the EU. Potentially, Option 4A would allow consumers to save
money through the purchase of cheaper products and services online. Option 4B
would ensure access to a small overdraft or buffer facility while Option 4C
would guarantee that a minimum balance on the consumer's account is protected
against seizure. Option 4A would be most likely to attract additional consumers
relative to Option 2, whereas Option 4C would only attract the few consumers
that feared account seizure. Option 4B would only have a minimal impact and
might even increase unbankedness relative to Option 2: some, if not all,
providers may assess creditworthiness in line with responsible lending
obligations, which could restrict access. Accordingly, in terms of ensuring access to all basic payment means,
Option 4A would be most effective, enabling consumers to shop and conduct their
banking transactions online. Again, a flexible instrument
implementing these options (for instance a Directive) would need to be proposed
so that Member States can ensure that banks do not charge consumers excessively
for these additional account features. Stakeholders, including the financial
services industry, agreed that a basic payment account should be offered at
reasonable cost.[286] A flexible instrument could also ensure that providers would have
the possibility to offer different 'online purchase' facilities, envisaged
under Option 4A, and it could help better define unlawful discriminatory
practices at national level (under Option 4D). Neither Option 4B nor Option 4C
would broaden the range of payment services that are available to consumers
because none of them provides for any additional payment services with a basic
payment account. Option 4A would additionally be in line with the European
Parliament recommendations on access to a basic payment account, which states:
"[t]he legislation should enable the user of a basic payment account to
make any essential payment transactions such as receiving income or benefits,
paying bills or taxes and purchasing goods and services via both physical and
remote channels using mainstream national systems."[287] Options 2 and 3A would be most
effective in ensuring access to cross-border banking services. Under both
options residents and non-residents would have the right to open a basic
payment account anywhere in the EU. Option 3C would also be somewhat effective,
affording access to non-residents who have a link with the Member State in
which they wish to open an account. Finally, Options 4A and 4D would contribute
to increased cross-border activity, facilitating cross-border trade in goods
and services by opening the online market to all EU citizens and preventing
providers from restricting the use of the basic payment accounts to national
markets. This would allow consumers to use the features of their basic payment
account in another Member State. Option 4D would not be as effective alone: for
the cross-border and domestic right of access to be equally useful to
consumers, a pan-European framework providing general rules for all Member
States is most appropriate. It would allow mobile consumers to understand what
rights they have in terms of access to basic payment accounts both at home and
abroad, while Member States would still have the flexibility to adapt legislation to local conditions. This is considered
essential by the financial industry[288] and
public authorities.[289] All options would be equally effective in improving consumers’ awareness of the right
to a basic payment account: all assume better implementation of the Recommendation,
which mandates that Member States launch public awareness campaigns about the
availability of basic payment accounts. This is, in the opinion of consumers,
crucial to promote access.[290] In conclusion, a combination of binding
measures that allow Member States flexibility in implementing Options 2
and/or 3A, alongside Options 4A and 4D, would be most effective in tackling the
problems in the market and achieving the objectives set. Table 10: Access to basic account services –
costs and benefits of the policy options Total EU benefits (million EUR) || Op. 2 || Op. 3(A) || Op. 3(B) || Op. 3(C) || Op. 4(A) || Op. 4(B) || Op. 4(C) || Op. 4(D) Consumer benefits: || 542-2711 || 610-3050 (upper end) || 510-2548 (mid- range) || 526-2630 (mid- range) || 236-1179 (upper end) || -14 to -68 || 45-226 || 68-339 One-off benefits || Not quantified Recurring annual benefits || 542-2711 || 610-3050 (upper end) || 510-2548 (mid- range) || 526-2630 (mid-range) || 236-1179 (upper end) || -14 to -68 || 45-226 || 68-339 Payments services provider benefits: || 18-89 || 20-100 (upper end) || 17-84 (mid- range) || 17-86 (mid-range) || 2-11 (upper end) || -0.4 to - 2 || 1-7 || -1.8 to -9 Recurring annual benefits || 18-89 || 20-100 || 17-84 || 17-86 || 2-11 || -0.4 to - 2 || 1-7 || -1.8 to -9 Member State benefits: || 18-89 || 20-100 || 17-84 || 17-86 || 2-11 (upper end) || -0.4 to - 2 || 1.5-7 || 2-11 One-off benefits || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 0 Recurring annual benefits || 18-89 || 20-100 || 17-84 || 17-86 || 2-11 || 0 || 1.5-7 || 2-11 Enterprises || 32-160 || 36-180 (upper range) || 31-150 (mid-range) || 31-155 (mid-upper range) || 16-80 || -0,8 to -4 || 3-13 || 4-20 Recurring annual benefits || 32-160 || 36-180 || 31-150 || 31-155 || 16-80 || -0,8 to -4 || 3-13 || 4-20 Total EU costs (million EUR) || Option 2 || Option 3(A) || Option 3(B) || Option 3(C) || Option 4(A) || Option 4(B) || Option 4(C) || Option 4(D) Consumer costs: || 108-542 || 122-610 (upper range) || 102-510 (middle range) || 105-526 || 22-108 || -11 to -57 || 9-45 || 22-108 One-off costs || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 0 Recurring annual costs || 108-542 || 122-610 (upper range) || 102-510 (middle range) || 105-526 || 22-108 || -11 to -57 || 9-45 || 22-108 Payments services provider costs: || 71-356 || 80-400 (middle end) || 67-334 (middle range) || 69-345 || 15-74 || -2 to -9 || 6-30 || 19-94 One-off costs || Not || 0 || 0 || 0 || 0 || Not quantif. || 0 || 0 Recurring annual costs || 71-356 || 80-400 || 67-334 || 69-345 || 15-74 || Not quantif. || 6-30 || 19-94 Enterprise costs: || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 0 Member State costs: || 3.02 || 3.40 || 3.02 || 3.02 || 0 || 0.25 || 0.25 || 0.38 One-off costs || 1.13 || 1.27 || 1.13 || 1.13 || 0 || 0.09 || 0.09 || 0.14 Recurring annual costs || 1.89 || 2.12 || 1.89 || 1.89 || 0 || 0.16 || 0.16 || 0.24 In terms of
efficiency, there would be no one-off costs or benefits for consumers brought
about by implementing Options 2, 3A, 4A or 4D. Annual recurring costs for
consumers under Option 2 are estimated at between EUR 108-542 million; annual
benefits would total between EUR 542-2711 million, depending on the number of
consumers who opened a payment account.
Benefits (and costs) would be slightly higher under Option 3A. Benefits from
online account facilities (Option 4A) are estimated at between EUR 236-1179
million and benefits from non-discriminatory means of payment (Option 4D) at
between EUR 68-339 million, while costs are estimated at between EUR 22-108 million
for each of Options 4A and 4D. Overall, then, benefits for consumers
considerably outweigh the costs. The costs for consumers would primarily
consist of account operation fees and occasional charges for failed
transactions, whereas benefits would arise from discounts from reduced use of
expensive money transmission mechanisms and cheques, in addition to discounts
from electronic payments and online purchases. For providers, under Option 2, there would
also be no quantifiable one-off costs or benefits. Recurring annual costs for
providers are estimated at EUR 71-356 million, while benefits would total EUR
18-89 million, depending on the number of consumers who opened a payment account. Costs incurred by providers
would be those for operating basic payment accounts. Benefits would result from
fees imposed on consumers for the use of the accounts, as well as an increased
client base. The costs for providers would increase significantly if Option 3A
were introduced, since all banks would be obliged to offer a basic payment
account to any consumer even if he/she already holds another regular account.
Such costs would be disproportionate to the set objectives; even consumer
representatives consider basic payment accounts should only be provided to
those who do not yet have another payment account in the country where they
apply for one.[291] Providers would also incur the costs of switching consumers who
wanted to change their regular and usually more expensive payment account to a
basic account. These additional costs for providers resulting from the
introduction of Option 3A would be substantial, but are not quantifiable. The
costs for providers would be between EUR 15-74 million for Option 4A and
EUR 19-94 million for Option 4D. Costs for banks under Option 4D would be
slightly higher; they would need to ensure that all the account features could
be used identically by consumers domestically and cross-border. The benefits
from Option 4A would only be EUR 2-11 million while the benefits from
Option 4D would be negative. Consequently, it is likely that costs for
providers would outweigh the benefits; the extent of this net loss would depend
on the extent to which providers could recuperate any costs from fees charged
to consumers and other non-quantifiable benefits. The potential losses would be
substantially greater under Option 3A than Option 2; accordingly, Option 2 is
the more efficient option, since it would be equally effective and
proportionate in addressing the problem identified. With the introduction of Option 2,
Member States would incur one-off costs of EUR 1.13 million and recurring
annual costs of EUR 1.89 million. This includes the cost of
implementing, monitoring and enforcing new legislation. These costs would
slightly increase if Option 2 were combined with Options 4A and 4D. The costs
could, however, be lower than indicated because the necessary enforcement
mechanisms already exist at national level in some Member States and would not
need to be established from scratch.[292]
Member States would incur recurring non-cumulative benefits of between
EUR 18-89 million per annum if the three options were combined, since
they could make more payments of social benefits by cost-effective electronic
transfer. It is assumed that Member State benefits would also be slightly
higher with a greater number of consumers opening a basic payment account
because there would be less fraud than associated with paper systems and tax
collection would be cheaper. These benefits are non-quantifiable. Option 2 would bring recurring benefits
to utility firms of between EUR 32-160 million, depending on the number of
consumers who opened a payment account
(pessimistic, realistic or optimistic scenarios). Energy and water providers
would benefit from reductions in transaction costs since newly banked consumers
would switch to direct debit payments, which is a cheap payment collection
method for utility companies. If Option 2 were combined with Options 4A and 4D,
these benefits would increase – particularly Option 4A in particular when combined
with Option 4A. Greater benefits may be unlocked if Option 3A replaced Option
2, since more consumers would open a basic payment account, but these benefits
are unlikely to outweigh its high cost for providers. In conclusion, the preferred package is
Options 2, 4A and 4D. This package would ensure the right of access to a basic
payment account for both residents and non-residents and to all basic means of
payment by providing the possibility to purchase online and use internet
banking. Further, a better implementation of the Recommendation under Option 2
would facilitate cross-border access to basic banking services and would raise
consumer awareness of the availability of basic payment accounts. Finally,
Option 4D prevents providers from restricting the use of a basic payment
account to domestic transactions. Option 3A, allowing for universal access of
consumers to a basic payment account, must be excluded since it would generate
excessive and disproportionate costs for providers and Member States. It is highly unlikely that a
non-binding instrument could be effective in ensuring consumers' right of
access to basic payment account with all the features of the account envisaged
under Options 2, 4A and 4D, though the financial industry favours such a solution.[293] It has been clearly demonstrated, following the adoption of the
Recommendation on access in 2011, that non-binding measures cannot deliver
results in this area. The Recommendation was implemented by just three Member
States while several other EU countries introduced legislations or
self-regulation only partly complying with the Recommendation, causing
substantial divergences between Member States to develop. Some Member States
also limited the use of the account exclusively to their national market. Such
varying rules make it more difficult for mobile consumers to open a basic
payment account abroad and, as a consequence, may prevent many of them from
attempting to open one cross-border. On the other hand, it has been
demonstrated (and is broadly supported by stakeholders[294]) that
measures on basic payment accounts should allow Member States some flexibility
allowing for the specificities of national markets. The costs to Member States imposed by
EU-level measures on access would not depend on the number of unbanked
consumers in a given country: administrative costs are likely to be similar
regardless of account penetration. They will rather depend on whether rules on
access have been implemented domestically. Benefits may differ depending on
account penetration; the more banked consumers, the more social benefits can be
paid through cheaper bank transfer. Therefore, Member States with currently
more unbanked consumers are likely to benefit more from measures on access.
Romania and Bulgaria, with the highest unbanked populations in the EU, would
benefit most, but Poland, Hungary, Lithuania have almost 30% of their citizens
above the age of 15 without a payment account.[295] The preferred package of options on
access would be most costly for Member States which have not yet introduced any
legislation in this area.[296] They would need to implement measures from scratch and thereafter,
monitor compliance and enforce it where necessary. It is assumed that
monitoring and enforcement could be carried out by existing authorities which
would substantially limit the costs. Belgium, France and Italy, which
adopted legal measures in line with the Recommendation, would incur lower costs
because they would only need to introduce the additional provisions provided by
Options 4A and 4D, i.e. the possibility for consumers to purchase online and to
use internet banking as well as provisions on non-discrimination. Also,
monitoring of compliance and enforcement would not be very costly for them
because it can be assumed that provisions exist under their current legislation
and that there are national authorities designated to this end. Member States which have introduced
legislation or self-regulation not complying (fully) with the Recommendation
would need to align these measures accordingly.[297] In
general terms, it can be expected that amending the existing legislation will
be less costly than introducing a new law. It will be more expensive if
self-regulation is to be replaced by a legal instrument. Member States which
already have a law or self-regulation, even if not complying with the
Recommendation, would obtain fewer benefits because some previously unbanked
consumers will have already opened a basic payment account in these countries.
Nevertheless more consumers may be attracted by the new features of the account
which were not available earlier (e.g. online purchase facility or
non-discriminatory provisions), and even more in the Member States where some
of the payment account features were limited to domestic markets (e.g. the Netherland
and Hungary). Table 11: Options for access to basic
account services – Impact on main stakeholders || Consumers and society || Financial services industry || Member States || Non-financial service product providers 1. No action || 0 || 0 || 0 || 0 2. Ensure application of provisions of Recommend. || ü || û || ü || ü 3. Modify provisions of Recommend. (beneficiaries) || || || || 3 (A) Universal right to a BP account || üüü || ûûû || ü || üü 3 (B) Right to a BP account at least for national residents || ü || ≈ || ü || ü 3 (C) Introduce a right to a basic payment account at least to those non-residents with a link to the country where they wish to open an account || üü || û || ü || ü 4. Improve the features of the basic payment account || || || || 4 (A) Enlarge the list of basic services to include internet banking and online purchasing || üü || ûû || ü || üüü 4 (B) Enlarge the list of basic services to include a small overdraft or a 'buffer' facility || üü || ûûû || ü || üü 4 (C) Oblige MS to have in their legislation an indication of a minimum account balance that cannot be seized || üü || ûû || ûûû || ü 4 (D): Features are not of a discriminatory nature. || üüü || û || ü || üü Impact on effectiveness and efficiency compared to the situation today,
üüü (Strong) – üü (Moderate) – ü
(Weak) positive contribution
ûûû (Strong) – ûû (Moderate) – û
(Weak) negative contribution – ≈ neutral contribution 7.5. Comparison of options and assessment of their impact: presentation
and ease of comparison of bank fees Effectiveness
of policy options This analysis assesses the efficacy of the policy options under consideration in light of
the detailed operational objectives identified. The problems discussed above
highlight the complexity of this area, which raises barriers to consumers when
they seek to understand and compare bank fees. Divergent approaches have been
taken by Member States to address these issues; moreover, price differences
across Member States indicate substantial market fragmentation. Table 12 below assesses the effectiveness and efficiency of the individual policy
options, which are not necessarily mutually exclusive and may be combined to
better address the problems outlined and achieve the set objectives, even
though they aim to address the same set of weaknesses. The 'information provision' policy
options can be broken down into two groups: the first focuses on the ex-ante
provision of information (mainly during the advertising and pre-contractual
stages); the second focuses on the ex-post provision of information. The group
of options dealing with ex-ante information can be further broken down into two
broad groups. The first group
focuses on fee information presentation while the second group analyses tools
that would support comparison and clarity of information. Certain criteria must be taken into
account when assessing the use of information as a means to support consumer
choice. Proposals must be capable of reaching a large range of consumers and
must be effective across the board. It is also vital to maintain a balance
between complete and comprehensive information and providing too much. The
OECD's Consumer Policy Toolkit states that: "Long and overly complex
information risks being of little value to consumers. Moreover excessive
information can lead consumers to feel overwhelmed."[298] A Commission study that aimed to measure behavioural responses to
different ways of presenting bank fee information to consumers indicated that
highly detailed, mainly numerical information may lead to uncertainty in
consumers who then choose to ignore that information as a consequence.[299] The proposals should additionally provide common EU standards, in
order to counter further market fragmentation as a result of isolated
regulatory action in domestic markets. At the same time, it is also important
that EU action takes account of domestic market specificities. Table 12: Effectiveness of the policy options for ease
of comparison of bank fees and presentation requirements || Effectiveness in achieving the objectives below || Efficiency (cost effectiveness) in achieving all listed objectives Operational objectives Consumers receive clear, complete and comparable information || Consumers enabled to understand bank offers and assess value for money || Payment account offers are easy to compare || Help consumer choice towards offer best matching needs || Increase consumers awareness of charges actually paid || Reduce direct financial costs of switching to consumers 1. No action || 0 || 0 || 0 || 0 || 0 || 0 || 0 2. Standard price list || üüü || üüü || üüü || üüü || üüü || üü || üüü 3. National glossaries for bank fee terms || || || || || || || 3(A) non-harmonised terminology || üü || üüü || ü || ≈ || ≈ || ≈ || ü 3(B) fully harmonised terminology || üü || üü || ü || ≈ || ≈ || ≈ || ü 4. Comparison websites || || || || || || || 4(A) Single national website || üü || üü || üü || üü || ü || üü || üü 4(B) Accreditation scheme || üü || üüü || üüü || üüü || üü || üü || üüü 5. Representative examples || || || || || || || 5(A) set-up by banks || û || ü/≈ || ü/≈ || ü || ü/≈ || ü || ≈ 5(B) prescribed by M. States || ü/≈ || ü/≈ || ü || ü || üü || ü || ü/≈ 6. Cost simulation || || || || || || || 6(A) set-up by banks || û || ü || ü/≈ || ü || ü/≈ || üü || ≈ 6(B) prescribed by Member States || ü || ü || ü/≈ || ü || ü || ü || ü/≈ 7. EU standardised forms for ex-ante information || ü || üü || üüü || üü || ü || üü || ü 8. Banks obliged to provide ex-post information || üü || üü || üüü || üüü || üüü || üü || üüü 9. EU standardised forms for ex-post information on fees || ü || ü || üü || ü || üü || üü || ü Impact on
effectiveness and efficiency compared to the situation today,
üüü (Strong) – üü (Moderate) – ü
(Weak) positive contribution
ûûû (Strong) – ûû (Moderate) – û
(Weak) negative contribution – ≈ neutral contribution Without action (Option 1), the comparability and presentation of payment account
fees would not be improved, remaining unclear to consumers. The current levels
of market fragmentation would increase as Member States continued to take
uncoordinated action to address the issues identified in the problem section.
From a policy and regulatory point of view this option hinders regulatory
convergence between Member States. It also prevents further integration, since
the harmonising impact of options presented below and in Annex III – albeit
with a longer-term view – would not take effect. In the 2012 public consultation on bank
accounts, all consumers supported the need for EU action on transparency and
comparability of bank account fees in order to allow an EU-wide level playing
field. More mixed views emerged from the Member States participating to the
consultation.[300] Some favoured EU level initiatives and cross-border coordination
(e.g. Estonia, Austria and relevant public authorities in other Member States,
such as the Hungarian Financial Supervisory Authority, and the Central Banks of
Ireland and Lithuania). A number of other Member States stressed the usefulness
of EU level initiatives, while recognising the inherent difficulties of such an
approach (Belgium, Spain and France). Others acknowledged the need for an
intervention to tackle this issue, but advocated national action first (Hungary
and Poland). The UK did not recognise the need for EU action in this field.
Most financial services industry respondents indicated that, if EU action were
to be pursued, it should be flexible and take account of efforts made at
national level. It was also stressed that EU action in these areas will be
required when an EU retail financial market is truly achieved, thus tackling
the existing differences among national rules governing these areas. If no action is taken then the payment account market would not benefit from the
advances at EU level in the payments market achieved through SEPA. Citizens
would not be able to clearly distinguish between price advantages brought about
by SEPA for direct debits and credit transfers if the price of the underlying
payment account remains opaque, continues to exhibit significant differences in
prices for equivalent payment account offers, and remains a complex product.
Meanwhile credit institutions wishing to establish business across borders will
have to continue to comply with different sets of rules and incur costs in
adapting their processes and operations to different national requirements.
Consumers living in Member States where bank infrastructure is less developed
and the provision of daily banking services is more costly would not benefit
from the arrival of new market entrants who operate lean processes and provide
good services at competitive prices. Options 2 and 7
focus on ex-ante fee presentation requirements, through standard form price
lists. They foresee the definition and use of standard terminology for fee
items. As discussed in the problems section, the use of differing terminology
by credit institutions affects the ability of consumers to compare offers. Both
Options 2 and 7 can address this issue as they will provide fee information in
a clear and comparable way. These Options have similar characteristics to other
forms of EU standard pre-contractual information in retail financial services
such as SECCI[301] and ESIS.[302] The use of an EU standard price list is essential both in domestic
and cross-border contexts as it establishes the same requirements for the
presentation of fees within Member States and across the EU. However Options 2 and 7 differ in two
respects: The first concerns the extent of fee standardisation; the second concerns whether standardisation occurs at EU or national
level. Under Option 2, the price list would
involve the ex-ante disclosure of payment account fees. Fees common to all
Member States would be identified at EU level and supplemented nationally to
cover the 20 most representative fees or at least 80% of key charges incurred.
Common presentation
requirements, which could include the introduction of a single form for ex-ante
disclosure of payment account fees, and requirements regarding availability of fee information and selection
criteria for common fees across the EU, would be
established at EU level. Option 2 allows for the harmonisation of the most
commonly used fees at EU level, while permitting Member States flexibility to
add fee items more relevant to domestic markets. This approach was supported by
the majority of responses to the public consultation.[303] Some
Member States recognised that even with the aid of national initiatives,
whether through legislation or self-regulation, bank fees often remain complex. Some of them supported EU level action on
standardised terminology (EE and AT) and others agreed on the usefulness of EU
actions, while recognising the technical difficulties entailed by such an
approach (BE and ES). Consumers, the financial services industry and public
authorities indicated that the full standardisation of fee terminology could
bring about the unintended consequence of standardising products. They also
mentioned the risk of information overload to consumers. Option 7
approximates SECCI and ESIS more closely since it foresees full EU
standardisation of fee terminology and corresponding disclosure requirements in
an EU standard form price list. However the types of fees that comprise the
cost of a payment account cannot be combined into a single measure, as with the
Annual Percentage Rate of charge for loans, which forms the basis for cost
information in both SECCI and ESIS. Given the wide
range of fees for payment accounts and their differing relevance to domestic
markets, Option 7 would not achieve the stated objectives. Standardising all
fee terminology at EU level would be complex; not all payment instruments are
commonly used throughout the EU: cheques are common in France but not used at
all in Belgium. The result could be that EU standard fees would not only be overly
cumbersome to be effective, but they may also lead to confusion by requiring
disclosure of fee items that may not be relevant to a large number of EU
citizens. Option 3 (Glossaries) should not be considered as a stand-alone option since
it does not address information about bank offers as such, neither in terms of
prices nor of the services offered. Therefore glossaries are not able to
fulfill operational objectives without being combined with other options. As
with Options 2 and 7, glossaries are closely linked to the use of standardised
terminology. They need to be sufficiently comprehensive to be useful. This
Impact Assessment assessed two alternative approaches to the development of
glossaries as information tools. The first (Option 3A), foresees the development
of a single, reference glossary within each Member State providing standard
term definitions, while the second (Option 3B), is a single glossary that
would collect different definitions for fees in use within credit
institutions. Both alternatives analysed are likely to result in an
overly-cumbersome document to be useful. This is particularly true for 3B that
would contain a larger number of items and a significant degree of duplication
of terms. The public consultation showed that Member
States have diverging views on the role of glossaries. Most of them stressed
the usefulness of these tools when developed at the national level. Some
respondents supported EU level intervention in this area, while noting the
difficulty to accomplish it; others, considered any intervention to improve
glossaries unnecessary. However, a definition of terms
is essential to all other options under consideration where terminology is
used. Yet it is inherent to Option 2, which foresees the use of standard
terminology. Within the
subset of options comprising tools to facilitate comparison and clarity of
fees, Option 4 (comparison websites) provides the means for consumers to review
several payment accounts in a single place, online. This lowers search costs
when compared to all other options under assessment that require consumers to
collect separate information from different credit institutions as a first
step. Online comparison tools have other positive attributes such as their
ability to present large amounts of information in a structured way and to
balance the level of detail provided to the viewer according to their needs,
through drill down or pop-up menus. They also lend themselves well to other
forms of information, such as service quality or convenience indicators for
different service providers. The use of comparison sites is generally assessed
positively in other industries.[304] For
example, in July 2012 the European Energy Regulators developed guidelines of
good practice for price comparison tools in the field of energy supply.[305] The recommendations highlight the key requirements of price
comparison tools (such as independence, transparency, exhaustiveness, clarity,
user-friendliness and accessibility), which can ensure neutral and objective
information to consumers. In the 2012 public consultation on bank
accounts this was the preferred tool for enhancing transparency and
comparability of bank fees. The financial services industry generally supported
the development of comparison websites, but stated that they should remain
voluntary, in particular if existing initiatives function well. A few
respondents, however, pointed out the importance of public intervention on
these websites, in the form of a supervisory or management role (e.g. Banking
Associations in the Czech Republic, Italy and the Netherlands). Member States
generally acknowledged the importance of developing tools to enhance
transparency and comparability, while stressing the need to carefully assess
their costs and effectiveness. Some replies pointed to the possibility of
binding requirements to set up such tools, should self‐regulatory
regimes not lead to satisfactory results, as well as the need for public
supervision. In order to be truly effective, comparison sites should provide unbiased,
timely and accurate information. This impact assessment identified two
approaches to address the issue of independence. The first approach (Option
4A), would entail a single comparison website per Member State managed by the
responsible public authority. As an alternative (Option 4B), a website
accreditation scheme could be established, defining quality criteria for
website operators to obtain accreditation. These criteria could include
requirements to disclose potential conflicts of interest, ensure minimum market coverage and to ensure timeliness and
accuracy of fee information. Participation on the part of credit institutions
would be voluntary. In our view, Option 4B is superior.
This preference recognises the fact that an increasing number of comparison
websites operate across the Union. EU action would aim to establish common
minimum standards for accreditation, which Member States will be able to adopt
without modifying the structures which have emerged naturally and without
limiting access to private operators, whose adherence would be voluntary. The
merits of accreditation schemes, though in other industry sectors are also
supported by BEUC.[306] Options 5 and 6 are aimed at helping
consumers make product choices that best match their needs. Both options take account of the variable nature of some categories
of fees and could provide a better understanding of the costs of an account
over a given period of time than other options that provide unit fee
information alone, such as Options 2 and 7. Both representative examples (Option 5) and personalised cost simulations (Option 6)
would need to establish a set of consumer consumption profiles that are
sufficiently representative and that apply to a broad range of consumers. We
explored two approaches with varying degrees of standardisation; the first
approach would allow credit institutions to tailor usage profiles to the
individual, while the second approach foresees a mandatory set of standard
usage profiles established at Member State level. Stakeholder responses to the
public consultation highlighted weaknesses in both approaches. While according to consumers the first approach
could lend itself to methodological bias and hamper comparison between
different bank offers, the financial services industry
did not favour the second approach that would generalise the use of
representative examples and risks standardising products. In addition, both approaches raise concerns as to whether consumers
would be able to locate their own usage patterns within available profiles. Both representative examples and personalised cost simulations are better adapted to
provide information on specific elements of cost. Their effectiveness varies
depending on the way an account is priced. Representative examples are
effective in providing concise information on a number of limited variables,
such as overdraft cost information. Cost simulations are mostly adapted to
variable elements of fees but are less relevant to one-off costs. If
representative examples are adapted to different usage profiles, their use as
advertising tools may become cumbersome, unless they are tailored to specific
target groups of customers. Finally cost simulations are not widely in use and
only provided on a voluntary basis. All of these issues point against a generalised
use of these tools as a means to ensure comparable information is provided in a
structured form. Options 8 and 9
concern the provision of ex-post information on fees to payment account
holders. The ex-post information options complement the options for ex-ante fee
information assessed above and allow consumers to monitor their actual
expenditure. Further, they facilitate the comparison of continuing fees and
could encourage switching of payment accounts. Option 8 would provide the
ex-post information on the same standardised fee terms as Option 2 does on an
ex-ante basis. Option 9 complements Option 7 as it provides ex-post information
on all fee items. While credit institutions are
expected to incur costs in updating their information systems to adapt to this
approach, most of them have already adopted the
practice of providing consumers with fee summary statements as a result of
national regulation. In the public consultation, the industry also stressed the
importance of striking a balance between transparency with customers about
charges and the risk of providing excessive and complex information. If this option is combined with Option 2, the greatest benefit
would be achieved by providing a summary of information in standardised price
lists that cover major fees. Options 8 and 2
combined would provide Member States with a degree of flexibility, allowing
them to tailor the fees to national specificities. As Options 9 and 7 are based
on all fees, they do not retain this flexibility. Most respondents to the public consultation from the financial
services industry recalled the current practices that have been already
developed and used in terms of providing consumers with statements on a regular
basis. Consequently, Options 8 and 2 are considered to be more effective in
providing clear and concise information to consumers that is truly relevant to
their needs. The analysis in this section and in
Annex III indicate that Options 2, 4B and 8 are the optimal package of options for transparency/comparability when combined.
Options 3, 5, 6, 7 and 9, demonstrate a number of weaknesses which risk the
objectives not being met. Combined, this package would provide consumers with
relevant ex-ante and ex-post fee information, presented in a clear and
comparable format. Consumers would understand how much they would be, and
actually were charged for key services. This provides an excellent basis for
fee comparison across providers on a comparison website and could facilitate
switching. Efficiency
of policy options and impact on stakeholders This section describes the impact on
stakeholders and focuses on Options 2, 4B and 8, as the package of options that
were considered most effective above. Table 13 below provides a summary of
quantified costs and benefits for all relevant stakeholders. Annex III and
Annex VI provide a more detailed description of costs and benefits for all
options for presentation and ease of comparison of bank fees. All options impose costs on stakeholders. These mostly fall on credit institutions.
All options give rise to relatively similar types of costs. In the main, they
relate to: adapting IT systems; marketing and advertising materials; internal
compliance; the cost of training; and disseminating material to consumers. The
extent of costs depends on the time and effort required to implement the
proposals within each option. The combined costs of Options 2, 4B and 8, amount
to between EUR 737 million and EUR 1247.76 million. However some major items,
such as the cost of updating IT systems, internal compliance and training
costs, will generate cost synergies for the combined set of preferred options.
The impact on an aggregate basis of other major items of expenditure is
expected to approximate the cost estimates derived on an individual option basis.
These comprise mainly recurring costs of disseminating standard form price
lists and fees summary statements amounting to EUR 144.32 – 432.96 million from
2013 to 2022. Other relevant non-cumulative costs are one-off costs in adapting
marketing as a result of the introduction of standard fee lists (EUR
83.21-138.69 million); adapting account statements to provide ex-post
information (EUR 13.62 - 27.25 million); and total one-off costs attributed to
website operators to comply with accreditation requirements (EUR 5.09 -10.18
million). As indicated in Table 13, long-term costs to
Member States are not expected to be significant. Synergies are expected in the recurring costs of
monitoring and enforcement, although there will be partial cumulative costs
arising from different monitoring requirements for each of the three options. Total EU Benefits (million EUR) || Option 1 || Option 2 || Option 3.A || Option 3.B || Option 4.A || Option 4.B Consumer benefits: Change to switching behaviour Better account management Credit institution benefits: Cross-border cost savings Business opportunities || - - - - || 584.87 Not quantifiable || Not quantifiable Not quantifiable || Not quantifiable Not quantifiable || 731.08 Not quantifiable || 731.08 Not quantifiable Total EU costs (million EUR) || || || || || || Credit institution costs: one-off recurring Comparison website operators One-off recurring Member State costs: one-off recurring || - - - - - - || 95.95-163.03 183.17-255.79 - - 0.05–0.08 0.60-1.17 || 11.66-23.58 149.67-192.32 - - 0.02–0.05 0.82-1.56 || 40.35-72.76 334.11-442.78 - - 0.08-0.11 0.99-1.95 || 13.75 – 21.81 49.36 – 98.72 - - 0.76-2.86 14.04-20.95 || - - 0.32-0.65 4.77-9.53 0.36-0.66 3.48-6.74 Table 13: Presentation requirements and ease
of comparison of bank fees – costs and benefits of the policy options Total EU benefits (million EUR) || Option 5.A || Option 5.B || Option 6.A || Option 6.B || Option 7 || Option 8 || Option 9 Consumer benefits: Change switching behaviour Better account management Credit institution benefits: Cross-border cost savings Business opportunities || 146.22 Not quantifiable || 146.22 Not quantifiable || 219.32 Not quantifiable || 219.32 Not quantifiable || 438.65 Not quantifiable || 1462.16 2702.57 Not quantifiable || 292.43 954.48 Not quantifiable Total EU costs (million EUR) || || || || || || || Credit institution costs: one-off recurring Member State costs: one-off recurring || 265.44-463.30 323.68-347.76 0.02-0.03 0.71-1.40 || 299.71-522.34 362.97-390.94 0.08-0.12 0.94-1.85 || 420.77-691.71 2 572.48- 3 682.59 0.02-0.03 0.71-1.40 || 461.21-757.51 2 821.51-4 036.32 0.08-0.12 0.99-1.95 || 148.89-252.07 224.89-297.51 0.01-0.02 0.33-0.64 || 192.42-326.31 260.37-492.45 0.07-0.11 0.81-1.59 || 345.71-681.55 587.74-1100.48 0.03-0.05 0.71-1.40 Consumers are expected to derive the greatest benefit from this package of
options. The package will provide a regulatory basis to facilitate comparison
of bank offers and ensure clear information is provided both before and after
acquiring a payment account. This package also takes into account differing levels
of regulation currently in Member States and is expected to provide comparable
consumer protection to all EU citizens in the payment account market. Although
benefits for the three options are not cumulative, the impact on consumer
switching behaviour is expected to hover around the higher-level estimate
calculated for Option 8, amounting to EUR 1462.16 million from 2013 to 2022.
Similarly, potential benefits as a result of improved account management (as
per Option 8) are expected to be EUR 2702.57 million from 2013 to 2022. Benefits would accrue
to credit institutions, though these are not quantifiable. They would be better
able to operate cross-border, within the internal market, as a result of more
transparent pricing information and the same information requirements across
the EU. Better comparison and clarity will also favour more efficient credit
institutions and are expected to encourage competition not only on price but
also in terms of service, to the benefit of consumers. This section focuses on the preferred
package, comprising Options 2, 4B and 8. A policy instrument can be analysed by
its effectiveness in implementing and ensuring compliance with the proposed
measures. This assessment of policy options is primarily based on these
criteria. As described above, previous attempts by the industry to provide clarity, comparability and
transparency of fee information through EU-wide self-regulation has been
unsuccessful and raises concerns as to the appropriateness of future
self-regulation in this area. Table 14:
Impact on main stakeholders for options on ease of comparison of
bank fees and presentation requirements || Consumers and society || Financial services industry || Member States 1. No action || 0 || 0 || 0 2. Standard price list || üüü || ü || ü 3. Glossaries for bank fee terms in Member States || || || 3(A) non-harmonised terminology || ü || û || û 3(B) fully harmonised terminology || ü || ûû || ûû 4. Comparison websites || || || 4(A) Single national website || üü || û || ûû 4(B) Accreditation scheme || üüü || ü || û/≈ 5. Representative examples || || || 5(A) set-up by banks || ü/≈ || ûû || û 5(B) prescribed by M. States || ü/≈ || ûûû || ûû 6. cost simulation || || || 6(A) set-up by banks || ü/≈ || ûûû || û 6(B) prescribed by M. States || ü/≈ || ûûû || ûû 7. EU standardised forms for ex-ante information (price list) || üü || ûû || û 8. Banks obliged to provide ex-post information || üüü || üü || ü 9. EU standardised forms for ex-post information on fees || üü || ü || û Impact on
effectiveness and efficiency compared to the situation today,
üüü (Strong) – üü (Moderate) – ü
(Weak) positive contribution
ûûû (Strong) – ûû (Moderate) – û
(Weak) negative contribution – ≈ neutral contribution The package foresees the partial
standardisation of EU fee terminology and cross-border comparability of payment
accounts. The effectiveness of this package is contingent upon consistent
application across Member States and therefore is more appropriately
implemented through binding measures. In addition, higher levels of compliance
can be achieved through binding measures due to monitoring and enforcement
provisions. A certain level of flexibility would be beneficial for Member States
in implementing the package to allow for national specificities. This accords
with the wishes of stakeholders, who in response to the 2012 public
consultation, stated that there is a need for a balance between ease of
comparison and excessive standardisation affecting differentiation, qualitative
aspects and particularities of national markets. 7.6. Comparison of options and
assessment of their impact: payment account switching Table 15 assesses the effectiveness and efficiency of the individual policy options
for switching. These are not necessarily mutually exclusive and may be combined
to better address the problems outlined and achieve the set objectives. Table 15: effectiveness of the policy
options for payment account switching || Effectiveness in achieving the objectives || Efficiency (cost effectiveness) in achieving all listed objectives Operational objectives Smooth and easy switching process with max duration of 14 days || Number of misdirected/missed payments during switching process is reduced to less than 5% of recurrent transactions || Consumers are assisted and informed of the switching process in an adequate manner || Reduced direct financial costs of switching to consumers || Increase the mobility of payment account users 1. No action || 0 || 0 || 0 || 0 || 0 || 0 2. Ensure that the switching services follow the Common Principles (CP) || ü || ≈ || ü || ü || ü || ü 3. Improve effectiveness of the CP || || || || || || 3 (A) Improve existing CP || ü || ≈ || üü || ü || ü || üü 3 (B) Broaden the scope of CP to EU-wide cross-border switching || üü || ≈ || üü || ü || üü || üüü 4. Set up an automatic redirection service for all receipts and payments from an old to a new account || || || || || || 4 (A) Domestic automatic redirection service || üü || üüü || üü || üü || üü || ûûû 4 (B) EU-wide redirection service || üüü || üüü || üü || üü || üüü || ûûû 5. Payment account portability || || || || || || 5 (A) Domestic payment account portability || üü || üü || üüü || üüü || üüü || ûûû 5 (B) EU payment account portability || üüü || üüü || üüü || üüü || üüü || ûûû The 'no action' option (Option 1)
would not address the problems identified in Section 3.2.3; nor would it achieve the objectives outlined in Section
4. If 'no action' were taken, the different level of consumer protection across the EU – arising from differing application of
the Common Principles across the EU – is likely to be amplified. Even though
the financial services industry argues that there is no need for new measures,
consumer and civil society representatives have voiced clear discontent with
the status quo and consider the voluntary character of the Common Principles to
be a major reason why switching services remain inadequate.[307] If no action is taken, switching
will likely remain burdensome, unpredictable and costly to consumers,
ultimately restricting their mobility. Option 1 is therefore rejected. Option 2 would ensure that switching services follow the Common Principles. This
would have a positive effect on the ease of switching payment accounts and
ensure that the switching process does not last for more than 14 days. The
direct cost of the process to consumers would also fall due to a slight
increase in competitive pressure. Even though the financial services industry
argues that new measures ensuring the application of the Common Principles are
unnecessary, consumer representatives strongly oppose this view. They argue
that while the Common Principles have been in place for three years, they are
insufficient, as demonstrated by the results of national surveys and mystery
shopping exercises.[308] In comparison to 'no action', this option would better meet the
stated objectives, but it would not address all obstacles to switching.
Accordingly, while this option amounts to a good first step, additional
measures are explored and analysed below. Section 3.2.3 stated that the Common
Principles briefly address some of the shortcomings of the switching process
encountered during mystery shopping exercises, but do not explicitly provide
for solutions. Adding explicit provisions to address these deficiencies, as
proposed in Option 3A, would help define providers' obligations clearly,
ensuring a minimum level of quality in switching services across Member States.
A provision that all account providers should have information on switching
services on their websites (displayed in an easy to find and easy to understand
manner) would go beyond the
current requirement of the Common Principles that only foresees information be
made available "on a durable medium and supplied by banks and national
banking associations". At present, there are no explicit bank staff
training requirements regarding the switching process. Such provisions would
provide for a more streamlined approach by providers, improving assistance to
consumers. As such, Option 3A (incorporating the application of the Common
Principles as set out in Option 2) is considered more effective than
Option 2 on its own. Option 3A would be flexible
enough to take into account national specificities and thus ensure nationally
effective switching. The new provision for staff training could specify that
staff are to be adequately trained on the functioning of the switching service,
leaving the possibility for Member States to decide how this is to be applied
in practice. Disadvantages would remain: Option 3 would not eliminate a risk of an uneven playing
field between providers wishing to enter new markets. Such an approach would be
contrary to the internal market. Moreover, this option would not help develop a
cross-border switching service. In response to the 2012 Commission
consultation on bank accounts[309],
representatives of the financial services industry argued that there is low
demand for cross-border switching and therefore no need for cross-border
switching provisions. It can be argued that demand is low because there are
difficulties in opening payment accounts cross-border, in comparing products
from different Member States, and as there is no dedicated cross-border
switching service in place. Consumer representatives are strongly in favour of
the development of cross-border switching services; some noted that this option
will become particularly relevant once the Single European Payment Area is
fully implemented. Following implementation, consumers should be able to conduct payment transactions from
anywhere. Considering the potential benefits from cross-border switching to
consumers in particular due to SEPA implementation, there is reason to expect
that the potential cross-border demand for payment account services will
increase and has the potential to grow in future.[310] By standardising certain provisions (e.g. establishing a common duration for the
switching procedure), Option 3B would complement Options 2 and 3A and help
create a cross-border switching service within the EU. It is therefore more
effective than Option 3A. Yet even though Options 2 and 3 facilitate
switching, they do not fully address the problem of potential errors occurring
when in/out payments by third countries are credited/debited to the wrong
account, resulting in delayed/missed (recurrent) payments. This issue is only addressed by
Options 4 and 5. Option 4 proposes redirection of payments.
Option 5 envisages the introduction of account number portability, so that
an account number is kept when switching accounts. Consequently, payments
credited/debited to an account will, by default, be sent to the correct/active
account. Both options can be implemented at a domestic (Variant A) or
European level (Variant B). The introduction of either of these options at
a national level would not facilitate cross-border mobility of consumers and
would have fewer positive impacts for payment account providers than if
implemented at a European level. Furthermore, the implementation of these
options only domestically could be counterproductive to any future steps at the
European level to further standardise switching services. Significant resources
would be deployed nationally to create infrastructure that might then be costly
to adapt to make it compatible with a pan-European system. Thus, the more
effective options – as well as those with potentially the greatest benefit to
stakeholders – would be European level implementation of these options. Even though both options would to a great extent reduce or even eliminate
misdirection of payments, account number portability would completely eliminate
consumer inconvenience arising from the need to communicate the new account
details to third parties, rendering switching more straightforward for
consumers. Therefore, when comparing Options 4B and 5B, the introduction of
account number portability (Option 5B) would be more effective. In terms of meeting the objectives,
Option 5B would be the most effective long-term option. Due to its technical
nature, this option could be implemented through either a self-regulatory
initiative or a legally binding approach with a number of regulatory technical
standards. At present there are no laws in Member States that could prevail
over any self-regulatory agreement, leaving the door open for a self-regulatory
approach. However, due to the high one-off costs of this option and the fact
that the significantly less costly and burdensome Common Principles were not
sufficiently applied on a voluntary basis, a legal obligation might be
necessary to achieve effective results. Table 16
assesses the impact of the individual policy options. || Consumers and society || Financial services industry || Member States || Non-financial service product providers 1. No action || 0 || 0 || 0 || 0 2. Ensure that the switching services follow the Common Principles || ü || û || û || ≈ 3. Improve the effectiveness of the Common Principles || || || || 3 (A) Improve the existing Common Principles || üü || û || û || ≈ 3 (B) Broaden the scope of the Common Principles to EU-wide cross-border switching || üüü || û || û || ü 4. Set up an automatic redirection service for all receipts and payments from an old to a new account || || || || 4 (A) Introduce a domestic automatic redirection service || üüü || ûûû || ûûû || ü 4 (B) Introduce an EU-wide redirection service || üüü || ûû || ûû || üü 5. Introduce payment account portability || || || || 5 (A) Domestic payment account portability || üüü || ûûû || ûûû || ü 5 (B) EU payment account portability || üüü || ûû || ûû || üü Table 16: Options
for payment account switching – Impact on main stakeholders Table 17 provides an overview of the estimated the costs and benefits of the assessed
policy options where the Commission was able to provide an estimate (even if a
broad one). Some types of costs/benefits have not been quantified or are not
quantifiable. A more detailed description of the methodology used and
assumptions made is provided in the methodological annex (Annex VI). Table 17: Options
for payment account switching - Comparison of costs and benefits Total EU benefits (million EUR) || Option 1 || Option 2 || Option 3A || Option 3B || Option 4A || Option 4B || Option 5A || Option 5B Consumer benefits: || || || || || || || || Changes in switching behaviour || 0 || 1 462 || 1 680 || 3 655 || 5 849 || 6 580 || 8 773 || 9 504 Reduction direct/indirect costs || 0 || Marginal || Marginal || Marginal || 1 284 || 1 427 || 1 284 || 1 427 Credit institution benefits: || || || || || || || || Cross-border cost savings || 0 || Not quantifiable || Not quantifiable || Not quantifiable || Not quantifiable || Not quantifiable || Not quantifiable || Not quantifiable Business opportunities || 0 Total EU costs (million EUR) || Option 1 || Option 2 || Option 3A || Option 3B || Option 4A || Option 4B || Option 5A || Option 5B Credit institution costs: || || || || || || || || one-off || 0 || 17-33 || 37 - 73 || 67 - 129 || 500-22 734 || 500-22 734 || 14 700 || 14 700 recurring || 0 || 229-396 || 853 -1 214 || 2 041-2 649 || Not quantified || Not quantified || Not quantified || Not quantified Member State costs: || || || || || || || || one-off || 0 || 3 || 3 || 3 || 3 || 3 || 3 || 3 recurring || 0 || 19 || 19 || 19 || 19 || 19 || 19 || 19 Option 5B
(EU-wide payment account portability) is the most effective, and if implemented
via a legal instrument, is likely to produce greatest benefit to consumers and
wider society in terms of cost efficiency. It would, however, also impose significant initial costs on
stakeholders, as it would necessitate either a renumbering of all account
numbers or the introduction of a comprehensive database linking each account
number to a virtual portable number. Consequently, one-off changes would need
to be made not only to payment account provider infrastructure, but potentially
also to other payment infrastructures linked to it. However, once the initial
renumbering was completed, consumer switching would no longer be an issue and
long-term consumer mobility
within the retail financial sector would be facilitated. Moreover, any
subsequent switches would not cause third parties to incur costs in as their
customer records would not need to be updated. Given that the use of direct
debits/credits is growing all over Europe, Option 5B is the best long-term
option. Its benefits would need to be weighed up carefully against the
technical issues behind modifications to payment infrastructures. For the time
being, however, an immediate implementation of this option seems
disproportionate to the identified problems. Option 4B introducing the EU-wide redirection service, which would be the next most
effective option, would be potentially less efficient and proportionate that
Option 5B. Not only are its estimated benefits lower – mainly due to the fact
that it does not achieve the same level of consumer mobility, it may lead to
even higher overall costs to industry. For both options, in order to correctly
assess all potential implications of these complex measures, further research
should be undertaken, analysing the opportunities and risks related to them. A
mandate could be given to the EBA to engage in further analysis with a view to
it elaborating a technically feasible and efficient way to introduce this
policy within the next three years. This would nevertheless meet consumer
demands for the Commission to conduct a deeper analysis before reaching any
decision.[311] As for the domestic variants of
portability and redirection services, an analogous analysis applies. It leads
to the conclusion that the next most effective option is Option 3B, as it aims
to ensure the cross-border application of the Common Principles, by specifying
explicit provisions making their application more consistent and
consumer-friendly. If implemented, consumers would be better informed and
better assisted by staff with regard to the switching process, in time gaining
the confidence to ask a 'new' bank to provide them with a switching service. This
increased confidence could encourage consumers to shop around for a better
product to meet their needs. Consumers would also find it easier to switch
provider cross-border. Payment account providers will incur one-off costs in adapting their IT systems and
business processes to comply with Common Principles, in complying with the new
cross-border dimension of the switching service, and in monitoring internal
compliance. They will incur costs in acquiring an understanding of the new
provisions, in training staff on switching process, and in updating
website/branch information to include information on switching. Overall these
one-off costs are estimated at between EUR 67-129 million. Providers
would incur recurrent costs relating to running the switching service and to
monitoring and reporting on compliance. Calculated on a 10-year basis, these
recurrent costs would be EUR 2 041-2 649 million. Even though the overall costs of this
option are substantial and are likely passed on to consumers, they are outweighed by the benefits. The benefits are estimated at
EUR 3 655 million and are calculated as the potential cumulative
cost savings by those consumers who actually decided to switch. These benefits
do not include the potential benefits to wider society. These benefits will
take the form of savings for consumers who do not switch, since they will also
benefit from a more competitive environment. Furthermore, payment account
providers will benefit from potential economies of scale realised within their
cross-border operations. They would also benefit from increased consumer
mobility and a more level-playing field if they wish to expand their client
base and/or enter new markets. Option 3B is likely to benefit
consumers more than it will negatively impact upon other stakeholders. By
significantly improving the functioning of the Common Principles, improving
these in areas that have been identified as problematic[312] and
broadening their scope to cross-border switching, customer and provider
mobility would increase, and competitive within retail financial markets would
be significant enhanced. Its implementation would represent an efficient step
towards better-functioning switching services across the EU and would lead to a
better integrated, functioning internal retail banking market that would allow
for more growth in the European economy.[313] The effectiveness, impact, costs and
benefits of this option will depend on the policy instrument via which it is
implemented. If a self-regulatory approach is chosen, all effects and impacts
are likely to be significantly
lower: there is a risk that the measures will not be implemented or, once
implemented, not sufficiently applied in practice due to a lack of enforcement.
As with the self-regulatory Common Principles (in place for three years),[314] a self-regulatory approach would not guarantee satisfactory
application; therefore a legally binding approach is preferable in meeting the
defined objectives. This conclusion was also drawn in Australia, where a
voluntary switching code was recently made obligatory within broader banking
reform.[315] Due to the generally principle-based
wording of the Common Principles, on which this option is based upon, even a
binding instrument could leave Member States with considerable flexibility in
implementing this option. Member States could define for example the extent of
necessary staff training, the
layout of information on the switching service, the exact content of the
information that needs to be submitted from the 'old' bank to the 'new' one, and
its format. A more standardised approach across the Member States would be
necessary for certain provisions (such as maximum length of the switching
procedure) relevant in particular, to the functioning of the cross-border
switching service. As this option would introduce provisions facilitating cross-border switching,
many stakeholders in all Member States would be affected. The extent of the impact would be
dependent on how far the Common Principles are already applied in practice.
Furthermore, the cost of implementing this option is directly linked to the
number of credit institutions which need to apply its provisions. Consequently,
other things being equal, Member States with a higher number of credit
institutions would be likely impacted more in total terms than those with fewer
ones.[316] On this basis, it has been assessed[317] that
the Member States affected most would be Bulgaria, Germany, Finland, Luxemburg,
Poland, Portugal, and the United Kingdom. Denmark,
Estonia, Malta and the Netherlands would be affected to a relatively small
extent whereas the remaining Member States would be affected to a medium
extent. 8. The preferred policy option and its impact The previous chapter presented the
analysis of the policy options' likely impact for the three areas this report covers. It considered the policy options for
access, transparency/ comparability and switching separately, determining the
sets of preferred options in each of the areas. In this chapter we analyse
different combinations of options for all the three areas together as a
'package'. As illustrated in Chapter 3, the
rationale for selecting a 'package' is strictly and fundamentally linked to the
general objectives. Only a combination of actions in these areas can establish
the right to a basic payment account to EU citizens, provide common standards
to ensure transparent and comparable bank account fees and make (cross-border)
switching of bank accounts easier. This package would enhance the functioning
of the internal market, ensure a high degree of equivalent consumer protection to all EU citizens and foster economic growth
alongside greater financial inclusion. As presented in Section 3.3, the stated objectives (see
Chapter 4) are strongly interlinked. Improved access would contribute to the
development of a single market for every EU citizen. Transparency and
comparability of fees are necessary to support improved access, but they also
facilitate demand for account switching. A properly functioning switching
service will enable citizens to reap the benefits of broader access and better
fee information. Combined, these objectives can enhance competition and lower
the barriers to cross-border demand. Yet no single policy option is able to
meet them all. A package that omits even one of these elements may risk creating a single market
that is not accessible to all EU citizens, entrenching market fragmentation,
endangering competition, and restricting efficiency gains. Action at EU level
to facilitate cross-border switching of payment accounts without accompanying
measures to enhance transparency/comparability or establish the right to access
in the Member States would be inefficient. Accordingly, there is a need for a
combined approach to the problems identified in this Impact Assessment. The preferred approach, combining the optimal solutions that emerged
from the analysis of three areas covered, will constitute one of the key
actions to re-launch the Single Market. It will strengthen cohesion and
consumer confidence, ensuring inclusive growth and offering opportunities based
on fair, robust and equitable rules for citizens and businesses.[318] 8.1. Comparison of different sets ("packages") of policy
options The table below presents distinct
packages of policy options, which do not comprise all possible combinations of
individual options. In particular none of the packages is composed exclusively
of options that were discarded in the individual analysis. The set of packages
presented below was determined by grouping options that reflect different
degrees of EU intervention. The first represents the 'no action' scenario;
Package 2 focuses on action solely targeting regulation in Member States'
domestic markets; Package 3 brings together the combination of preferred
options identified in each of the three areas when analysed on an individual
basis; and Package 4 combines options that would result in the greatest degree
of EU harmonisation. Table 18: Packages
of policy options addressing access, fee transparency and switching 1. No action options (No further action is taken at EU level.) || => Encourage Member States to implement the Recommendation; Commission would continue to monitor implementation; => No EU intervention on presentation requirements and enhanced comparability of bank fees; => EBIC Common Principles will continue to apply; (possible) voluntary initiatives to improve functioning and/or quality. Package 2 || => Binding measure ensuring the right of access to a basic payment account for national residents only (Option 3B); => Binding measure ensuring common quality requirements for transparency and comparability of bank account fees and comparison web-tools (Options 2, 4B and 8); and => Binding measure ensuring that switching services follow the Common Principles (Option 2). Package 3 || => Binding measure ensuring the right of access to a basic payment account for both residents and non-residents (Options 2, 4A and 4D); => Binding measure ensuring common quality requirements for transparency and comparability of bank account fees and comparison web-tools (Options 2, 4B and 8); and => Binding measure ensuring quality principles for payment account switching, including cross-border (Option 3B). Package 4 || => Binding measure ensuring the right of access to a basic payment account for both residents and non-residents (Options 2, 4A and 4D); => Binding measure introducing EU standardised forms for the provision of ex ante and ex post information on fees (Options 7 and 9); and => Binding measure setting up an automatic redirection service or EU payment account portability (Options 4B and 5B). The 'no action' scenario was
discarded in the analysis of each area (see chapter 7). As a result no further
assessment is made in this section. Package 2 would foresee a combination of options including the
establishment of a right of access to a basic payment account limited to
national residents (3B on "Access") and the proposal to render the
Common Principles legally binding, retaining their current focus on domestic
markets (2 on "Switching"). While this package may result in improved
compliance with the recommendation on access and the provisions of the Common
Principles, it omits cross border provisions in the areas of access and
switching. This would not tackle the problems identified in this report and
would be contrary to the stated objectives of this initiative. The full
potential of the single market would not be unlocked. In addition, the
combination of options would not be consistent with each other, given that the
options for bank fee comparison and presentation requirements do have a cross
border element. Package 3 contains the policy options identified in each
area as the most effective and efficient approach in addressing the problems
analysed in this report (see Sections 7.4, 7.5 and 7.6). On a cumulative basis
the three sets of options are complementary and do not result in diverging
impacts. This package does not suffer from the weaknesses of Package 2, since
it enhances the internal market, while allowing specificities in domestic EU
markets. Compared with Package 3, Package 4
proposes a higher level of EU harmonisation in the areas of bank fee comparison
and switching, proposing full EU harmonisation of bank fee terminology and an
EU-wide bank account portability or an EU-wide redirection service. In this case,
the EU approach would be disproportionate to the problems identified and
difficult to implement in practice. As a result Package 3
represents the sets of preferred policy options, as outlined in the table
below, to tackle the problems identified in this report. These options do not overlap, but would be
complementary, creating the synergies described below. The binding nature of
the proposed instruments would nevertheless permit flexibility to take account
of the differences in retail financial markets and would allow for monitoring
across the Member States. The replies to the public consultation have favoured
a balanced approach to addressing the problems identified. Most notably, all
categories of stakeholders have underlined that a gradual approach would be
more effective to achieving European harmonisation. Table 19: The
preferred package of policy options (1) Access || - Ensure application of the provisions of the Recommendation; - Improve the features of payment accounts, by enlarging the list of basic payment services to include internet banking and online purchasing and by ensuring that the features of the payment account are not of a discriminatory nature; and (2) Presentation and ease of comparison of bank fees || - A standard price list to be provided as part of account opening procedures, by identifying at EU level and supplementing nationally fees common to all Member States in order to cover the 20 most representative fees or at least 80% of key charges incurred; - Introduce the requirement to set up independent fee comparison websites at Member State level, which should fulfil specific quality requirements; - Introduce an obligation to provide consumers with ex-post information on fees incurred. The ex-post information would cover the same fee items as the ex-ante information; and (3) Switching || - Improve the effectiveness of the Common Principles and Broaden the scope of the Common Principles to EU-wide cross-border switching. 8.2. Cumulative
impacts and impacts on stakeholders Different methodologies were used for the analysis of the different
areas. The use of different methodologies enabled the analysis to focus more
closely on the relevant issues in each of the three areas and permitted the
interpretation of the data in a rigorous manner. The consequence of this
approach is that it is more difficult to aggregate the impacts of the
individual options and thus calculate the costs and benefits for the package.
Yet a fully integrated assessment of costs and benefits would have deprived the
analysis of necessary detail, particularly with regard to how the options
impact on stakeholders. Although it is not possible to fully
integrate the analysis of costs and benefits, some degree of integration was
possible. For example, a large number of cost items are common to more than one
option. Synergies in terms of time or resources for stakeholders may result
where all three options are introduced simultaneously, particularly with
transparency/comparability and switching taken together. Several types of cost
generated by the preferred package for credit institutions and Member States
are expected to be less onerous on a cumulative basis than the aggregate
amounts estimated for each option, (e.g. updating of IT systems and cumulative
recurring costs of additional compliance staff). Benefits are more clearly interlinked. There is limited benefit to
better fee information (e.g. in terms of enhanced competition), unless it leads
to switching, which requires efficient switching mechanisms. Switching cross-border
can only be effective if EU citizens' rights of access to a basic payment
accounts are guaranteed. The methodology used to assess the
efficiency of the options considers both quantified and non-quantified costs
and benefits to stakeholders,
as described in the ensuing section. Moreover, as regards access, a prudent
estimation of costs and benefits has been maintained. While the size of the
problem of access to a basic payment account is larger than was estimated in the previous Impact
Assessment,[319] the assumed scenarios (pessimistic, realistic, optimistic) remain
at the levels of the previous assessment. The tables below provide a disaggregated overview of costs
and benefits for the preferred approaches in the three areas. Total EU costs (million EUR/year) || Option 2 || Option 4A || Option 4D Consumer: || 108-542 || 22-108 || 22-108 One off costs || 0 || 0 || 0 Recurring annual costs || 108-542 || 22-108 || 22-108 Payments services provider: || 71-356 || 15-74 || 19-94 One off costs || Not || 0 || 0 Recurring annual costs || 71-356 || 15-74 || 19-94 Member State: || 3.02 || 0 || 0.38 One off costs || 1.13 || 0 || 0.14 Recurring annual costs || 1.89 || 0 || 0.24 Enterprise: || 0 || 0 || 0 Total EU benefits (million EUR/year) || Option 2 || Option 4A || Option 4D Consumer: || 542-2711 || 236-1179 || 68-339 One off benefits || Non quantifiable Recurring annual benefits || 542-2711 || 236-1179 || 68-339 Payments services provider: || 18-89 || 2-11 || -1.8 to -9 Recurring annual benefits || 18-89 || 2-11 || -1.8 to -9 Member State: || 18-89 || 2-11 || 2-11 One off benefits || Non quantifiable Recurring annual benefits || 18-89 || 2-11 || 2-11 Enterprises || 32-160 || 16-80 || 4-20 Recurring annual benefits || 32-160 || 16-80 || 4-20 Table 20: Access to
a basic payment account Table 21: Ease of
comparison of bank fees and requirements covering presentation and payment
account switching Total EU benefits (million EUR 2013-2022) || Option 2 || Option 4B || Option 8 Consumer benefits: Change switching behaviour Better account management Credit institution: Cross-border cost savings Business opportunities || 584.87 Not quantifiable || 731.08 Not quantifiable || 1 462.16 2 702.57 Not quantifiable Total EU costs (million EUR 2013-2022) || || || Credit institution: one-off recurring Member State: one-off recurring || 95.95-163.03 183.17-245.40 0.05-0.08 0.06-1.17 || 0.32-0.65 4.77-9.53 0.36-0.66 3.48-6.74 || 192.42-326.31 260.37-492.45 0.07-0.11 0.81-1.59 Total EU benefits (million EUR 2013 -2022) || Option 3B Consumer: Change switching behaviour Reduction direct/indirect costs Credit institution: Cross-border cost savings Business opportunities || 3 655.4 Marginal Not quantifiable Total EU costs (million EUR 2013-2022) || Credit institution: one-off recurring Member State: one-off recurring || 67 – 129 2 041 – 2 649 3 19 8.2.1. Impacts on stakeholders The preferred package should improve
consumer welfare in the EU. The measures on access (ensuring access to a basic payment account and to all basic payment means for both resident and non-resident
consumers) would reduce the number of unbanked
citizens. Consumers would benefit from improved access to different methods of
payment that reduce transaction costs and open the internal market (providing the possibility of making purchases online and using
internet banking services). They would be able to
access their funds more quickly, regardless of their geographic location; experience
an increased level of security through lower levels of cash transactions; an
increased choice of goods and services where electronic payments are
obligatory; the possibility to access employment and accommodation more easily,
and a reduced sense of financial, economic and social exclusion. Those willing to identify the most appropriate product would be able to obtain clear
and comprehensible information from any EU payment account provider, helping
them compare and evaluate offers. If they chose to move accounts, domestically
or cross-border, they would have a switching service their disposal. The
framework to ensure clear and comparable fee information, together with a
pan-European switching service, would create an efficient and competitive internal
market for payment accounts. This would lead to a general reduction in prices,
meaning that consumers could access the best product for them at the best
price. A strong positive effect on consumer
confidence would underpin demand for payment accounts and encourage consumer mobility both at national and
cross-border level. These lasting effects cannot be quantified due to the difficulty of modelling consumer behaviour. At present, recurring costs for consumers usually consist of account management fees and
charges for misuse of account facilities. In light of this initiative, which
would introduce enhanced transparency and comparability and a facilitated
switching process, consumers should understand the charges that exist for
different services and choose products that better fit their needs. The expected effects of competition would include cost efficiencies for credit
institutions (since they could implement the same IT systems, processes, staff
training procedures etc. in all Member States within which they operate,
resulting in economies of scale), easier market entry for foreign providers,
and greater potential for market expansion of competitive providers.
Non-quantifiable benefits for credit institutions would include: an increased
customer base to which to market other products (e.g. home insurance); the
reduced cost of and risks from cash based payments; and the benefits from a
contribution to capital and funding. The preferred package would, however,
impose costs upon credit institutions. Unique one-off cost items, where no
change is expected when options are assessed on a cumulative basis, include
costs incurred in filtering fee information and aggregating summary fee
information for the purposes of developing ex-post summaries of bank charges, and
the cost of developing standard fee lists. One-off costs may also arise due to
lost revenue where consumers switch to another provider. However, a large
number of cost items are common to more than one option: these include costs of
updating IT applications, internal communication and training costs, and
compliance costs for legal departments. Providers are projected to incur more
costs – or at least quantifiable costs – than benefits, in the short term.
These costs would be limited by several factors. First, some of the preferred
options have already been implemented in several Member States. For many banks,
efforts to adapt to the new framework would be limited; moreover, France,
Belgium and Italy already comply with the basic provisions of the Recommendation
on access to basic payment accounts. Second, substantial synergies are expected
between the different options. Each option’s estimated costs include training
expenditure, but in practice this training can be combined into one session.
Third, banks would be able to cover their costs by adjusting prices of payment accounts. Competition, promoted by
transparency and switching, could keep this adjustment to a minimum; it would
also open market perspectives to credit institutions throughout the Internal Market.
Fourth, the more accounts opened over time, the lower the incremental costs of
access, switching and transparency. Member States and society as a whole
would benefit from lower costs for social security payments or less fraud
related to benefit and tax (potentially implying lower taxes, e.g. less costly
local tax collection). More
generally, promoting competitive banking markets would improve the efficiency
of the single market, which, at a time of economic crisis, would be
particularly valuable. These benefits would reinforce each other improving and
stimulating consumer and business confidence thus stimulating growth. Member States would incur costs of (potentially) legislating or
implementing the elements of the new framework (e.g. managing the accreditation
process for comparison websites would cost from EUR 3.8 - 7.4 million from 2013
to 2022). These only need to be accounted for once (for the one-off costs). The
recurring costs of supervising and monitoring would, however, be cumulative:
more people would be required to supervise various different aspects of the
package. That being said, some synergies are likely. EU budget This proposal has no implication for
the budget of the EU or those of EU agencies.. EU businesses This package would benefit EU businesses significantly. They
are unlikely to incur any costs but could benefit substantially from improved
access to payment accounts. The preferred options would create the conditions
for a bigger market for their goods and services. Moreover, non-discriminatory
instruments and online facilities in relation to payment account services would
trigger a potential increase in cross-border trade. 8.2.2. Geographical impacts The impacts of the preferred package would be spread across the
territory of the EU. The extent of these impacts would depend on the actions
required. Table 22 provides a summary of the expected impact of each preferred option on Member States. Concerning fee transparency and switching, this assessment is based on a comparison of the current
regulatory and market conditions in Member States. Each preferred option is
assessed by itself: the impact on Member States does not consider the relative
weight of any option relative to another. For example, while the impact of
introducing an accreditation system for comparison websites represents the
lowest value within the package of preferred options in terms of quantified
costs to Member States, its impact is expected to be high in Luxembourg where
no comparison websites are currently in operation. In terms of access to basic payment
accounts, the assessment of the geographical impact of option 2 depends on
whether Member States have already introduced a framework on access and to what
extent it complies with the Recommendation on access. It can be assumed that
three Member States which already comply with the Recommendation (FR, BE, IT)
will not be impacted upon by the measures introduced under Option 2. The
greatest impact will be observed in the Member States which have not adopted
any measures on access at all (AT, BG, CZ CY, GR, LV, MT, PL, RO, SK, SL, and
ES), and a slightly smaller impact in those countries where an industry charter
or self-regulatory rules exist (DE, HU, IE, PT, NL, UK). The Member States
which have already introduced legislation on access – although it does not
fully comply with the Recommendation (DK, FI, LU, EE, LT, SE) – will experience
a smaller impact, since they will only need to adapt existing rules to the
provisions of the Recommendation. Since the account features provided
under Options 4A and 4D do not exist in any Member State access framework, it
is assumed that all the Member States will be impacted upon by these features
to the same, substantial, extent. Table 22:
Assessment of the impact of the preferred package on Member States Policy options || Impact on Member States Large || Medium || Small || No Impact || Access Option 2: Ensure application of the provisions of the Recommendation || AT, BG, CZ CY, GR, LV, MT, PL, RO, SK, SL, ES || DE, HU, IE, PT, NL, UK || DK, FI, LU, EE, LT, SE || FR, BE, IT Option 4A: Enlarge the list of basic services to include internet banking and online purchasing || AT, BG, CZ CY, GR, LV, MT, PL, RO, SK, SL, ES, DE, HU, IE, PT, NL, UK, DK, FI, LU, EE, LT, SE, FR, BE, IT || || || Option 4D: Ensure that the features of the payment account are not of a discriminatory nature. || AT, BG, CZ CY, GR, LV, MT, PL, RO, SK, SL, ES, DE, HU, IE, PT, NL, UK, DK, FI, LU, EE, LT, SE, FR, BE, IT || || || Ease of comparison of fees and requirements covering presentation[320] Option 2: Standard price list for 20 or most representative fees || EE, UK || AT, BG, CZ, FI, IE, LU, LV, MT, NL, PL, RO, SE, SI, SK, || BE, CY, DE, DK, EL, ES, FR, HU, IT, LT, PT || Option: 4B: Comparison web-site with accreditation scheme || LU || EE, FI, FR, HU, PT, SI || AT, BE, BG, CY, CZ, DE, DK, EL, ES, HU, IE, IT, LV, MT, NL, PL, RO, SE, SK, UK || Option: 8: Ex-post information provided by banks || || BG, CY, CZ, EE, HU, IE, IT, LT, LU, LV, MT, NL, PL, PT, RO, SE, SI, SK || AT, BE, DE, DK, EL,ES, FI, FR, UK || Switching3200 Option 3B: Broaden the scope of the Common Principles to EU-wide cross-border switching || BG, DE , EL, FI, LU, PL, PT,RO, UK || AT, BE, CY, ES, FR, IT, LT, LV, MT, SK, SL || CZ, DK, HU, IE, EE, NL, SE || 8.2.3. Social
impacts Society as a whole should benefit from economic development and
growth since "people with access to savings accounts or simple informal
savings technologies are more likely to increase productivity and income."[321] Facilitating access to and use of banking services in a universal
and habitual manner in the near future would also ensure further economic
growth, particularly in less developed EU countries where the retail banking
sector must advance. Discounts from reduced use of cash and cheques together
with an increase in electronic payments and online purchases would benefit
public administrations, the private sector and consumers.[322] Other positive impacts may include less fraud and tax avoidance
since payment transactions would increasingly take place through electronic
(and traceable) channels. Access and efficient use of basic
payment accounts is a key enabling service contributing to the overall success
of the EU active inclusion strategy. In this context, access to basic payment
accounts would enable the most disadvantaged to better use services that are
provided through the banking system (such as receipt of social assistance,
purchase of certain goods, etc.), as indicated in the European platform against
poverty and social exclusion, the Europe 2020 flagship initiative for inclusive
growth. 8.2.4. Administrative
burden Administrative costs are the costs incurred by enterprises, public
authorities and citizens in meeting legal obligations to provide information on
their activities either to public authorities or to private parties. They are
different from costs stemming from the substantive requirements of the
legislation, i.e. those setting, for instance, social and environmental
standards requiring changes in products or processes. No obligations are imposed upon
citizens in terms of reporting or providing information to other parties. The
preferred access options do not include any provisions relating to the
provision of information; rather, by ensuring that consumers have a right to a
payment account as set out in the Recommendation, it should actually reduce the
administrative burden placed on consumers who would no longer need to provide
as much documentation and evidence to open an account. For credit institutions, the main administrative burden would arise from an obligation to
provide information to both consumers (particularly potential customers) and
authorities (particularly supervisory authorities in the context of legal
compliance). An impact assessment accompanying the Recommendation on access to basic
payment accounts previously estimated the administrative burden for providers
at between EUR 0.34-0.66 million in one-off costs (including the preparation of
information materials) and recurring costs of EUR 6.4-12.8 million (including
providing consumers with information and providing authorities with information
on practices). The administrative burden on the
financial services industry may be reduced in some respects, since it would not
need to collect and analyse information from consumers before deciding whether
or not to provide an account. The administrative burden faced by Member States is considered to be limited and is
therefore assessed together with the general costs of monitoring and
supervising enforcement by the relevant national authorities. The preferred options for transparency
and comparability of fees focus on establishing standards and setting
requirements regarding the provision of information, which would inevitably
generate administrative costs. The main administrative burden would arise from the internal processes of credit
institutions being adapted to cater for information requirements for both
consumers and authorities. This comprises mainly the cost of adapting
information systems and materials. There would also be a cost for Member States
of organising and running public information campaigns concerning consumer
awareness of the right to access. Administrative costs would not be incurred by
credit institutions or Member States in the absence of legislation;
consequently, all administrative costs identified are treated as part of the
administrative burden. When expressed as a percentage of total
compliance costs, the administrative burden represents 24% - 29%.[323] Credit institutions would incur between 95% and 96% of this. While
the nature of the proposals inevitably gives rise to an administrative burden,
all possible means and available tools have been employed within the analysis
in order to remain consistent with the Commission's proactive approach to
reducing the administrative burden upon citizens, businesses and public bodies. A description of the methodology used to determine the
administrative burden is provided in Annex VI to this impact assessment,
together with a detailed breakdown of relevant activities and corresponding
costs. Table 23 below provides a summary of the amount of administrative burden
per stakeholder group. Total EU costs (million EUR) || Min || || Max || Total compliance || Administrative Burden || % || || Total compliance || Administrative Burden || % Credit institution costs: One-off: Recurring: Total credit institution costs: || 355.59 2,251.01 2,606.60 || 253.55 354.61 608.16 || 71 16 23 || 618.78 3,163.54 3,782.32 || 428.69 651.28 1,079.97 || 69 21 29 Website operators costs: One-off: Recurring: Total credit institution costs: || 0.32 4.77 5.09 || 0.32 4.77 5.09 || 100 100 100 || 0.65 9.53 10.18 || 0.65 9.53 10.18 || 100 100 100 Member State costs: One-off: Recurring: Total Member State costs: || 3.63 23.65 27.28 || 2.32 22.77 25.08 || 64 96 92 || 4.00 28.26 32.26 || 2.65 26.52 29.17 || 66 94 90 || || || || || || || Grand total || 2,638.97 || 638.33 || 24 || || 3,824.76 || 1,119.32 || 29 Share of total: || Credit institutions: Comparison website operators: Member States: || 95 1 4 || || Credit institutions: Comparison website operators: Member States: || 96 1 3 Table 23: Summary
Administrative burden expressed in terms of total compliance costs 8.2.5. Impact on small and medium-sized enterprises As noted in Chapter 1, this Impact
Assessment focuses on payment accounts held by consumers. It does not cover
payment accounts held by small and medium sized enterprises (SMEs), though it
is likely that SMEs would benefit substantially from this package while facing
minimal, if any, costs. Some SMEs, in particular sole traders or one person
companies, may not hold business accounts but rather run their businesses from
their personal payment accounts. No statistical data on the number of such
companies exists. Such enterprises would fall under the scope of this proposal
and would accordingly reap the related benefits. As reported by the World Bank:
"without inclusive financial systems, poor people must rely on their
own limited savings to invest in their education or become entrepreneurs—and
small enterprises must rely on their limited earnings to pursue promising
growth opportunities. This can contribute to persistent income inequality and
slower economic growth."[324] The
costs faced by such consumers/enterprises would most likely be limited to an
account management fee; however, given the increased competitive pressures in
the market resulting from this package, this is likely to fall long-term.
Further, as described in Section 7.1, businesses could
potentially benefit significantly from improved consumer access to electronic
payments, in particular from consumers being able to shop throughout the EU.
Moreover, non-discriminatory instruments and online facilities in relation to
payment account services would trigger a potential increase in both domestic
and cross-border trade. Small and medium-sized internet businesses are likely
to benefit considerably from a
higher number of banked consumers: there is a huge growth potential if more
people are able to pay online. The further development of this sector
could also help tackle unemployment problems in Member States, especially where
many young people are unemployed (e.g. Spain). Growing internet use will also
mean greater profits for larger companies who have already established online
sales channels. Finally, for businesses of all sizes, it would be cheaper to
employ people, since more salaries could be paid by electronic bank transfer,
thus avoiding costs of expensive cash or cheque transactions. 8.2.6. Other impacts With regard to the impact on third countries, the introduction
of rules in these three areas would not lead to discrimination against credit
institutions from third countries willing to offer their services in the EU, as
they would need to comply with the same rules. If the proposed options were
extended to the three European Economic Area countries which are not members of
the EU, the same impacts as described above would affect stakeholders in
Iceland, Liechtenstein and Norway. No direct impact on the environment can be
expected from the policy proposals. Indirectly, a reduction in the level of
cash in circulation resulting from increased use of electronic means of payment
via payment accounts could bring environmental benefits: an ECB study found
that the environmental impact of euro banknotes during their complete lifecycle
was the equivalent of each European citizen driving a car for one hour or
leaving a 60 watt light bulb on for half a day.[325]
Similarly, there would be reduction in the use of those chemicals used to print
euro banknotes. 8.3. Proportionality of the preferred options The actions entailed by the EU level
intervention are limited to those necessary to achieve the stated objectives.
The elements of the package are complementary and provide the right balance
between effectiveness in ensuring a fully functioning internal market for
retail financial services with a high level of consumer protection and due
regard to efficiency. Only binding legislation would ensure a level playing field throughout the EU, minimising
costs and maximising the scope for economies of scale for account providers
seeking to operate cross-border. Adopting binding legislation imposes an implementation burden for stakeholders in
terms of time and money. Member States' administrations would incur costs for
designing, implementing, transposing (in case of a Directive) and enforcing
legislation. However, while providers would face one-off and recurring
implementation costs, these would be similar to those incurred under a
Recommendation or self-regulation, if properly applied. The burden on Member
States resulting from the preferred package is most proportionate since the objectives would be met
without duplication of expenses or unnecessary administrative encumbrances (see
paragraphs 8.2.1, 8.2.2 and 8.2.4). A Directive permits flexibility in
implementation at national level and thus risks market fragmentation. However, it enables tailor-made solutions to
be designed to address national market specificities. Moreover, Commission
guidance or implementing measures may be used to limit variations in
implementation. A Directive could also allow for maximum harmonisation in some
areas and minimum harmonisation in others providing further flexibility. A Regulation allows for quick
implementation of fully harmonised measures. This would ensure a level playing field for both consumers and businesses
throughout the EU. It also offers a greater potential for private enforcement
as Regulations can be directly invoked by businesses and citizens before
national administrations and courts, whereas this can only be done in very
limited circumstances with Directives. While a non-binding approach would probably be less expensive for industry and Member
States, its value could be limited considering the current weaknesses in
self-regulatory and non-binding approaches attempted within the three areas, as
described above in Section 3.2. 9. Monitoring and Evaluation The proposed legislative package would
include a provision stating that a review of its appropriateness and
effectiveness in meeting the stated objectives should be carried out. This
review should take place a few years after implementation. For transparency of
fees and switching, Member States may be asked to provide information on the
number of switches on an annual basis as well as details on possible customer
complaints. Specifically for
access, the Commission will invite Member States to provide, on an annual
basis: the number of basic payment accounts opened; the number of applications
for basic payment accounts refused, including the grounds for refusal; the
number of terminations of such accounts; and the associated charges. The
Commission will monitor the features of basic payment accounts and verify that
Member States have undertaken adequate consumer information campaigns. Finally,
the Commission will evaluate whether cross-border access to basic payment accounts
is easily available to consumers without any unnecessary barriers at national
level. In order to assess
the implementation and effectiveness of the measures, it will be necessary to
improve the quantity of data available in the three areas. This could be
achieved, for example, through a public consultation, research, mystery
shopping exercises, questionnaires to stakeholders, and the monitoring of
consumer complaints. These would be conducted ahead of the scheduled review. Annex I
Policy Background 1. European Commission studies
and research 1.1. Quantification
of economic impacts of EU action to improve fee transparency, comparability and
mobility in the internal market for bank personal current accounts. This study was carried out in 2012 on the
Commission’s behalf by GHK. The study quantifies the economic impacts in terms
of costs and benefits of different policy options and presents them as net
changes to the baseline scenario. The tasks for analysis are broken down into
different sections according to the policy options being assessed. Fee
transparency and comparability is broken into options for ex-ante disclosure
(pre-contractual) and fee disclosures and ex-post fee disclosures. Switching
options cover actions to facilitate the process of switching in sections and
actions to render switching an error free process with respect to the execution
of payments and receipts. Unless otherwise stated, all references in
this impact assessment to quantified costs and benefits in the areas of bank
fees and switching are sourced from this study. 1.2. Behavioural
study on bank fees transparency and comparability and bank mobility This study was carried out in 2012 by TNS, on
behalf of the European Commission. The study focuses on issues related to bank
fees transparency, comparability and bank mobility. In an experimental setting,
the study investigated the impact of different policy options to improve
information provision on bank account offers and encourage switching. The study
was conducted through an online survey covering 10 Member States (France,
Germany, Italy, Ireland, Latvia, Netherlands, Romania, Spain, Sweden, and the
United Kingdom) and approximately 10,000 respondents. The study used survey
questions to collect information about personal finances, general perceptions
and understanding of information provision. The experimental part of the study
tested the degree to which people react rationally in response to a range of
information stimuli. While none of the approaches related to information
provision generated a significant impact on consumer behaviour, the study
provided important insights into consumer perceptions and awareness of costs. Due care was taken in making use of the
results of the study for the purposes of this impact assessment, in particular
by taking into account a number of relevant intervening factors. Firstly, the
study was carried out online, which implies that the sample included consumers
with above average levels of financial literacy, even though the sample is
statistically representative at national level. Secondly, an experimental
environment poses a number of constraints when recreating real-life consumer
choices. These include the absence of elements influencing decision-making in
the real life and which are specific to credence goods, such as
relationship-building and advice. Other elements that could not be
reproduced faithfully within an experiment setting relate to the impact of
branding or to the use of alternative distribution channels in online
purchases. 1.3. Consumer
Market Study on the consumers' experiences with bank account switching with
reference to the Common Principles on Bank Account Switching This study, carried out
on the Commission’s behalf by GfK was published in January 2012. The objective
was to monitor and evaluate the effectiveness for consumers of the
implementation of the Common Principles on Bank Account Switching (CP), in
addition to understanding the consumer experience when attempting to switch a
payment account. More specifically, the study was designed to evaluate
compliance with the CP in relation to the detailed elements of information and
staff facilitation of switching which can be physically examined in banks,
examined visually on websites and through oral and written communication with bank
staff. The conclusions of this report were that there is no consistency across
banks in the EU in terms of the timescales taken to switch a bank account. Mystery shopping is a technique used widely
for checking the performance of traders or service providers towards consumers.
Though not representative, it illustrates the experience of real consumers by
replicating situations they encounter while purchasing goods or services.
Mystery shoppers are carefully selected so that they match relevant consumer profiles.
Their tasks can range from simple observation to more complex interaction
involving role play to assess compliance, weaknesses in procedures or quality
of service Mystery shopping is mostly conducted face-to-face, by telephone or
online. Results of a mystery
shopping survey can be a rich source of information not only for business
operators, but also for policy makers, because they complement the picture of
consumer conditions. They are often also the single most effective means to
monitor compliance with detailed rules and regulations. 1.4. Data
collection for prices of current accounts provided to consumers This study was carried
out by Van Dijk Management Consultants with the Centre for European Policy
Studies (CEPS) and was published in 2009. The purpose of the study was to
determine the transparency of fees charged in the context of having and using a
payment account; to compare prices for the services linked to a current account
and finally analysing the underlying factors behind price differences within
and across Member States. Overall, the study improved the knowledge of the
market of retail payment services in the 27 EU countries. First, it provided a
detailed collection of the prices of accounts, packages and operations for 224
banks covering on average 81% of the EU market and representing the diversity
of institution categories. Second, for each country and for the EU27 as a
whole, it developed four categories of user profiles, i.e. average, active,
passive and basic. Third, it matched prices and user profiles to produce
'priced profiles' to analyse dispersion of offers within countries and draw
comparisons between countries. Fourth, it provided an assessment of the
transparency and comparability of prices for consumers. Moreover, the study highlighted
a major hindrance to carrying out monitoring: to create the profiles, there was
a lack of consistent data covering all the services targeted. Finally, this
study played a very important role in the context of the improvements
introduced by the Single Euro Payments Area (SEPA) to the market of payments. 1.5. Sector
Inquiry into Retail Banking In June 2005, on the basis of a number of
indications of market fragmentation, entry barriers and lack of effective
choice on the demand side in retail banking, the Commission launched a sector
inquiry into retail banking, which covered the issue of customer mobility. In
January 2007, the Commission published its final report, referred to as
the 'sector inquiry' throughout this impact assessment.[326] The
sector inquiry identified four sources of switching costs that are likely to
reduce the ability of consumers to switch payment accounts: administrative
burden, information asymmetry and low price transparency, bundling and tying
and closing charges. The conclusion of the inquiry on the issue of customer
mobility was that "proportionate steps to reduce switching costs will
enhance competition in retail banking."[327] 2. Expert
Groups 2.1. Expert Group on Customer
Mobility The Expert Group on Customer Mobility In
Relation To Bank Accounts was established in May 2006 and was tasked with
identifying existing obstacles to customer mobility in relation to payment
accounts and providing recommendations on how the obstacles identified should
be addressed – the Group however was not asked to measure the impact of its
recommendations. The Group included 19 experts selected in a personal capacity,[328] coming from the banking sector, consumer organisations and
academics but without necessarily representing the views of their respective
organisations. The Expert Group met 9 times during 2006-2007. The Report of the
Expert Group was published in June 2007. The Group’s members’ views diverged on
most issues, e.g. the very fact that customer mobility is an issue to be
addressed or the relevant context for analysing this issue, such as the impact
of the Union single payments market, consumer behaviour and bank strategies. Concerning account switching, the Report
proposed 9 recommendations (with varying levels of support from the Group) to reduce
information asymmetry and improve price transparency, 10 recommendations (some
unanimous, some not) to reduce administrative burden that consumers may face
when wishing to switch accounts, 3 recommendations (with varying levels of
support from the Group) to address the issue of closing charges, while no
consensus was found on tying and bundling. With respect to cross-border opening of
accounts, the Report recommended that the Commission look into existing legal
and regulatory barriers and contained 6 recommendations (with varying levels of
support from the Group) to address information barriers and uncertainty as well
as 3 recommendations (with varying levels of support from the Group) to improve
access to accounts for non-residents. The report was opened for consultation in
June 2007. All responses to the consultation authorised for publication were
published on the internet.[329] A report summarising the feedback received in the consultation was
also published on 20 November 2007.[330] 2.2. Government Expert Group on
Retail Financial Services The Government Expert Group on Retail
Financial Services (GEGRFS) was established in 2007 and comprises Member State
government experts. Its role is to assist the Commission in the development of
its policy on retail financial services, including cross-sectoral issues.
GEGRFS has discussed issues relating to payment accounts on several occasions
since its establishment. Access to basic payment accounts has been discussed 7
times (June and September 2007, June 2008, June 2009, November 2010, and March
and September 2012). Switching of payment accounts has been discussed 7 times
(June and September 2007, June 2008, June 2009, November 2010, and March and
September 2012). Bank fee transparency has been discussed five times (June
2007, November 2009, November 2010 and March and September 2012). 3. Previous
public consultations 3.1. Public consultation on access to a basic
payment account (2010) On 6 October 2010, the European Commission
published a consultation document[331] on access
to a basic payment account and invited stakeholders to respond. The objective
of the consultation was to collect stakeholders’ views on the envisaged
measures on access to a basic payment account in order to strengthen and deepen
the Commission services’ understanding of the appropriate policy options in
this field. Stakeholders were invited to express their opinions and positions
on the principle of a European harmonised framework aiming at guaranteeing
the right for consumers to access a basic payment account. In total,
contributions were received from stakeholders in 19 Member States as well
as from representative bodies at EU and international level. The consultation allowed the identification
of some key messages from stakeholders. First, the financial industry was
generally against a binding EU instrument in this field, arguing that such an
initiative would not add value compared to what has already been developed and
what could be realised at national level in a dialogue with the industry. Second,
consumer representatives were supportive of an initiative that will ensure
effective access for all consumers to an account with a sufficient range of
functionalities likely to enable them to live a normal life. They favour an EU
level proposal which would introduce only minimum standards, leaving
Member States free to adapt them in line with local conditions and
consumers’ needs. Third, both national public authorities and financial
industry tend to consider that the compliance with customer due diligence
requirement is a matter of the utmost importance. The issues for which
there was the most consistent cross-stakeholder approach vis-à-vis possible EU
action was the acknowledgment that access to a payment account is highly
desirable for the widest possible part of society is important and the need to
ensure that any EU initiative would allow sufficient flexibility at national
level. 3.2. Consultation
on financial inclusion (2009) On 6 February 2009, the European
Commission published a consultation document on financial inclusion: ensuring
access to a basic payment account and invited the stakeholders to respond by 6
April. The objective of this consultation was to collect views from all
stakeholders on how financial inclusion can be improved and, more specifically,
on how best to ensure that by a certain date, every EU citizen or resident had
access to a basic payment account. The Commission services in particular
welcomed input on how the responsibilities and competences between the public
authorities and the private sector and more broadly between the national and
the European level, should best be shared to address financial exclusion, and
on what instruments could be used. The scope of the consultation was limited to
access to basic payment accounts, which include services such as payments and
withdrawals but excludes overdraft facilities. The European Commission received
97 responses to the public consultation. The respondents can be classified into
seven main categories: public authorities, consumers/users, financial services
industry, trade unions, civil society organisations, academics/think tanks, and
individuals/others. In total, contributions were received from stakeholders in
20 EU Member States as well as from representative bodies at EU and international
level. In general, most respondents thought that
access to a basic payment account was considered necessary for fully
participating in society. It was recognised that financial exclusion
contributes to social exclusion and that denying access of some persons to
basic financial services opens a gateway to denying them a host of other
fundamental, social and economic rights. It was also accepted that financial
exclusion is increasingly a problem in the EU, and considering the important
societal role of financial services, the level of financial exclusion in Europe
is alarming. Many respondents agreed that increasing numbers of people are
likely to be affected as a result of the financial crisis, and welcomed the
priority that the Commission gives to this public policy challenge that the EU
is currently facing. Access to a basic payment account was viewed by many as
the most urgent issue to be tackled, while other financial services, e.g.
savings, insurance or credit, could be looked at in the future. 3.3. Consultation
on the report of the Expert Group on Customer Mobility (2007) A public consultation on the above-mentioned
Expert Group's report was held from 5 June until 1 September 2007. Part of the
banking industry, mostly from Member States where some measures to facilitate
customer mobility are in place, together with consumer representatives and some
other respondents, agreed with the Commission that customer mobility is one of
the factors determining the intensity of competition and therefore is an important
pre-requisite for well-functioning retail banking markets. The latter group of
stakeholders was generally supportive of facilitating customer mobility across
the EU, but stressed the importance of focusing on the easiest and most
cost-effective ways to do so. In terms of measures to facilitate the process of
payment account switching, the introduction of switching services was
considered acceptable to most of the stakeholders. 4. Commission
Policy Statements 4.1. Single Market Act The Bank Account
initiative is one of the priority actions of the Single Market Act II (SMA II),
adopted by the Commission on 3 October 2012 in order to deliver inclusive
growth without discrimination, allow for economic and social participation and
spur territorial cohesion. In particular, key action 12 of the SMA II announces
Commission legislative proposals to "give all EU citizens access to a
basic payment account, ensure bank account fees are transparent and comparable,
and make switching bank accounts easier".[332] The SMA I, adopted by the
Commission in April 2011, already called for enhanced protection of consumers
of retail financial services "with particular regard to the
transparency of bank fees and better protection of borrowers in the mortgage
market". The Commission had also announced "an initiative
concerning access to a basic payment account for all citizens at a reasonable
cost, wherever they live in the EU" in order to enable all citizens to
participate actively in the single market.[333] 4.2. Monti
Report The new strategy for the Single Market (2010
Monti report) underlined the importance of improving "the transparency
of bank fees, ensure the availability of standardised and comparable
information for retail financial products and facilitate bank customer mobility".
The report also recognised the importance of access to basic banking
services. The lack of basic banking services prevents a relevant number of
European citizens from effectively accessing the Single Market. The report
called for a Commission legislative proposal ensuring that all citizens are
entitled to a number of basic banking services. In this way, the EU framework
for financial inclusion would complement the ongoing comprehensive reforms of
financial services regulation at EU level, thus allowing an important part of
the population, in particular in the new Member States to reap more fully the
benefits of the Single Market.[334] 4.3. Single
Market Review In November 2007, on the basis of the
feedback received, the Commission published its Communication on a single
market for 21st century Europe.[335] This
was accompanied by a Commission staff working document on initiatives in the
area of retail financial services,[336] where
the Commission announced its intention to invite the banking industry to
develop, before mid-2008, a set of common rules on payment account switching (switching service), to be applied by banks in each Member
State when customers switch at national level. Such switching service
should facilitate the operation of switching by, for example, ensuring that
direct debits and standing orders are transferred within a certain deadline to
the new bank, that proper information is given to the customer and that there
is adequate cooperation between both banks involved. The Commission also made
it clear that the rules should be designed on the basis of the best practices
already existing in Member States. It also indicated that, should the banking
industry fail to set up adequate arrangements, legislation would be considered. 4.4. Green
Paper on Retail Financial Services In April 2007, the Commission published a
Green Paper on Retail Financial Services in the Single Market, in which
stakeholders were invited to reflect on how customer mobility could be
enhanced. While consumer representatives argued that a number of barriers
needed to be addressed, the banking industry was less convinced, but argued
that, were measures to facilitate customer mobility to be taken, switching
services would be the most appropriate way to do so. Member States generally
acknowledged that there were barriers to customer mobility that needed to be
addressed. 5. Feedback
from EU Institutions 5.1. European
Parliament 5.1.1. Resolution
on Access to Basic Payment Accounts On 4 July 2012, the European Parliament
adopted an own initiative report, drafted by MP Jurgen Klute, with
recommendations to the Commission on Access to Basic Banking Services.[337] The report underlines that access to basic payment services is a
precondition for consumers to benefit from the internal market and to reap the
opportunities of e-commerce. It also ensures better inclusion in terms of
access to employment, healthcare and housing. The report points out that it
should be the right of consumers and not an obligation to open a basic bank
account. The report highlights particular difficulties
of migrant workers to access a basic payment account in another Member State,
which obstructs the proper functioning of the internal market. It also suggests
that anti-money laundering legislation should be applied in a justified manner
and should never be used as an excuse by providers to reject a consumer’s
application. The Parliament insists on a basic payment account to be provided
free of charge or at low cost to any consumer who does not already have an
account in that Member State. In addition, fees and charges imposed by
providers must be proportionate and reasonable. Furthermore, providers should
check the consumer’s regularity of income, credit history, level of
indebtedness or expected turnover in order to grant access to a basic payment
account. The report also provides for management services and standard payment
services which should be made available together with the basic account. It
also invites Member States as well as payment services providers to inform consumers
about the availability of a basic payment account. Moreover, Member States
should designate competent authorities, with powers of sanction, to ensure
appropriate monitoring and enforcement of rules on access to a basic payment
account. The report proposes complementing legislation
on access to a basic payment account with a legal initiative on transparency
and comparability of bank fees, and facilitating switching of payment accounts.
The Commission proposal should also improve seller’s acceptance of different
payment methods in order to allow for easier internet shopping, further clarify
anti-money laundering rules and enhance financial education which, as argued by
financial industry, can help tackle financial exclusion.[338] The report invites the European Commission to submit a relevant
proposal of legislation by January 2013. 5.1.2. Resolution
on vulnerable consumers On 22 May 2012, the European Parliament
adopted an own initiative report, drafted by MEP Maria Irigoyen Perez, on a
strategy for strengthening the rights of vulnerable consumers. This report
assumes that all consumers are susceptible to becoming vulnerable consumers
over the course of their lives, since vulnerability can result from endogenous
as well as exogenous causes. The report asks that EU legislation address the
problem of vulnerability among consumers. It also underlines the importance of
improving consumer education and information but notes that information alone
does not fulfil its consumer protection function, especially in certain sectors
and clearly in cases of vulnerability. The report asks that appropriate and
effective measures be taken in sectors not covered by Directive 2011/83/EU,
where a particular vulnerability may exist, such as the financial sector. The
report notes that in international fora the need to protect consumers through
information and regulation of the financial markets has been recognised. The
report also highlights that the complexity of these markets may lead consumers
into excessive debt and stresses that more needs to be done by the financial
services industry to provide clear and simple explanations about the nature of
the products and services they provide, and calls on all stakeholders to
develop effective financial literacy programmes. 5.1.3. Resolution
on the contribution to the Annual Growth Survey 2012 The European Parliament
Resolution on the contribution to the Annual Growth Survey 2012, adopted in
plenary in February 2012,[339] stressed that access to basic banking services
remains a key factor for social inclusion and therefore encourages the
Commission to take bolder action to guarantee this access. 5.1.4. Resolution
on a single market for Europeans In its Resolution on a
single market for Europeans,[340] the European Parliament called
on the Commission to submit by June 2011 a legislative proposal on guaranteeing
access to certain basic banking services and to improve the transparency and
comparability of bank charges by the end of 2011. 5.1.5. Report
on the Green Paper on Retail Financial Services and the Sector Inquiry into
Retail Banking On 5 June 2008, the
European Parliament adopted a Report on the Green Paper on Retail Financial
Services and a Report on the Sector Inquiry into Retail Banking. According to
the European Parliament, consumers who wish to change financial service
provider must be free to do so at any time, with minimum legal barriers and
costs involved. The Parliament encouraged the Commission to facilitate customer
mobility without, however, leading to a reduction in the level of consumer
protection in the Member States. The Parliament also encouraged the banking
industry to develop best practices for swift and efficient account switching,
taking into account the duration of the procedure and the costs associated with
it. 5.2. Council In December 2011, the
Competitiveness Council adopted its conclusions on the results of the Single
Market Forum. On the 20 main concerns of the Single Market (par.25), the COMPET
Council calls on concrete follow-up, in particular through in-depth examining and
appropriate steps to be taken to ensure progress on these problematic areas.
Two of the main concerns related to access to basic payment account and
transparency and comparability as well as switching of payment accounts. 5.3. European
Council The conclusions of the
2012 March European Council welcomed the Commission's intention to propose in
the second half of this year a new round of measures designed to open up new
growth areas in the Single Market. In this connection, the European Council
stresses the importance of completing the Single Market and removing remaining
barriers. It is essential that EU
actions aim to promote growth and solidarity in line with Europe 2020.
Restoring sustainable growth and job creation requires positive action at EU
and national levels to support competitiveness and social inclusion. 5.4. European
Economic and Social Committee (EESC) The EESC has issued several reports
mentioning issues related to payment accounts.[341] In
general, they agree that retail financial services represent one of the areas
where the greatest shortcomings in the operation of the single market have been
observed.[342] 5.4.1. Access to a basic payment account In the past, the EESC agreed with the
Commission on the importance of having access to a payment account in modern
economies.[343] More recently, in the context of efforts to improve the single
market for retail financial services, the EESC welcomed the Commission's
initiative to improve access to basic banking services.[344] On
financial inclusion, the Committee also highlighted that financial institutions
should take on the role of facilitating access to banking services for the
poor, to prevent financial exclusion. It added that it is important to promote
initiatives that foster the financial inclusion of sections of society that are
at high risk of exclusion (women, the unemployed, people with disabilities, the
elderly, the poor, etc.) by ensuring universal accessibility and developing
financial products and services that are tailored to these groups.[345] 5.4.2. Ease
of comparison of bank fees and requirements covering presentation The EESC feels that transparency is crucial
when interacting with consumers and that it is key in the process of winning
back consumer confidence in the financial services industry post-financial
crisis.[346] The EESC shares the Commission's concerns regarding transparency of
banking conditions. They have mentioned that differences in prices and price
formulas often result in information asymmetry and make it difficult to compare
prices. According to the EESC however, consumer information must take into
account cultural diversity, i.e. information requirements must be geared to the
different national situations.[347] The
EESC welcomed the Commission's initiative to improve the transparency and comparability
of bank charges.[348] 5.4.3. Payment account switching The EESC considered that the Commission's aim
to remove obstacles to the mobility of cross-border accounts was commendable
and could contribute to lowering bank charges.[349] The
EESC has also stated that the adoption of a single European account number
would carry enormous costs that would be totally unjustified and that would end
up being paid for by consumers. According to the EESC, transferability should
refer to all the transactions linked to the account, such as standing orders,
direct debits or securities accounts, but certainly not to the account number.[350] Annex II
Access to basic account services 1. Problems 1.1. General
problem: restricted access to account services 1.1.1. Large
number of unbanked Europeans The number of consumers with no payment
account is difficult to estimate. Much of the data available is not comparable.
However, research estimates the number of EU
citizens with no payment account at between 30 and 68 million according to two
Eurobarometer surveys from 2009 and 2011 respectively.[351] At
the same time, calculations based on World Bank data put the figure at 56
million in 2012.[352] A 2009 Eurobarometer survey found that there were around 30 million unbanked
Europeans over the age of 18.[353]
Calculations based on a 2011 Eurobarometer survey,[354]
however, put the number of Europeans over the age of 15 without a payment account at more than 68 million. Differences between the 2010 and 2012 calculations can be attributed
to the different questions asked. In 2009, the question referred to having a
'bank account' and, in 2011, to a 'current bank account'. Moreover, both these
calculations likely underestimate the number of persons without an account:
they are based on representative surveys of the general population and
volunteers; vulnerable groups of society are typically unlikely to participate
in surveys. Conversely, it should be noted that this figure may include a very
slight over-estimation since it does not factor in people having joint
accounts. National data also exists, but is fraught
with similar problems. For instance, according to
recent reports, 1.54 million adults do not have access to a 'transactional' payment account in the United Kingdom[355] and 96% of 'financially weaker' French households do not have
access to a 'deposit' account.[356] 1.1.2. Levels
of exclusion from basic account services vary between Member States Account penetration is diverse. The percentage of the population having a current account per
country as of 2011 is displayed in Graph III in the main impact assessment
report. The different levels of payment account
penetration across the EU mean that the extent of the problem and the probable
impact of the presented policy options vary considerably. The number of consumers with no payment
account varies from 45% and 53% of the population in Romania and Bulgaria
respectively to close to 100% in Scandinavia (see Graph 2A). In terms of
volume, the most consumers without accounts are in Italy and Romania with more
than 13 million citizens over the age of 15 without payment accounts, while
Denmark and Luxembourg have the fewest number of consumers without accounts
(See Table 2.A). 1.1.3. Evolution
of the number of unbanked Europeans No robust statistical data is available to analyse
the number of unbanked Europeans over time. The only time-series data available
is from Eurobarometer for which a survey question on whether the consumer held
an account was included in both the 2005 and 2011 surveys. Nevertheless,
differences in the question asked are so large that any comparison is
meaningless. Whereas the 2011 survey asked about consumer holding of current
accounts, the 2005 survey asked two questions, one on the number of accounts
with a cheque book and/or debit card attached and one on the holding of deposit
accounts.[357] Nevertheless, some data on the number of
Europeans who have opened an account in the last 5 years is available from the
Eurobarometer survey: "over a quarter of those who own any financial
products have opened a current bank account in the last five years in just four
Member States: Romania (37%), Latvia (36%), Bulgaria (33%) and Lithuania (27%)
which demonstrates that bank accounts market has been steadily growing in new
Member States".[358] Moreover, according to data provided by
Romania and Bulgaria there has been an increase in the number of basic payment
accounts opened in 2011; 652 107 accounts were opened in Bulgaria and
3 767 356 in Romania.[359] It is
not possible to draw firm conclusions from the Eurobarometer data; first, it
does not account for multi-banking, and second, it does not account for
population growth, changes in demographic structure, and other relevant
factors. With respect to the numerical data from Romania and Bulgaria, similar
concerns apply. Graph II.A: Payment
accounts opened in the last 5 years (%) 1.1.4. Are
there alternatives to payment accounts? In the current increasingly online world, the
role of payment accounts is changing. It is therefore important to ask whether
access remains important or whether alternative means of payment could be used. With the advent of the internet, a range of
products which act as substitutes to payment accounts is emerging. In the
developing world, online/mobile services, such as M-Pesa in Kenya, act like a
parallel banking system allowing phone users to send and receive money through
agents.[360] Similarly, in the EU, mobile payment systems are increasing in
popularity. For example, Paypal has for several years operated an online
payment mechanism. However, there are also an increasing number of competitors
such as the Google Wallet, which is integrated to a consumer's mobile
phone, linked to a consumer's credit card and can act as a payment instrument
via the phone. [361] Globally, e-payments and m-payments collectively accounted for an
estimated 22.5 billion transactions in 2010.[362]
Furthermore, e-payments (online payments for e-commerce activities) are
expected to grow globally to 30.3 billion transactions from 17.9 (in 2010-13),
while m-payments are expected to grow globally to 15.3 billion transactions
from 4.6 billion in the same period.[363] However, these alternatives are insufficient
substitutes to payment accounts. Prepaid payments or online payment mechanisms
are set up in such a way that the consumer needs, in the majority of cases, to
have a payment account to make transfers from in order to pay/charge such cards
or even a credit line (many telephone accounts are defined as consumer credit
as the transactions involve a deferred credit unless prepaid cards are used).
Consequently, many of the most vulnerable consumers may have difficulties in
accessing or obtaining such payment instruments. Furthermore, despite the
increasing popularity of e-payments or m-payments, such payment mechanisms
still count for an extremely limited stare of the market (See Graph I in the
Impact Assessment Report). 1.1.5. Why
do many consumers not have a payment account? A 2011 Eurobarometer survey[364] found that the main reason (56%) not to have an account was that
the person did not need or want to have one. This percentage was higher in the
New Member States (67%) and lower in the EU15 (45%). The survey also showed
that "older respondents are more likely to say they do not need or want
a bank account", as well as those people who "spent less time
in education". Against this background, it is estimated that 25
million[365] consumers do not have an account but would like one. 33% (10
million consumers; of which almost 4 million are in Romania) of those without
an account in EU 12 and 55% (15 million consumers, of which more than 7 million
are in Italy) of those without an account in EU 15 would like one. Graph II.B: Reasons why consumers do not
have payment accounts Source: 2012 Eurobarometer Other reasons for not having a payment
account include consumers being too young or their use of another person's
payment account, but there was also a significant number of applicants who were
refused access. It is estimated that almost 3 million consumers who would
like an account have been refused access to one.[366] These
figures range from 0 in Denmark to over 1 million in Italy.[367] The reasons for refusal are: no regular income, incorrect
documentation, no credit history and non-residence. Graph II.C: Number
of refusals to open a payment account and reasons why Source Eurobarometer 2012 1.1.6. Main
categories of consumers with difficulties in accessing a basic payment account Accessing a payment account is particularly
difficult for two main population groups: 'vulnerable' consumers and 'mobile'
consumers who are active cross-border. This observation has been explicitly
confirmed by the European Consumer Organisation BEUC in their feedback to the
consultation on bank accounts.[368] ·
Vulnerable consumers are discussed in recent
legislation but have not been defined.[369] They
are described as consumers who are particularly vulnerable because of their
mental, physical or psychological infirmity, age or credulity. This impact
assessment considers consumers living on low incomes to be vulnerable: they are
often excluded financially.[370] This
is a significant part of the EU population. ·
Mobile consumers. Consumers move
cross-border for various reasons including for work, study or retirement.
Amongst those, migrant workers are probably the largest group. ·
Based on the feedback collected by the
Commission, it is assumed that those who become resident in a Member State face
fewer problems in accessing an account.[371]
Consequently, according to calculations by Commission services, the mobile
population that faces difficulties in accessing basic account services is
estimated at 3.5 million or approximately 6.25% of those without a payment
account.[372] It should be noted that some providers recognise that migrant
consumers represent a business opportunity and prepare special offers, such as
for foreign students.[373] Box I: Data on mobile consumers: Erasmus and other cross-border
students It has become increasingly easy to travel and study in another EU
country.[374] In 2010, there were 581 400 students
(including 231 410 Erasmus students[375]) enrolled at universities in another Member State. A payment account in the country where they are studying is
indispensable. Students who are not residents often receive financial support
from their families at home. A payment account is the easiest and the cheapest
channel for these resources to be transferred without paying excessive fees to
cash the money. In addition, it can be difficult to rent an accommodation
without a payment account as, e.g. in some German universities, rent in a
student dormitory can only be paid for by means of a standing order.[376] It is also no surprise that foreign
students need to travel home from time to time and the easiest and the cheapest
way of doing so by flying with a low cost air carrier. However, to buy a ticket
without excessive intermediary costs, a student will need a payment account to
be able to pay over the internet by bank transfer or credit card. In March 2012, the Commission launched a survey of Erasmus and exchange
students from EU Member States to check whether they encountered any
difficulties in opening a bank account while studying abroad. Out of the total number of ca. 600 000 EU students enrolled at foreign universities in another EU country[377] 4 864 of them responded to the survey, of which
there were 4 352 Erasmus students, 253 students of other exchange
programmes and 259 national students conducting their studies in their country
of origin. The latter group is excluded from all subsequent data as they were
unable to complete the questions. The total number of mobile students who
responded is therefore 4 605. Students from all Member States with the
exception of Malta took part in the survey. Graph II.D: Responses by country of origin Each of the 27 Member States was mentioned at least once as a
destination where respondents carried out the Erasmus or another exchange
programme. Graph II.E: Member States where respondents carried out Erasmus or other
exchange programmes. 2507 (54%) students tried to open a bank account while 2 098 (46%)
students did not attempt to do so.[378] Although
the majority of students found it relatively easy to open a payment account, a
number of students faced difficulties. From those who tried, 1646 (66%) students found it
easy, 694 (28%) considered it burdensome and 167 (7%) failed to open a bank
account.[379] 373 students who found the process burdensome responded that it took a
long time; for 294 it meant too much paper-work, while another 375 respondents
indicated that too many documents were required.[380] Finally, of the 167 students who were refused an
account, 95 (57%) were rejected due to "not being a national resident",
while the remaining 72 (43%) indicated other reasons for refusal (not
specified).[381] The reasons for not opening an account were that it took too long (54.9%
of those who did not open an account) and/or too many documents (54.6% of those
who did not open an account) and/or too much paperwork was required (42.8% of
those who did not open an account). 1.2. Specific
problems The reasons why consumers face difficulties
in accessing a payment account vary. 1.2.1. Ineffective,
inconsistent or non-existent regulatory framework Despite Member States being asked to comply
with the Recommendation by January 2012 and a Commission review being announced
for mid-2012, as illustrated by the report on the application of the
Recommendation,[382] regulatory failures have made the Recommendation's application
sub-optimal. Table 2.A: Recommendation on access to a basic payment
account Member States || National frameworks implementing the Recommendation || No framework in place Legislation || Self-regulation Yes || Partially || Yes || Partially Austria || || || || || X Belgium || X || || || || Bulgaria || || || || || X Cyprus || || || || || X Czech Republic || || || || || X Germany || || || || X || Denmark || || X || || || Estonia || || X || || || Greece || || || || || X Spain || || || || || X Finland || || X || || || France || X || || || || Hungary || || || || X || Ireland || || || || X || Italy || X || || || || Lithuania || || X || || || Luxembourg || || X || || || Latvia || || || || || X Malta || || || || || X The Netherlands || || || || X || Poland || || || || || X Portugal || || X || || || Romania || || || || || X Sweden || || X || || || Slovenia || || || || || X Slovakia || || || || || X UK || || || || X || Source: European Commission analysis of
Member States' reports In general, countries
with a legal framework in place have lower levels of exclusion than those that
have a self-regulatory framework or have no data at all (See Graph II.B) though
the financial services industry argues that “there is no proven correlation
between the existence of a legal obligation to provide access to a bank account
and the number of bank account holders”.[383]
Analysis of the data on average account penetration shows that in those Member
States where there is no framework in place, weighted average account
penetration is 70% (27% in Romania and Bulgaria; 80% in other Member States)
compared to 88% in those Member States which have industry based charters and
96% in those Member States with a legal framework in place.[384] Consequently, it can reasonably be assumed that a legal framework
is the most effective way of improving the accessibility of payments accounts. That being said, the mere existence of a
framework does not in itself ensure its effectiveness. Among those Member
States which have industry charters or other self-regulatory initiatives in
place, some consider that their implementation has been unsatisfactory (e.g.
Germany). For those with a legal framework, only six countries comply (or will
soon comply) at least partially with the Recommendation. These are France,
Belgium, Italy, Luxembourg, Portugal and Finland. Despite this, even in those
countries, there remains a portion of the population financially excluded. This
therefore raises the question of the effectiveness of some of the measures in
place. For instance, in France, even if 3% of poor households have already been
refused access to an account, only 5% of them have made use of the procedure
foreseen in the law following a bank refusal.[385] In
Belgium, 5% of the respondents not having an account mentioned that they had
tried to have one but their application was rejected by the bank without any
specific reason.[386] Consumer awareness of their rights and effective enforcement of the
framework are, therefore, vital. Moreover, in those countries where a
framework exists (or is in the process of being introduced), the framework
takes on a range of different forms ranging from specific legislation to
industry charters. Furthermore, those requirements diverge considerably. In
some countries (e.g. Belgium, France, Italy and Portugal), the characteristics
and conditions of the basic account are defined. In others (e.g. in Denmark,
Finland, Luxembourg or Sweden), the law introduces a right to a payment account
without any further specification. Diverging legal and
self-regulatory frameworks create burdens when trying to operate cross-border
due to divergent rules and practices. In many cases, credit institutions who
offer their services in more than one Member State will need to create
different products or create new standard operating procedures for providing a
payment account according to the approach of each Member State. This is
expensive and time consuming and prevents economies of scale, hindering
cross-border business and the realisation of a single market. In particular
these fragmented national rules prevent providers from offering online payment
accounts across borders posing a barrier to new market entrants and thus to a
greater competition. 1.2.2. Limited
bank profitability from certain groups of consumers Vulnerable and mobile consumers may be
perceived by banks as not profitable. In fact, the European Consumer
Organisation BEUC reported that insufficient consumer income was a reason for
banks refusing an account.[387] Current accounts are generally offered at low cost because they are
considered as a gateway product that would allow the bank to earn additional
revenues.[388] This opinion is shared by academics: "The basic banking
service should be the first step in the banking system, so it would be
interesting if banks were encouraged to offer wider access to their services in
order to make the relationship more profitable (but still appropriate to the
needs of the customers…If the services provided are free and if the charges are
capped, there is a real threat that basic banking services become an unbearable
cost for the providers."[389] It might not be obvious for the bank that
vulnerable or mobile consumers (who tend to change place of residence) would
remain long-term clients ready to be offered additional services. Not having a
regular income or permanent residence in the country were one of the most
frequent reasons given by the 2012 Eurobarometer respondents that had tried to
open an account but had been rejected by the bank.[390] The
contrary is argued by providers who state that by providing access to accounts,
they can market and sell more products to consumers. 1.2.3. Limited
and more costly access to basic financial products and services Consumers without a payment
account find it more difficult and more expensive to
purchase other financial products. As illustrated in paragraph 1.2.7, payment
accounts act as a gateway to other financial products and services, e.g. home
insurance. In addition, these products would most likely be linked to the payment account, making it easier for the
consumer to have a control over his liabilities, expenses and available funds. The consumer who does not have a payment account and is not in the habit of
using basic banking services, when in need of a financial product (e.g.
consumer credit, fire insurance), will most likely first check the offers of
non-banks or financial brokers whose marketing campaigns are targeted, in
particular, at vulnerable consumers. Services which they offer are usually
easily available (e.g. SMS loans in some EU countries) but also more expensive
(e.g. high interest rate) and without as many safeguards for consumers as those
offered by regular banks. “This
[…] raises the issue of a need for basic banking services to be
available for all consumers, which enables consumers to avoid higher-risk
sources of credit. Arguments have been made that the provision of basic banking
services to high-risk consumer groups as part of a financial inclusion
programme would be a powerful protection against irresponsible lending
practices and so would be of great assistance in preventing over-indebtedness”.[391] It has been demonstrated that poor families without a payment account have to pay more to obtain
credit often from informal lenders.[392] For
instance, "a loan from a pawnbroker of £100 over six months will cost between 5%
and 12% per month (equivalent to an APR of 70% to 100%), making the total cost
of the loan between £170 and £200. Households without a bank account who need
to cash a £200 cheque from a third party quickly will be charged a fixed fee
and interest: for example, a £200 cheque would cost £12 to cash at Cash
Converters."[393] Again, this problem mostly concerns poorer
and less educated consumers who in addition face a psychological barrier to
approach a bank to enquire about a loan or another financial product. Even
without trying, they will consider themselves not meeting the banks' criteria
to be offered a service e.g. in terms of required documents. Therefore, they
are likely to turn to non-bank providers which can offer credit with a simple
telephone call but under worse conditions than any credit institution. As a
result, many vulnerable consumers end up in debt. This risk could be partly
avoided if they had easy access to a payment account. Once they establish a link with a bank and the
psychological barrier disappears, it would be natural for many vulnerable
consumers to check the offer of their bank first, before turning to informal
lenders. 1.2.4. Low
awareness of availability of basic payment accounts In the Member States where a right to a basic
payment account has been introduced by law, these accounts are not actively
marketed by banks since they prefer to offer more expensive variants of accounts
to their clients.[394] In Belgium, where every bank is obliged to provide a basic payment
account upon the consumer's request, many unbanked consumers are unaware of the
legal right to have one. In other cases, the economic advantage of
having access to an account and the means of payments associated to it may not
be so clear for the consumer, particularly if high fees and penalties are
charged in the case of certain events, such as bounced cheques or the use of
overdraft facilities. These charges are often unclear at the moment of opening
to consumers with low level of financial literacy and result as a huge burden
when they later have to be paid. The UK Financial Inclusion Taskforce
calculated that, even if having an account would lead to savings of £125 to
£215 on utility payments, part of those savings would be offset by an average
loss of £140 per annum in penalty charges.[395] 1.2.5. Discriminatory
rules on accessing payment accounts Asymmetric information between the credit
institution and the consumer can lead to an application being rejected because
the consumer is considered riskier or because the information on the client is
not readily available. Consumers associations note that consumers
may be rejected for an account due to their lack of any regular income.[396] In fact, 40% of consumers who would like an account but were
refused cited this as the reason. This was the most common reason for refusal.[397] This problem certainly affects vulnerable consumers, without any
regular employment. Equally, if not more so, it can affect mobile consumers as
with no account, it will be difficult for them to find employment or
accommodation in a new Member State. Another common reason why
mobile consumers are refused an account is non-residence. It represents a
significant barrier to the internal market, as stressed by the European
Parliament Resolution,[398] by impeding or prohibiting cross-border activity, for example,
through the free movement of persons or the free provision of goods and
services by businesses. The procedure for accessing payment accounts
can differ tremendously. In order to open an account in some Member States, it
is necessary to present an ID card (e.g. Belgium) while in other countries
there is no such tradition (e.g. Sweden, UK).[399] This
can mean that a consumer seeking to open a payment account cross-border may be
able to do so in some instances but not in others. This would impede or
prohibit cross-border activity, for example, through the free movement of
persons or the free provision of goods and services by businesses. Around half
a million consumers across the EU have been refused access to an account due to
the lack of appropriate documentation. In many cases, such refusals are
attributed to anti-money laundering legislation;[400] this is supported by evidence from users' representatives
who have pointed out that banks often use anti-money laundering rules abusively
to reject applications from unattractive consumers.[401] However, an analysis of EU and national anti-money laundering rules
has established that the rules themselves do not create any such barrier.[402] 1.2.6. Low
consumer confidence in the financial system A general mistrust of banks may be another
reason for self-exclusion. A 2010 study reported that unbanked people perceive
"banks to be intimidating and untrustworthy, interested only in making
money out of people."[403] This
negative image of the financial industry does not help in attracting unbanked
consumers who could benefit substantially from a basic payment account provided
at low cost. It is also a missed business opportunity for credit institutions
that could increase the number of customers interested in other banking
services and products. Some vulnerable consumers may fear opening an account.
For example, even if having an account may reduce the cost associated to the
payment of certain services (e.g. utilities bills, online shopping), some
consumers may refrain from opening because of the risk that, if in debt, their
balance will be seized. On the other hand, there
are examples of measures taken by Member States which protect a minimum account
balance from being seized by creditors. For instance, Germany introduced a
so-called P-Konto for over-indebted consumers which protect a minimum income of
around EUR 950.[404] However, it has been demonstrated by consumer organisations that
this account is actually three times more expensive than a regular payment
account and often does not offer a debit card.[405] Access to banking services may however also
have positive psychological effects. According to a 2010 study, "almost
one in three (31%) of the unbanked who aspire to becoming banked feel it would
give them more independence, a quarter think being banked would make them feel
‘more like everyone else’ and 16% think they would feel more confident if they
had a bank account."[406] 1.2.7. Discriminatory
rules on basic payment services The different characteristics of a basic
payment account in different Member States restricting the use of basic payment
accounts to national level (e.g. in the Netherlands, Hungary, Belgium) create a
barrier to the internal market. Consequently, consumers with basic accounts can
only engage in domestic transactions. For mobile consumers and vulnerable
consumers living in border areas, this represents a significant problem. Domestic enterprises providing goods and
services in those Member States that have implemented the Recommendation
benefit from a larger market size and reduced costs, as consumers have easy
access to and more often use electronic payments. However, the European market
as a whole may be unable to benefit due to restrictions on the account services
that limit users of the basic payment account to 'domestic' transactions. Vulnerable consumers, who have no financial
history or 'track record' due to their state of financial exclusion (e.g. the
homeless), may face similar problems albeit on the lesser scale, although no
less important in terms of the consequences. In social terms, therefore, even
those excluded consumers who are making an effort to reintegrate themselves in
society may face difficulties in doing so in financial terms. In order to mitigate the risks, more
burdensome procedures need to be in place in the credit institution so that
identity/creditworthiness is verified and additional transaction costs may be
incurred, such as accessing a credit register in another Member State. The
resulting costs may render the potential foreign client less profitable and
thus lead to rejection. 2. Consequences 2.1. Consequences
for consumers 2.1.1. Limited
product choice and economic exclusion Online shopping offers an extensive choice
and usually lower prices. However, consumers without a payment account have
limited opportunities to make use of e-commerce. "This is sometimes
referred to as the “poverty premium”, i.e. the higher price poorer families
have to pay for goods and services because they cannot access the online deals
that are available to households with payment means accepted for e-commerce."[407] There are also some services which are
almost exclusively available over the internet. Consequently, an unbanked
consumer would struggle to access them. For instance, it is difficult to buy
airline tickets from low cost air carriers without a credit card or without the
ability to make a bank transfer. Even if these tickets can be purchased at a
travel agency, they are more expensive due to additional charges imposed. This
follows the trends of non-European developed economies, such as US: "as
of June 2009, certain American airlines (e.g. American Airlines) only accept
payment card payments for domestic flights."[408] Furthermore, there is scope for further
growth of e-commerce, also in the cross-border dimension, which is considered
crucial for the development of the Single Market. This can be achieved by
opening up access to banking services as "[...] the availability of
payment cards and electronic money transfer channels are crucial factors
underpinning e-commerce, particularly as they offer to the consumer protection
and credibility."[409] Although it may appear unlikely that poor consumers, even if
equipped with a payment account,
would massively turn to online shopping, one study which examined the
experience of newly banked consumers in the UK found that 22% had shopped by
telephone or online since opening their account.[410] "Moreover, paying for goods and services on the internet
using international credit cards may entail certain additional benefits for
consumers, e.g. insurance services."[411] Although credit cards or bank transfers are
frequently used over the internet, there are other ways to pay for a product.
However, these are usually more expensive and inconvenient.[412] For instance, pre-paid cards can be used for non-cash payments over
the internet but the fee structure behind them is not very transparent and in
addition, access channels for payments into and out of the card account are
limited.[413] What is even more important is that they are not as safe as a payment account – once a pre-paid card is
lost, the consumer will not be able to recover the balance. However, a precondition for e-commerce growth
is the improved access of citizens to online shopping, the levels of which
differ substantially across the EU Member States. Only once widespread internet
access, especially in new Member States, e.g. Bulgaria and Romania, is ensured,
will consumers in these countries find it useful to use electronic means of
payment. In conclusion, restrictions in accessing
payment accounts can restrict consumer choice and cross-border activity. 2.1.2. Higher
costs Access to basic financial services is a
pre-condition to benefiting from the internal market and fully participating in
the modern economy. The security and convenience associated to electronic
payments is also generally higher than for cash transactions. It also enables
access to discounts, e.g. those offered by utilities companies when payments
are done by direct debit or those provided through having a bundle of products
or services with the same provider. For consumers, cash/cheque payments of
social benefits imply wasted time (e.g. queuing at the post office), hassle and
charges (e.g. when cashing the cheque). In Germany, the Federal Employment
Agency pays the majority of unemployment benefits to the recipients' payment
accounts. Nevertheless, beneficiaries without a payment account receive them by
cheque (so called ZzV transaction).[414] An
average amount of the ZzV benefit in 2010 was EUR 380 which means that the
recipient was charged EUR 7 (EUR 2 basic charge plus EUR 5 additional fee) for
the processing of the payment which gives an average of EUR 85 per recipient
per year.[415] It has been calculated that in 2010 almost EUR 13 million was spent
by recipients of unemployment benefits on fees charged upon the receipt of the
ZzV payments. In the UK, a report also concluded that in total unbanked
families pay some £253 per year more in gas and electricity bills compared to
families that pay by direct debit.[416] There
is also an important issue of security for those who have to cash their
benefits upon receipt, without a possibility of keeping them in a payment
account. Many benefit recipients are vulnerable in some regard and experience
an elevated risk of theft. An additional burden for unbanked consumers
may be the amount limit for cash transactions introduced for instance in Spain
or France (up to EUR 3000),[417] or in Italy, an obligation to pay social benefits solely via a
payment account. Even though these measures were taken by the governments with
the aim to prevent fraud and money laundering, in reality they make it
impossible for unbanked consumers to access certain products and services. 2.1.3. Difficulties
in accessing accommodation and/or employment Consumers may face difficulties in relation
to employment or renting property without a payment account. At some German
universities rent for student halls is paid by standing order.[418] Regarding employment, having a payment account may not be a legal
requirement to take up a position. However, in some cases, "paying out
salaries in cash or by cheque may simply no longer be possible".[419] A 2010 study reported that "having an account was perceived
to be a necessity for securing employment among the unbanked."[420] Limited access to payment
accounts is a serious burden for migrant workers and
students coming from other EU Member States and poses a barrier to free
movement of persons in the Union. Workers will find it more difficult to find a
job if the employer cannot pay their salary into a payment
account and instead has to issue a cheque or provide
cash. This is not a common practice anymore and therefore may create
administrative costs for the employer and he may simply refuse to hire a person
without a payment account. It
is no surprise that some migrant workers refrain from travelling and looking
for a job abroad once they are aware of these potential obstacles. 2.2. Financial
services industry Restrictions on consumers' ability to access
a payment account also impacts on the financial services industry. First, the
use of cash is expensive. Financial services providers therefore strongly
encourage their clients to use electronic means of payment. With a higher
number of banked consumers, providers could substantially reduce costs.
According to a Finnish report, "cash was uniformly unprofitable payment
instrument for banks. Banks are of course aware of this and they have favoured
electronic means of payment instead of cash [...] The usage of cash has been
reducing in domestic payments […]".[421]
Similarly, in Demark, banks' costs related to payment services totalled almost
kr. 4.4 billion in 2009, with about half the costs attributable to cash.[422] "Cash handling is more labour-intensive than other payment
services, which is the reason for the banks' considerable costs related to cash".[423] "A comparison of the banks' costs per transaction shows
that payment services which require a lot of working time entail the greatest
costs. This applies first and foremost to deposits and withdrawals of cash at
branch counters and deposits via night safes. Conversely, the costs of cash
withdrawals at ATMs, card payments, online banking transfers and
Betalingsservice transactions are relatively low. This is because these
services involve a high degree of automation and the fixed costs are
distributed on a large number of transactions."[424] The financial services industry would
therefore clearly benefit from greater access of users to payment accounts and
more broadly to basic payment services, which would lead to a greater number of
cash transactions being replaced by electronic payments. Nevertheless, cash
should not be phased out completely since there are many vulnerable consumers,
for instance, the elderly who find it very difficult to use electronic means of
payment. This is also the reason why providers charge consumers much higher
fees for cash transactions. Second, new market
entrants, in particular those from another Member State, are restricted in
their ability to enter new markets. Different regulatory frameworks established
along national boundaries contribute to the fragmentation of the market and
raise barriers to entry. The different regulatory frameworks for
access and switching to payment accounts also create a significant barrier to
cross-border entry. 2.3. Enterprises Restrictions on consumers' ability to access
a payment account also impacts on enterprises. First, consumers who are unable
to access and those who have only limited payment functions face barriers in
being able to purchase goods and services, particularly online. For
enterprises, a potential market for goods and services is lost. For online
sales, this means a substantially reduced market size. For direct distribution
channels which accept cash, enterprises may increase their prices but this also
restricts their competitiveness and growth prospects.
Moreover, some consumers who may wish to purchase goods or services may be
unable to do so because they do not have sufficient cash available at that
moment. Second, restrictions in accessing payment
accounts can increase the cost of payment transactions for both businesses. Not only do they have to insure the cash held in their company and
spend time depositing and collecting cash from a bank as a result of cash
transactions, but they also face an increased risk of fraud through money
laundering, fake notes and coins, etc. High cost of cash is particularly
burdensome for retailers, for instance in Denmark, retailers cost of cash
payments at point of sale totalled just under kr. 2.4 billion and approximately
kr. 1.6 billion for the payments by cards in 2009.[425]
Further, "more than half of the costs of cash payments related to the
time spent on internal procedures. This covers e.g. cashing up and counting and
packaging of cash. Another significant cost of cash payments was the payroll
costs for cashiers for the time spent on executing a payment."[426] Therefore, retailers tend to prefer electronic means of payment,
which are cheaper than cash, even if surcharges for each transaction are
imposed by providers. Finally, it can also be a significant administrative and
security cost for enterprises that have to pay salaries in cash or by cheque. 2.4. Public
administrations and society as a whole The lack of a payment account also implies
higher costs for public administrations, e.g. when paying wages or benefits. In
a number of countries, the payment of social benefits into a payment account
has been made compulsory (e.g. in Denmark and France) or payment in cash are
charged extra (e.g. in Germany). In those countries, account penetration is
closer to 100%. However, in others, such as Ireland, only 40% of social
benefits payments are made through a payment account, while another 52% by a
post office.[427] The Strategy for Financial Inclusion prepared for the Irish
government in 2011 quotes a 2007 survey of the members of the Irish Payment
Services Organisation which estimated "that the use of non-electronic
payments systems costs the economy approximately €1 billion each year."[428] Therefore, "a shift to
electronic payments should therefore yield significant benefits in GNP terms,
given that electronic payments cost a mere fraction of the cost of cash
payments."[429] For the economy at large, the cost can likewise be non-negligible,
considering that social protection expenditure of Member States represents
around 30% of the EU GDP.[430] A report on financial inclusion prepared by the German Bundestag
confirmed high administrative costs incurred as result of payments of benefits
made through non-electronic means by the governmental agencies.[431] Even though, in a great majority of cases it is for the beneficiary
to cover the transaction cost, nevertheless, the costs of child benefits paid
by the Federal Employment Agency are actually incurred by the taxpayers. In
Hungary, approximately 50% of pensions are paid by money orders and not by
credit transfer. If this could be done by transfers, society could save
approximately HUF 6.5 billion annually.[432] The complete phasing out of paper-based orders could produce savings
of approximately HUF 85 billion annually for Hungarian society.[433] The report concludes by stating: "Electronic payments
result in social benefits through security, ease of use, convenience and time
savings and improve social welfare. Electronic payments also allow banks to
consume less resources."[434] The
cuts which can be achieved by a more widespread use of electronic means of
payment, instead of cash, would be very beneficial for public finances in
Member States, especially in the current economic climate, and could further
contribute to economic growth in the EU. Data from outside the EU shows that
important savings could be achieved. For example, mailing Federal benefits
cheques in 2010 cost the US taxpayer more than $117 million that would not have
been incurred had those payments been made by electronically.[435] Disbursing grants and funds electronically through newly
established payment accounts helped reduce the administrative costs of Brazil’s
conditional cash transfer program Bolsa Familia from 14.7% to 2.6% of
the disbursed grant value.[436] Finally, encouraging electronic transactions
will support efforts to fight corruption and the black economy since
transactions in cash are practically untraceable. Access of a larger number of
citizens to the means of electronic payments is a natural complement to the
measures against fraud which a number of Member States are currently trying to
improve, e.g. Italy which recently introduced a legal obligation for consumers
to hold a bank account.[437] Further, improved access will allow Member States to better tackle
the problem of tax evasion (e.g. Greece and Italy) thus contributing to
healthier public finances and economic growth. 2.5. Summary
of problems and consequences Table 2.B: Problems
and consequences Problems || Consequences Ineffective, inconsistent or non-existent regulatory framework Limited bank profitability from certain groups of consumers Limited and more costly access to basic financial products and services Low awareness of availability of basic payment accounts Discriminatory rules on accessing payment accounts Low consumer confidence in the financial system Discriminatory rules on basic payment services || Restricted cross-border activity => characteristics and process of basic payment accounts restrict consumer cross-border activity => increase costs for credit institutions => Limits market size for enterprises Restricted product choice => reduced product choice for financial and non-financial products and services => higher prices for financial and non-financial products and services High administrative burden for public authorities Low consumer confidence => Economic exclusion (e.g. unable to take advantage of competition domestically or in the single market) => Social exclusion (e.g. problems in accessing accommodation) 3. Objectives In general, and in line with the Treaty, the
objective is to create an efficient and competitive Single Market (Article
114.1 of the Treaty) with a high level of consumer protection (Article 114.3 of
the Treaty) that fosters balanced economic growth with greater social inclusion
by: enhancing consumer confidence; broadening consumer choice both in terms of
the quality of the products available and in terms of price reductions;
facilitating customer mobility; facilitating the cross-border activity of
payment account providers; and ensuring a level playing field between market
actors. In relation to access to basic account services,
the specific objective is to facilitate access to basic account services. The
operational objectives are to: reduce the number of unbanked Europeans by 6.4 million by 2020;[438] ensure access to all basic payment means for all consumers with
basic payment accounts; facilitate cross-border access to basic banking
services for 3.5 million consumers by 2020;[439] and
improve consumers' awareness on basic payment accounts. 4. Description
of the options for policy instruments Each of the above options
could be given effect through a variety of different policy instruments. These
include an industry self-regulation (Code of Conduct), Community level
non-binding measures such as a Recommendation or Communication, or through
binding Community measures such as Community legislation in the form of a
Regulation or Directive. In the case of the latter, delegated acts or
regulatory technical standards could also theoretically be envisaged for
certain aspects. Table 2.C explores the feasibility of giving effect to each of
our policy options through each of the available policy instruments. Table 2.C: Policy options versus instruments || Self-regulation || Recommendation || Communication || Directive || Regulation 1. No action || || || || || 2. Ensure application of the provisions of the Recommendation || || X || || X || X 3. Modify the provisions of the Recommendation relative to the beneficiaries || || || || || 3(A) Introduce a universal right to a basic payment account || X || X || || X || X 3(B) Introduce a right to a basic payment account at least for national residents || || X || || X || X 3(C) Introduce a right to a basic payment account at least to those non-residents with a link to the country where they wish to open an account || || X || || X || X 4. Improve the features of the basic payment account || || || || || 4(A) Enlarge the list of basic services to include internet banking and online purchasing || X || X || || X || X 4(B) Enlarge the list of basic services to include a small overdraft or a 'buffer' facility || X || X || || X || X 4(C) Oblige Member States to have in their legislation an indication of a minimum account balance that cannot be seized || || X || || X || X 4(D): Ensure that the features of the payment account are not of a discriminatory nature. || X || X || || X || X A Commission
Communication would be unable to achieve any of the objectives as it is a tool
to communicate information to the Member States rather than effect a particular
change in the way things are done. The following sections will assess the
impact of the policy options and will describe which policy instrument is the
most appropriate to use, as well as the underlying reasons for the choice. 5. Analysis
of the options for access to basic account services 5.1. Option
1: No action Effectiveness of policy option Certain trends should be considered when
appraising 'no action' as an option. Some mitigate, and others exacerbate the
consequences of having many unbanked citizens. First, there are plans in a number of Member
States to introduce legislation or self-regulation to encourage the
implementation of the Commission Recommendation. The current state of
implementation of the Recommendation is presented in Table 2.A. Regarding
self-regulation, users' representatives argue against soft law because,
contrary to the view of the financial services industry, they considered it
ineffective to combat financial exclusion.[440] Even
if this partial implementation continues, it would not lead to a greater
convergence of the rules across the EU and would be unlikely to increase the
number of consumers opening payment accounts.[441] It is
also unlikely that diverse national solutions will ensure greater access to
basic payment means, i.e. allowing online purchases. Even if Member States have
legal or self-regulatory rules on access, they actually exclude the possibility
for consumers to buy over the internet since it is costly for banks Further, varied
national rules on access do not help consumers to make use of basic payment
accounts cross-border because consumers have difficulties to understand what
legal regime in terms of access to a basic payment account they can expect in
another Member State. Likewise, providers will be discouraged from offering
cross-border services: they will face high costs in adapting to different
national legal systems and accordingly find it difficult to compete in national
markets. Second, the development of alternative means
of payment which may have some features of payment accounts are relevant, since
they could act as substitutes to basic payment accounts though only to some
extent, thus limiting both the problems and the consequences described. These
new trends are costly but may solve some of the problems of unbanked consumers
such as access to online shopping or could very much reduce consumers' reliance
on cash. The most common pre-paid cards would not
allow their holder to transfer money or to pay bills via direct debit or a
permanent order. Receiving money via a bank transfer may not always be
possible. The maximum amount that pre-paid cards can hold is usually limited to
ca. EUR 500 - 1000. Such cards can be a more costly solution because of the
top-up and usage fees applied. Impacts of policy option on stakeholders
and efficiency In the absence of EU action, the consequences
for consumers in Section 2.1 will persist. Some, such as the difficulties
encountered when trying to rent a property or finding a job, are difficult to
quantify. Others, such as the impact on consumers' self-esteem of being
financially excluded, are impossible to calculate. Likewise, too many
assumptions are required to be able to calculate the costs associated with the
extra time, hassle and insecurity associated with payments in cash to render
any calculation meaningful. It is possibly to quantify some costs.
Consumers who have no access to a basic payment account cannot utilise cheaper
means of electronic payment or make good-value internet purchases. They also
find it more expensive to travel to other Member States where, without the
right of access to a basic payment account, they use non-bank transfers of
funds. Further, if they rely on cash, they face the cost and hassle of currency
exchange and may put their personal security at risk. The costs extend further.
In 2010, being paid by means other than bank transfer, cost benefit recipients
a bit more than €11 million in Germany.[442] On
the basis of UK Treasury data, it has been calculated that unbanked households
could pay as much as £587 million per year only to cash benefit cheques.[443] Limited access has quantifiable disadvantages
for wider society. The cost of cash payments is estimated to be between EUR
50bn and EUR 75bn per year.[444] The costs of cash for society would amount to half a GDP point for
countries such as Austria, the Netherlands or Belgium. The cost is higher in
more cash-oriented Member States (e.g. Bulgaria, Romania, Greece, Italy or
Spain) and lower in Member States, such as Sweden or Finland, where card usage
is higher.[445] Although those estimated costs refer to the use of cash in general
(not only as a result of those who do not hold an account), it shows that
important savings can be reaped if a higher portion of consumers can access
electronic payments for goods and services. Reduced use of cash would benefit providers,
since cash operations are expensive for them. Conversely, providers would find
it costly to provide basic payment accounts cross-border. Divergent national
rules and requirements as well as a non-level playing field would require
considerable investment to adjust to new markets. This would be
disproportionate to any potential profit. Public administrations (and therefore
taxpayers) are also incurring in costs that could be avoided if social benefits
were automatically paid into a payment account and therefore many national public authorities consider it
essential to grant the right of access to basic payment accounts to all
consumers.[446] The administrative and financial costs of issuing a cheque and of
distributing it are not negligible. In the fiscal year 2010, the US Treasury
spent $117 million only in mailing Federal benefit cheque to benefit recipients
(some 11 million people).[447] This data cannot be extrapolated to the EU case but in certain
Member States the cost can also be significant. In Belgium, paying pensions by
cheque is the default option. In Ireland, only 40% of the social welfare
payments are made through an account (compared to 52% of them through the Post
Office and 8% by cheque).[448] In the UK, the Government has recently decided to phase out the
payment of benefits by cheque. It has also been reported of giving "the
£20 million-a year contract for payment to Citibank, which runs the PayPoint
system, instead of the Post Office".[449] Thus,
although currently less than 1% of the UK total population receive their state
pension or benefits by cheque in the UK, it has been considered worthwhile to
pay £20 million annually for an alternative system instead of continuing paying
benefits by cheque. The administrative cost of enterprises could
also be reduced. For instance, in Belgium, a telecom company recently offered a
20% reduction on the monthly mobile phone subscription and another a monthly
EUR 1 rebate for cable TV services paid by direct debit.[450] According to a UK report, poor families are paying some £253 per
year extra in gas and electricity bills compared to families that pay by direct
debit.[451] This implies overall annual cost of £288 million for the society (on
the basis of the above mentioned UK Treasury data).[452] 5.2. Option 2: Ensure
application of the provisions of the Recommendation Effectiveness of policy option Implementation and application of the
Recommendation by Member States so far has been unsatisfactory (See paragraph
1.2.1).[453] Many Member States took insufficient measures to ensure the right
of access to basic payment accounts for consumers despite the deadline imposed
by the Recommendation, and consumers associations do not expect that this
situation can improve.[454] This option should result in easier access to
basic payment accounts for consumers, especially in the countries (e.g.
Austria, Bulgaria, Czech Republic, Greece, Latvia, Malta, Poland, Romania,
Slovenia, Sweden, Slovakia, and Spain) where barriers to accessing a basic
payment account at reasonable cost exist. This option would permit consumers to
open a basic payment account with all the features foreseen in the
Recommendation regardless of whether the consumer is a resident in the country
of application or not. In addition, Member States' launch public campaigns on
access, as required under the Recommendation and supported by the European
Parliament, would improve public awareness on access.[455] This
would attract unbanked and cross-border consumers. In Romania and Bulgaria,
where no framework for access to basic payment accounts exists and more than
half of the population does not have a payment account, the positive effects
should be large. This option would have a positive impact on
customers' mobility and confidence, particularly for citizens travelling abroad
for work or study. Consumers would find it easier to open a payment account in
another Member State because similar principles would apply when opening an
account in every Member State. The limits of basic payment accounts, as
defined by the Recommendation, and the consequent shortcomings, would remain.
Unless Member States went further than the Recommendation, consumers would
enjoy a right to a basic payment account only if they were otherwise unbanked
in that country. The limited features of the account would not facilitate
internet banking or online shopping, for example. These limits would continue to prevent the
consumer from making use of online shopping with more choice and lower prices,
which is considered essential by the European Parliament for consumers to be
able to reap the benefits of e-commerce.[456] Thus,
the problem of vulnerable consumers who without the possibility to use internet
shopping spend more on products and services would persist. Also, in this way,
a more common access to payment accounts would not necessarily contribute to
further development of e-commerce and thus to economic growth. At the same
time, this option would help decrease the costs incurred by administrations or
companies when making payments, such as transferring benefits or paying wages. Since the Recommendation provides minimum
standards, Member States that implemented the Recommendation did so in a
non-homogenous way. Depending on the policy instrument chosen, the Commission's
enhanced efforts to ensure application of the Recommendation would encourage
more Member States to implement it, aligning general rules on the right of
access in the EU while leaving some flexibility to Member States, in
recognition of market differences at national level. Member States could, for
instance, set limits for the price of a basic payment account, choose whether
to designate selected (versus all) providers to offer accounts, and decide on
the content of public campaigns on access. Consequently, consumers travelling abroad
would experience slightly different conditions and criteria of access – in
addition to different features - to a payment account. Cross-border activity
could be restricted through limitations on payment facilities attached to the
account, i.e. only domestic transactions. Likewise, payment services providers
may find it difficult to provide basic account services cross-border since they
would have to comply with potentially different legal or self-regulatory
regimes in order to enter the market. Accordingly, although this option could
reduce the number of unbanked citizens it would not remove the practical
obstacles the development of an efficient Internal Market. This option would have a positive impact on
customers' mobility and confidence, particularly for more mobile ones such as
those travelling abroad for work or to study as well as for unbanked citizens
who were refused a payment account so far. Consumers would find it easier to
open a payment account in another Member State because the principles for the
right of access, based on the Recommendation, would be the same and thus
criteria to open a payment account similar across the EU. What is also very
important is that the account would be available free of charge or at
reasonable cost, also in terms of fees for services linked to the account in
line with the European Parliament recommendations[457]. This
option is however more likely to impact on the vulnerable group of consumers
than mobile consumers. The main reason for this is that this option would
foresee only an enforcement of the existing Recommendation and not any improvements
in the content, in particular in relation to non-discriminatory features, which
are of a greater importance to mobile consumers (see Sub-section 1.1.6). In conclusion, even though this option could
reduce the number of unbanked citizens across EU Member States through
increased implementation of the Recommendation, it will not remove the
practical obstacles that impede the creation of efficient Internal Market, and
thus impede economic growth. However, the effectiveness of this option would
largely depend on the implementing measure chosen to ensure application of the
Recommendation (e.g. improved enforcement of the Recommendation or new
regulatory obligation based on the Recommendation's provisions). The choice of
instrument would thus be critical. Impacts of policy option on stakeholders and efficiency In general, under this option, all consumers
will be able to open a basic payment account anywhere in the EU. The figures
presented by the World Bank's report demonstrate that there are many more unbanked
consumers in the EU12 than EU15, and therefore it may be assumed that the
impact of any initiative targeting basic payment accounts will be greater in
new Member States, especially in those which do comply with the Recommendation.[458] Consumer benefits arise in three ways: more
efficient payment instruments, i.e. reduced use of money transmission
mechanisms and fewer cheques; discounts from using electronic payments, e.g. by
establishing a direct debit to pay an electricity bill; and the reduced risk of
theft or fraud associated with cash payments (see Section 2.4). Consumers may
also be able to purchase additional financial products, such as home or fire
insurance, further minimising risks and costs. Such costs are however not
tangible, as they only exist when the event occurs. However, while newly banked
consumers may be able to access additional financial and other products by
using electronic payments, since the features of the basic payment account
under the Recommendation do not cover facilities necessary for internet
shopping, these consumers would not be able to pay for them and thus avail of
the cheaper goods and services. Access to online shopping is considered to be
an essential feature of a basic payment account by consumer representatives and
some public authorities.[459] Consumers should also get a clear view of the features of a basic
payment account because they will all be based on the same broad principles of
the Recommendation and this will allow them to be more confident to ask for a
payment account abroad. Consumers will face costs in terms of opening
and maintaining an account. These should not be excessive: the account should
be provided free or at reasonable cost. Some vulnerable consumers will bear
occasional and recurring costs for the inappropriate use of the basic account,
e.g. unpaid overdrafts. In France and the UK, these charges are estimated at
between EUR 17 and 22 for each failed transaction.[460] As a
result of these charges and due to the fear of seizure, as a minimum balance is
not protected against seizure by creditors under this option, some consumers,
especially those who tend to fall in financial difficulties, may still be
discouraged from opening an account. Financial services providers would also incur
costs. They would incur both one-off and recurring costs for opening and
running payment accounts. There might also be an administrative cost for
providers, since they may face substantial inflow of new clients, many of whom
will not be very profitable. Providers in countries with fewer unbanked
citizens are less likely to incur these costs though providers in more
developed Member States may notice a growing number of immigrants from EU12
asking for a basic payment account. For instance, in the UK, there are numerous
workers from other EU Member States and many do not have a payment account. Under this option, mobile consumers will have
the right of access to a basic payment account but there might be a language
issue between them and the bank, which may result in additional cost for the
provider. These costs could, however, be recovered by banks partly or fully,
depending on the level of charges imposed on consumers for the use of a basic
payment account. In practice, the real level of costs is likely to be lower.
Second, one-off costs would be incurred by providers from paying consumers
switching to a basic payment account. The introduction of a basic payment
account, which can be offered free of charge or at low cost, will result in
some consumers switching from their regular account to a cheaper option.
Finally, banks interested in providing account services cross-border would
continue to face unnecessary barriers and costs as the rules introduced in
Member States, although based on the Recommendation's provisions would differ from
country to country. Financial services providers, entering new markets, would
have to meet these specific national requirements and therefore their IT
systems, operating procedures, and the features of already existing products
would have to be adapted accordingly. These costs are likely to exceed
potential benefits at least in the short to medium term and banks may refrain
from operating across borders. Payment account providers will also encounter
benefits. With a legal right of access to a payment account and public
campaigns attracting citizens to open one, many more payments will be made
through bank transfers. This may result in substantial savings from reduced
costs of transporting and insuring cash. Providers are also likely to enjoy a
larger customer base to which they can market other products, e.g. fire
insurance; they will be able to reduce costs of and risks from cash based
payments and will benefit from a contribution to capital and funding. These
benefits are non-quantifiable. Companies, in particular utility companies
such as energy and water providers, would benefit from reductions in
transaction costs as many banked consumers would switch to cheaper direct debit
payments which are a cheaper way of collecting payments. Companies providing goods
and services online would, however, not benefit to the same extent as there is
no guarantee of online purchasing facilities. Moreover, international companies
may suffer if the features of the account are limited to domestic transactions.
Companies would be able to benefit by paying salaries through accounts rather
than through more expensive payment instruments such as cheques. Member States would experience costs and
benefits. The extent of these would depend on the instrument chosen. Member
States which already implemented the Recommendation (Belgium, France and Italy)
would enjoy fewer benefits. Benefits would come in the form of savings on
payments of social security which could be made through a bank transfer. A 2010
study estimated these savings at EUR 7-12 per recipient per annum.[461] States with more unbanked consumers at present are likely to enjoy
more savings. Member States would incur the cost of
organising a public information campaigns to inform consumers of the existence
of basic payment accounts and their rights to open one. However, those with
fewer unbanked citizens (e.g. Denmark, Finland, Germany, Sweden, the
Netherlands and the UK) may be able to limit costs by focusing on targeted
groups of consumers. Member States' costs incurred as a result of
new European measures on the right of access to basic payment account will not
depend on the number of unbanked consumers in a given country because
administrative costs of introducing a new legislation or aligning the existing
one are likely to be roughly the same regardless of the level of account
penetration in a Member State: administrative costs should not change
significantly. They will rather depend on whether the Recommendation has been
implemented or not. It can be assumed that the lowest costs will be incurred by
the three Member States which fully implemented the Recommendation (Belgium,
France and Italy) because they will need to make only minor amendments in the
existing legislation. Member States which introduced legislative or self-regulatory
measures, however not fully complying with the Recommendation (Portugal,
Denmark, Estonia, Finland, Lithuania, Luxembourg, Sweden, Germany, Hungary,
Ireland, Netherlands, and the UK), will have to incur costs to align the
existing measures with the new EU law. However, the highest cost will have to
be borne by the Member States which do not have any rules on access in place:
Austria, Bulgaria, Czech Republic, Cyprus, Greece, Latvia, Malta, Poland,
Romania, Slovakia, Slovenia and Spain. Likewise, the additional costs of
monitoring and enforcement will be lower for the Member States where
legislation on access already exists (Belgium, France, Italy, Denmark, Finland,
Luxembourg, Estonia, Lithuania, Sweden), be it fully or partly compliant with the
Recommendation, because it can be assumed that these Member States are already
involved in the monitoring and enforcement of the existing rules. These costs
will be higher for Member States with self-regulation or industry charters
(Germany, Hungary, Ireland, Portugal, the Netherlands and UK) where monitoring
and enforcement will have to be enhanced, and even higher in Member States
where there are no rules on access at all (Austria, Bulgaria, Czech Republic,
Cyprus, Greece, Latvia, Malta, Poland, Romania, Slovakia, Slovenia and Spain)
because these Member States will have to designate responsible authorities to
monitor and enforce the new law on the right of access. The benefits may differ though because the
more banked consumers, the more social benefits can be paid by public
authorities through a bank transfer which is cheaper than other means of
payment. Therefore, those Member States with currently more unbanked consumers
are likely to be impacted by more benefits following the introduction of measures
on the right of access to basic payment accounts. These would be Romania and
Bulgaria with the highest unbanked populations in the EU, but also Poland,
Hungary, Lithuania where almost 30% of citizens above the age of 15 do not have
a payment account. On the other hand, Member States with a very high bank
account penetration on the market (e.g. Denmark, Finland, Germany, Sweden, the
Netherlands, and the UK) will not be impacted by the benefits to a great extent
because it can be assumed that many consumers have already their social
benefits paid to bank accounts in these countries. Finally, broader society should benefit
through economic development and growth since "people with access to
savings accounts or simple informal savings technologies are more likely to
increase productivity and income."[462]
First, the development of the retail banking in less advanced countries is
unavoidable in the near future in any case. Even if cash is still the only
payment means for a significant part of the society in Romania and Bulgaria,
with the rapid development of electronic means of payment which are generally
cheaper and safer, citizens of these and other EU countries lagging behind will
catch up and use banking services in a universal and habitual manner in the
near future. This will also ensure further economic growth in the region since,
as demonstrated in Chapter 2, the use of electronic payments facilitates
savings for public administrations, the private sector, and for consumers.[463] Second, there is likely to be less fraud and tax avoidance since
payment transactions would increasingly take place through electronic (and
traceable) payments channels. Quantification of costs and benefits Consumers Consumers will face costs of between EUR
108 - 542 million in the first year (see Table 2.D). These costs
will be incurred in those Member States where the Recommendation has not yet
been implemented: Sweden, Germany, Hungary, Ireland, Austria, Czech Republic,
Estonia, Greece, Lithuania, Luxembourg, Latvia, Poland, Slovakia, Slovenia,
Spain, UK, Cyprus, Malta, Romania, Bulgaria, the Netherlands, Finland, Denmark
and Portugal. Table
2.D: Cost and benefits for consumers (EUR millions) || 2 million consumers || 6.4 million consumers || 10 million consumers Costs || || || Account operation costs || 91 || 290 || 453 Failed transaction costs || 18 || 57 || 89 Other costs (e.g. risk of account fraud, risk of seizure of funds) || Not quantifiable || Not quantifiable || Not quantifiable Total costs || 108 || 347 || 542 Benefits || || || Benefits from reduced use of money transmission and cheques || 320 || 1 024 || 1 600 Benefits through discounts for electronic payments || 222 || 711 || 1 111 Benefits through discounts for online purchases || 0 || 0 || 0 Other benefits (increased accessibility of funds, reduced risk of theft, increased choice of goods and services, accessibility of accommodation/employment/improved confidence) || Not quantifiable || Not quantifiable || Not quantifiable Total benefits || 542 || 1 735 || 2 711 In terms of
costs, no one-off costs have been identified since the cost of opening a
payment account is included in the annual maintenance charge. All costs
incurred by consumers are recurring costs and can be broken down as follows: ·
Annual maintenance charge estimated by the CSES
study at EUR 51[464]; ·
Costs of inappropriate use of the account.
Consumers would bear occasional and recurring costs of inappropriate use of the
basic account, e.g. due to unpaid overdrafts; ·
Non-quantifiable costs. These include potential
losses from fraud in the event that the account details are lost or stolen as
well as the risk of possible seizure of funds in the event of any court
judgment. ·
Regarding benefits (See Table 2.D), the annual
recurring benefits can be broken down as follows: ·
Benefits from discounts from reduced use of
money transmission and cheques; ·
Benefits from cheaper electronic payments and
online purchases; ·
Non-quantifiable benefits including being able
to access funds more quickly, regardless of their geographic location; an
increased sense of security; n increased choice of goods and services (e.g.
online shopping); enabling access to employment and accommodation more easily;
and a reduced sense of financial, economic and social exclusion. Payment
services providers Payment account providers will face total
costs of between EUR 71 - 356 million
in the first year. These costs will be incurred in those Member States where
the Recommendation has not yet been implemented. Table
2.E: Cost and benefits for providers (EUR millions) || 2 million consumers || 6.4 million consumers || 10 million consumers Costs || || || Annual account operation costs || 71 || 228 || 356 Other costs (modifying IT systems, internal procedures, staff training). || Not quantifiable || Not quantifiable || Not quantifiable Total costs || 71 || 227 || 356 Benefits || || || Recurring annual benefits || 18 || 57 || 89 Other benefits (increased customer base, reduced cost of cash, increased capital base, improved reputation) || Not quantifiable || Not quantifiable || Not quantifiable Total benefits || 18 || 57 || 89 These costs
comprise annual recurring costs and one-off costs: ·
Annual recurring costs of opening and operating
a payment account; ·
One off costs for modifying IT systems, staff
training and adapting internal procedures. Costs of these modifications will be
incorporated into the annual fees charged to consumers; over time, the more
basic payment accounts that there are, the lower the incremental costs[465]; ·
The introduction of a basic payment account,
which can be offered free of charge or at low cost, will result in a number of
consumers willing to switch from their regular account to a cheaper option. The
one-off cost of this is estimated at EUR 3 per consumer.[466] It is not possible to quantify how many consumers would make this
switch. Therefore, the revenue of payment services providers may fall. It is
however impossible to quantify their numbers as while concrete cost savings
would be available for these consumers, a number may decide against switching
as the basic account may not have all the services of a "normal"
account. Consequently, the numbers depend largely on consumer preferences which
vary considerably. Providers will enjoy benefits of between
EUR 18 million and EUR 89 million in the first year. These
comprise recurring annual benefits and non-quantifiable benefits, such as: an
increased customer base to which to market other products, e.g. fire insurance;
the reduced cost of and risks from cash based payments; or the benefits from a
contribution to capital and funding. Since these are however non-quantifiable,
the only quantifiable benefits are those indicated in the above table. Governments The costs and benefits will be incurred in
those Member States where the Recommendation has not yet been implemented.
(Sweden, Germany, Hungary, Ireland, Austria, Czech Republic, Estonia, Greece,
Lithuania, Luxembourg, Latvia, Poland, Slovakia, Slovenia, Spain, UK, Cyprus,
Malta, Romania, Bulgaria, the Netherlands, Finland, Denmark, Portugal). Member States will face total costs of
approximately EUR 3 million in the first year, depending on the
instrument chosen. Member States will face total benefits of between EUR 18 million
and EUR 89 million in the first year. The size of these costs will
depend on the instrument chosen. Table 2.F: Cost and
benefits for Member States (EUR millions) || 2 million consumers || 6.4 million consumers || 10 million consumers Costs || || || One off costs of introducing legislation || 1.13 || 1.13 || 1.13 Recurring costs of monitoring and supervising application || 1.89 || 1.89 || 1.89 Total costs || 3.02 || 3.02 || 3.02 Benefits || || || Recurring annual benefits || 18 || 57 || 89 Other benefits (less benefit and tax fraud) || Not quantifiable || Not quantifiable || Not quantifiable Total benefits || 18 || 57 || 89 Annual
recurring benefits for Member States comprise: ·
Savings on payments of social security. These
could be made through a bank transfer instead of more costly means (e.g.
cheques). ·
Non-quantifiable benefits, including less fraud
associated with paper systems and less costly local tax collection. Enterprises Utilities providers will face total benefits
of between EUR 32 million and EUR 160 million in the first
year. Energy and water providers would benefit from reductions in transaction
costs. Many banked consumers would switch to cheap direct debit payments which
for utility firms is one of the cheapest ways of collection of payments.
Utility firms may lose small amounts of revenue, although most likely not
material,[467] through offering discounts to consumers who pay electronically.
Those retailers that only accept cash would also face potentially lost business
although this is unlikely to be material.[468]
However retailers that were electronically based, not necessarily even in the
consumer's home country, would be able to benefit. Table 2.G: Total
benefits for utility firms from lower transaction costs (EUR millions) || 2 million consumers || 6.4 million consumers || 10 million consumers EUR 1.5/transaction || 32 || 102 || 160 5.3. Option
3: Modify the provisions of the Recommendation relative to the beneficiaries 5.3.1. Variant
A: Introduce a universal right to a basic payment account (i.e. Basic Payment
Account to be offered by all banks and not subject to conditions such as not
having another account) Effectiveness of
policy option The effectiveness of this policy option would
largely be dependent on the degree of application of the provisions of the
Recommendation (Option 2). This option would result in many requests for
a basic payment account, not only from unbanked consumers but also from those
who already have an account; in particular, if such an account is free of
charge or at reasonable cost. Since all account providers would have to provide
this service, then consumers' awareness of the availability of a basic payment
account would increase. Universal access would not only attract unbanked
consumers who often cannot afford a regular payment account but would also
attract those who do not need a basic account but would find it attractive
since it would be free or at low cost. Therefore, this option would be
disproportionate to the objectives and would be contrary to the Commission
Recommendation and to the European Parliament report, as well as to the users
view,[469] which suggest ensuring the right of access to a basic payment
account only to those consumers who do not already hold another account in that
Member State. Universal access would, however, increase the number of basic
payment accounts and thus reduce the number of unbanked consumers. Consumers would have the right of access to a
basic payment account based on the Recommendation's principles in both national
and cross-border contexts. Consumers travelling to another Member State would
be able to ask for such an account wherever they went which without a universal
right would not be possible. Consequently, this option would facilitate both
consumer mobility (in geographic terms) and thus confidence in the internal
market, while at the same time increasing the confidence of financially
excluded citizens. However, consumers with a basic payment account would still
have no access to all potential payment means (e.g. those allowing online
purchasing) due to limited features of a basic payment account under the
Recommendation which do not change under this option. By introducing common general rules on the
right of access across the EU for providing a basic payment account, national
legal fragmentation would also be mitigated. It would therefore be easier for
the banks to offer cross-border services and enter new markets without the need
for massive changes in their internal structures and procedures (although some
modifications may be necessary, for example in terms of product features).
Depending on the policy instrument chosen and assuming that this option would
introduce common general rules on the right of access across the EU (based on
the implementation of the Recommendation), Member States would still be given
the flexibility necessary to recognise different conditions at national level
(e.g. unequal degree of development of the banking sector, varying price levels
of banking services in Member States, different banking traditions and
divergent levels of payment accounts' penetration). Therefore they could, for
instance, set the limits for the price of a basic payment account or decide on
the content and target of public campaigns informing about the availability of
this product (as foreseen by the Recommendation). Impacts of policy option on stakeholders
and efficiency The impacts of this policy option would
largely be dependent on the degree of application of the provisions of the
Recommendation (Option 2). In general, the same effects as described under
Option 2 would apply. Additionally, obliging all account providers
to offer a basic payment account to any consumers, regardless of whether or not
they already hold and can afford a regular account, would lead to a massive and
disproportionate administrative and financial burden for financial services
providers. First, based on the Recommendation's provisions, the basic accounts
would have to be provided free of charge or at a reasonable cost. The example
of countries where basic payment accounts are offered at reasonable cost has
shown that the annual fee for an account is much lower than the costs for the
bank in maintaining this account. If basic accounts are available at low cost
to everybody, then many consumers, not only unbanked ones, might be interested
in having one, which would greatly increase the costs for banks, while reducing
their revenue from other accounts. This will result in
more consumers switching from their regular account to a cheaper option. The cost would not only be incurred in terms of the accounts’
subsidies, but also in terms of administrative burden and the number of staff
necessary to handle the expected high demand for basic payment
accounts. Second, financial services providers would
incur one-off costs of opening and recurring costs for running payment
accounts. These costs would be greater as the potential number of clients is
likely to be higher as there would be both unbanked and banked consumers who
would open accounts. However, while account providers would
welcome vulnerable, mostly poorer consumers, who have been unbanked so far, and
who would not be able to buy additional financial products that potentially
could offset the provision of low-priced basic payment accounts in the short term, they offer a potential growth market in
the future. Moreover, the universality of this option could lead to an increase
in multi-banking by the non-excluded consumers as thus a growth in the market
for other financial services products. Account providers will also face
benefits through the use of more efficient payments instruments, e.g. bank transfers. There would also be additional benefits for
providers such as the reduced cost of and risks from cash based payments or the
benefits from a contribution to capital and funding. Finally, providers entering new markets would still have to meet these
specific national requirements in terms of account features but would be aware
of the common framework for opening an account and therefore while they would
face some costs of adaptation in terms of IT systems, operating procedures and
the features of existing products, these costs would be minimised as some
elements relating to opening procedures would remain unchanged. A basic payment account available for
everybody would bring substantial benefits to many unbanked consumers. In
addition to the effects described under Option 2, this option would also bring
cost savings for consumers with payments accounts as some of those who can
afford a current account would switch to a 'cheaper' basic payment account.
However, the number of consumers switching would depend on the features of a
basic payment account. Consumers – both vulnerable and mobile – could benefit
from the universal access to a payment account within their country of residence and cross-border. This
would boost consumers' confidence and encourage geographic mobility. However,
they would still bear additional costs if shopping online because the necessary
facilities (e.g. a payment card) would not be a guaranteed feature of a basic
payment account. Also, since the current features of the basic payment account
do not protect a consumer's balance against seizure, consumers who fall into
debt may have their balance seized by creditors, which may be a costly
consequence of access. Member States would also face costs and
benefits although the ultimate size of these impacts would depend on the
instrument chosen. In principle, these would be similar to those described
under Option 2 and dependent on the degree of
application of the provisions of the Recommendation. The key difference would
be that those Member States that have not currently foreseen universal access
would have to do so. This means that those Member States which select only one
or two institutions to provide such accounts (e.g. France) as well as those who
already comply with the Recommendation (Belgium, France and Italy), as
currently foreseen as an option under the Recommendation, would no longer be
able to do so and would have to change their system. Moreover, all Member
States would have to engage in public information campaigns to raise awareness.
Consequently, the universal access would make the overall costs for public
authorities across the EU higher, also in terms of monitoring compliance and
enforcement. Companies would also face costs and benefits
although the ultimate size of these impacts would depend on the instrument
chosen. In principle, these would be similar to those described under Option 2
and dependent on the degree of application of the
provisions of the Recommendation. Companies providing
goods and services online would however not benefit to the same extent from
this option as there is no guarantee of online purchasing facilitates, which
are considered indispensable by users[470] and
several public authorities[471]. Moreover, international companies, particularly those online, may
suffer if the features of the account are limited to domestic transactions. Quantification of costs and benefits The impacts of this policy option would
largely be dependent on the degree of application of the provisions of the
Recommendation (Option 2). In general, the same impacts as those described
under Option 2 would be felt albeit with some, largely qualitative, differences
which are described. As such, the figures provided illustrate the estimated
cumulative benefit of Option 2 when combined with this policy option. Consumers Consumers will
face total costs of between EUR
122 million and EUR 610 million in the first year, provided
that there is improved application of the provisions of the Recommendation as
foreseen under Option 2. Under this Option, the costs would however be closer
to the upper end of the scale as the reduction in the number of unbanked (at
least relative to Option 2) would be expected to be slightly higher. Moreover,
given that all Member States would have to introduce
universality, no discount would be applied as it is assumed that the number of
unbanked would decline somewhat – although not necessarily by much in those
Member States that have to make broader access more feasible. Table
2.H: Cost and benefits for consumers (EUR millions) || 2 million consumers || 6.4 million consumers || 10 million consumers Costs || || || Account operation costs || 102 || 326 || 510 Failed transaction costs || 20 || 64 || 100 Other costs (e.g. risk of account fraud, risk of seizure of funds) || Not quantifiable || Not quantifiable || Not quantifiable Total costs || 122 || 390 || 610 Benefits || || || Benefits from reduced use of money transmission and cheques || 360 || 1 152 || 1 800 Benefits through discounts for electronic payments || 250 || 800 || 1 250 Benefits through discounts for online purchases || 0 || 0 || 0 Other benefits (increased accessibility of funds, reduced risk of theft, increased choice of goods and services, accessibility of accommodation/employment/improved confidence, benefits from switching to a cheaper account) || Not quantifiable || Not quantifiable || Not quantifiable Total benefits || 610 || 1 952 || 3 050 These figures
include both one-off costs and recurring costs. However, in practice, one-off costs for unbanked consumers have not been identified since
the cost of opening of a payment account is included in the first annual fee which the consumer has
to pay. All costs incurred by consumers are therefore recurring costs. The
recurring costs borne by consumers can be broken as
follows: ·
Annual maintenance charge (which includes
start-up charges in the first year); ·
Costs of inappropriate use of account; ·
Non-quantifiable costs in the form of potential
losses from fraud in the event that the account details are lost or stolen as
well as the risk of possible seizure of funds in the event of any court judgment. Recurring annual benefits for consumers are
estimated at between EUR 610 million and
EUR 3050 million provided that there is improved application
of the provisions of the Recommendation as foreseen under Option 2. Under
this Option, the benefits would however be closer to the upper end of the scale
as the number of unbanked (at least relative to Option 2) would be
expected to be slightly higher because of the universality of the access. The one-off benefits would be for consumers who opt to switch from a 'normal' to a 'basic' payment
account. These are non-quantifiable. While concrete cost savings would be
available for these consumers, a number may decide against switching as the
basic account may not have all the services of a 'normal' account. Consequently,
the numbers depend largely on highly variable consumer preferences. The annual recurring
benefits can be broken down as follows: ·
Benefits from discounts from reduced use of
money transmission and cheques; ·
Benefits from discounts from electronic payments
and online purchases; ·
Other non-quantifiable benefits. Consumers would
be able to access their funds more quickly, regardless of their geographic
location. They would also benefit from an increased sense of security through
lower levels of cash transactions, an increase in choice of goods and services
where electronic payments are obligatory which would become available, the
ability to access employment and accommodation more easily and a reduced sense
of financial, economic and social exclusion. Payment services providers Payment account providers will face total costs of
between EUR 80 million and EUR 400 million in the first
year provided Option 2 applies. Since all Member States would have to
introduce universal access, no discount factor will be applied: the number of
unbanked citizens will fall even in those Member States that have implemented
the Recommendation. Table
2.I: Cost and benefits for providers (EUR millions) || 2 million consumers || 6.4 million consumers || 10 million consumers Costs || || || Annual account operation costs || 80 || 256 || 400 Other costs (modifying IT systems, internal procedures, staff training). || Not quantifiable || Not quantifiable || Not quantifiable Total costs || 80 || 256 || 400 Benefits || || || Recurring annual benefits || 20 || 64 || 100 Other benefits (increased customer base, reduced cost of cash, increased capital base, improved reputation) || Not quantifiable || Not quantifiable || Not quantifiable Total benefits || 20 || 64 || 100 These costs
consist of: ·
Annual recurring costs are account operation
costs. ·
One-off costs arise from consumers switching to
a basic payment account. The introduction of a basic payment account, which can
be offered free of charge or at low cost, will result in some consumers
switching from their regular account to a cheaper option. The revenue of
providers may fall. It is impossible to quantify these
numbers as while concrete cost savings would be available for these consumers,
a number of consumers may decide against switching as the basic account may not
have all the services of a 'normal' account. Consequently, the numbers depend
largely on consumer preferences, which vary considerably. As such, it is
assumed that these costs, even though potentially substantial, are not
quantifiable. Given that all
Member States would have a new system introduced and that the switching rate is
likely to be higher due to the universality of the option (i.e. it would be
available to everyone not just the unbanked), these costs are likely to be
substantially higher. Payment services providers would face recurring
annual benefits of between EUR 20 million and
EUR 100 million. There would be the same
further, non-quantifiable, benefits as in Option 2 above. Since universal access should reduce the number of unbanked
citizens compared to Option 2, these benefits would be slightly higher. Governments Member States will face total costs of up to EUR 3.40 million in the first year depending on the
instrument chosen. Member States will face total
benefits of between EUR 20 million and EUR 100 million
in the first year. There would also be non-quantifiable
benefits in terms of less fraud associated with paper systems and less costly
local tax collection. Table
2.J: Cost and benefits for Member States (EUR millions) || 2 million consumers || 6.4 million consumers || 10 million consumers Costs || || || One off costs of introducing legislation || 1.27 || 1.27 || 1.27 Recurring costs of monitoring and supervising application || 2.12 || 2.12 || 2.12 Total costs || 3.4 || 3.4 || 3.4 Benefits || || || Recurring annual benefits || 20 || 64 || 100 Other benefits (less benefit and tax fraud) || Not quantifiable || Not quantifiable || Not quantifiable Total benefits || 20 || 64 || 100 Other stakeholders – utility firms Utilities
providers will face total benefits of between EUR 36 million and EUR 180 million annually, provided Option 2 applied. However, under this option, benefits would be closer to the upper
end of the scale (EUR 180 million) since the number of unbanked citizens (at
least relative to Option 2) would be lower due to the universal right of
access. Since all Member States would have to introduce universal access, no
discount factor will be applied: the number of unbanked citizens will fall even
in those Member States that have implemented the Recommendation. Table
2.K: Total benefits for utility firms from lower transaction costs (EUR
million) || 2 million consumers || 6.4 million consumers || 10 million consumers EUR 1.5/transaction || 36 || 115 || 180 5.3.2. Variant
B: Introduce a right to a basic payment account at least for national residents Effectiveness of
policy option The effectiveness of this policy option would
largely be dependent on the degree of application of the provisions of the
Recommendation (Option 2). This option would only solve the problem of
financial exclusion at the national level and would erect barriers to the
internal market. Unbanked consumers would be able to open a basic payment
account free of charge or at low cost exclusively in their country of residence
which is regarded as sufficient by the financial industry.[472] This solution would be entirely ineffective in facilitating
cross-border access to basic payment services and contrary to the European
Parliament recommendation which states that "access to basic payment
services is a precondition for consumers to benefit from the internal market."[473] In addition, consumers would not be encouraged to travel for work
or to study in another Member State as they would not have a right to deposit
their savings, wages or scholarships in a local payment
account. This could create a major restriction to the
free movement of persons guaranteed by the Treaty and could be considered
discriminatory vis-à-vis non-residents from other EU Member States. This
would also be an important barrier to potential economic growth in the EU which
is mitigated by millions of foreign workers who are ready to travel to EU
regions where deficiencies in the availability of labour exist. Despite the cross-border shortcomings, this
option would however largely address the larger problem of unbanked consumers,
reducing financial, economic and social exclusion by enabling newly banked
consumers to participate in modern national societies with a greater
confidence. However, a non-universal right of access to payment accounts, in
line with the Recommendation's provisions, would allow Member States to
designate only selected institutions to provide basic payment accounts. It can
be assumed that such a solution would not result in attracting as many unbanked
consumers as the measure on universal access when all providers would be
obliged to offer this service cross-border. This option would also allow for a higher
number of payments to be made by administrations (e.g. social benefits) and
employers (wages) through bank transfers thus ensuring savings and perhaps
additional resources for investments that could bring further economic growth.
Nevertheless, under the features of a basic payment account, consumers would
not have access to all payment means, such as those allowing for online
shopping. Cross-border internet shopping would not be available for holders of
a basic payment account and a major chance for this sector’s development and
greater market competition would be missed. Depending on the policy instrument chosen and
assuming that this option would introduce common general rules on the right of access across the EU (based on
the implementation of the Recommendation), Member States would still be given
the flexibility necessary to recognise different conditions at national level
(e.g. unequal degree of development of the banking sector, varying price levels
of banking services in Member States, different banking traditions and
divergent levels of payment account penetration). Therefore they could, for
instance, set the limits for the price of a basic payment account, choose
whether or not to designate selected or all providers to offer basic payment
accounts, or decide on the content and target of public campaigns informing
about the availability of this product (as foreseen by the Recommendation). Impacts of policy option on stakeholders
and efficiency The impacts of this policy option would
largely be dependent on the degree of application of the provisions of the
Recommendation (Option 2). Unbanked consumers in their country of
residence would have access to basic payment accounts free of charge or at
minimal cost but with limited features. In general, the same effects as
described under Option 3A could be expected albeit with some differences. There
would be cost savings for domestic unbanked consumers who would have an easy
access to basic payment account free of charge or at low cost. In particular,
mobile consumers could still face difficulties in opening a basic payment
account. This could be particularly problematic for less wealthy mobile
consumers, such as migrant workers who work in agriculture or in construction.
Moreover, domestic consumers would continue to face additional costs, often
excessive for vulnerable consumers, should they wish to make use of online
shopping or internet banking. This would inhibit their ability to avail of
savings which can be achieved from lower prices online. Financial services providers (all or some
depending on the approach chosen by Member States or self-regulatory
initiatives) would incur costs (e.g. accounts’ subsidies, internal
administrative procedures and staff resources) related to the provision of
basic payment accounts to domestic consumers. The majority of these costs would
fall on financial services providers in Member States with a high number of
unbanked consumers (e.g. EU12 and especially Romania and Bulgaria). However,
these costs would be lower than in Option 3A because there would not be an
obligation to provide an account to non-residents, even for those Member States
which have a large number of migrant workers. The benefits would however also
be correspondingly lower. Member States would face costs and benefits
although the ultimate size of these impacts would depend on the instrument
chosen. In principle, these would be similar to those described under Option 2
(i.e. less than under Option 3A) and dependent on the
degree of application of the provisions of the Recommendation. Companies would also face benefits from
efficiency gains although the ultimate size of these impacts would depend on
the instrument chosen. In principle, these would be similar to those described
under Option 3A and dependent on the degree of
application of the provisions of the Recommendation. However, it is likely that
they would be slightly lower due to the domestic focus of this option. Companies providing goods and services online would however not
benefit to the same extent from this option as there is no guarantee of online
purchasing facilities. Moreover, international companies, particularly those
online, would continue to suffer if the features of the account are limited to
domestic transactions Quantification of costs and benefits The impacts of this policy option would
largely be dependent on the degree of application of the provisions of the
Recommendation (Option 2). In general, the same impacts as those described
under Option 2 would be felt albeit with some, largely qualitative, differences
and which stem from the fact that under this policy option only national
residents would have the right of access to a basic payment account. As such,
the figures provided illustrate the estimated cumulative benefit of Option 2
when combined with this policy option. For the calculation of the potential
costs and benefits of this policy option, a discount is applied to take into
account the fact that three Member States (Belgium France and Italy) have
already fully implemented the Recommendation and all national residents have a
right to a basic payment account. Consumers Consumers will face total costs of between
EUR 102 million and EUR 510 million in the
first year. These costs will be
incurred in those Member States where the Recommendation has not yet been
implemented. Table 2.L: Costs
and benefits for consumers (EUR millions) || 2 million consumers || 6.4 million consumers || 10 million consumers Costs || || || Account operation costs || 85 || 273 || 426 Failed transaction costs || 17 || 53 || 84 Other costs (e.g. risk of account fraud, risk of seizure of funds) || Not quantifiable || Not quantifiable || Not quantifiable Total costs || 102 || 326 || 510 Benefits || || || Benefits from reduced use of money transmission and cheques || 301 || 963 || 1504 Benefits through discounts for electronic payments || 209 || 668 || 1044 Benefits through discounts for online purchases || 0 || 0 || 0 Other benefits (increased accessibility of funds, reduced risk of theft, increased choice of goods and services, accessibility of accommodation/employment/improved confidence) || Not quantifiable || Not quantifiable || Not quantifiable Total benefits || 510 || 1 631 || 2 548 These figures
include both one-off costs and recurring costs. However, in practice, one-off costs for unbanked consumers have not been identified since the cost of opening of a payment account is included in the first
annual fee which the consumer has to pay for the account maintenance. All costs
incurred by consumers are recurring costs. The recurring costs borne by consumers
can be broken as follows: ·
Annual maintenance charge (which includes
start-up charges in the first year); ·
Costs of inappropriate use of account; ·
There would also be non-quantifiable costs for
consumers in the form of potential losses from fraud in the event that the
account details are lost or stolen as well as the risk of possible seizure of
funds in the event of any court judgement. Consumers will
also face recurring annual benefits of between EUR 510 million and EUR 2548 million provided
that there is improved application of the provisions of the Recommendation as
foreseen under Option 2. Under this option, the benefits would however be
closer to the lower end of the scale as the number of unbanked (at least
relative to Option 2) would not decrease very substantially due to the fact
that non-residents would not have a right to a payment account. The annual recurring benefits can be broken down as follows: ·
Benefits from discounts from reduced use of
money transmission and cheques; ·
Benefits from discounts from electronic payments
and online purchases. Consumers would
also face non-quantifiable benefits in the form of being able to access their
funds more quickly, regardless of their geographic location; they would benefit
from an increased sense of security through lower levels of cash transactions,
an increased choice of goods and services where electronic payments are
obligatory, the ability to access employment and accommodation more easily and
a reduced sense of financial, economic and social exclusion. Payment services providers Payment account providers will face total
costs of between EUR 67 million and
EUR 334 million in the first year provided
that there is improved application of the provisions of the Recommendation as
foreseen under Option 2. These costs consist of annual recurring costs and
one-off costs. The annual recurring costs are account operation costs. Table
2.M: Cost and benefits for providers (EUR millions) || 2 million consumers || 6.4 million consumers || 10 million consumers Costs || || || Annual account operation costs || 67 || 214 || 334 Other costs (modifying IT systems, internal procedures, staff training). || Not quantifiable || Not quantifiable || Not quantifiable Total costs || 67 || 214 || 334 Benefits || || || Recurring annual benefits || 17 || 53 || 84 Other benefits (increased customer base, reduced cost of cash, increased capital base, improved reputation) || Not quantifiable || Not quantifiable || Not quantifiable Total benefits || 17 || 53 || 84 Payment
services providers would face recurring annual benefits of EUR 17 – 84 million. There would be the
same further, non-quantifiable, benefits as in Option 2 above. Governments Member States will face total costs of up to EUR 3.02 million in the first year, depending on the
instrument chosen. Member States will face total
benefits of EUR 17 – 84 million in
the first year. There would also be non-quantifiable
benefits in terms of less fraud associated with paper systems and less costly
local tax collection. Table
2.N: Cost and benefits for Member States (EUR millions) || 2 million consumers || 6.4 million consumers || 10 million consumers Costs || || || One off costs of introducing legislation || 1.13 || 1.13 || 1.13 Recurring costs of monitoring and supervising application || 1.89 || 1.89 || 1.89 Total costs || 3.02 || 3.02 || 3.02 Benefits || || || Recurring annual benefits || 17 || 53 || 84 Other benefits (less benefit and tax fraud) || Not quantifiable || Not quantifiable || Not quantifiable Total benefits || 17 || 53 || 84 Other
stakeholders – utility firms Utility providers will face total benefits of
between EUR 36 million and EUR 180 million in the first
year (likely to be closer to the lower end of the
scale), provided Option 2 applied, since non-residents would not have a right
of access.. Table
2.O: Total benefits for utility firms from lower transaction costs (EUR
million) || 2 million consumers || 6.4 million consumers || 10 million consumers EUR 1,5/transaction || 31 || 96 || 150 5.3.3. Variant
C: Introduce a right to a basic payment account at least to those non-residents
with a link to the country where they wish to open an account (i.e. targeting
specifically mobile consumers) Effectiveness of policy option The impacts of this policy option would be
closely related to the degree of application of the provisions of the
Recommendation (Option 2) and the instrument chosen. This option would reduce the number of
excluded national and mobile consumers with a link to the country, although
only to the extent that the Recommendation is applied. In general, similar
effects could be envisaged as those in Option 2, albeit on a far lesser scale
since the benefits would only be accrued by mobile consumers with a link to the
country where they apply for an account, which represents a comparatively small
number of people. The effectiveness in terms of reducing the number of unbanked
(both in terms of vulnerable and mobile consumers) would also depend on the
opportunity cost (in terms of time and effort) associated with proving the link
to that member state. Such an additional requirement in order to open a payment account, demonstration of which may
be even more difficult due to a language barrier, would decrease the confidence
of foreign consumers. The shortcomings of the Recommendation
identified in Section 1.2, e.g. limited availability of some payment means
(e.g. online payment facility), would persist and would have negative effects
on consumption – particularly in a cross-border context – and growth. Providers of basic payment accounts would
find it more demanding to enter new markets, as they would be required to
verify the link of non-residents with the country. This could be even more
burdensome and costly for them if the criteria for this link were established
at national level, even if only to a limited extent. Unless the criteria were
defined at EU level, this would not create a level playing field, since local providers
would better understand the specificity of national documents needed to prove
this link. Cross-border providers would need to incur the cost necessary to
adapt to national legal environments. Depending on the policy instrument chosen and
assuming that this option would introduce common general rules on the right of access across the EU (based on
the implementation of the Recommendation), Member States would still be given
the flexibility necessary to recognise different conditions at national level.
Therefore they could, for instance, set the limits for the price of a basic
payment account, choose whether or not to designate selected or all providers
to offer basic payment accounts, define which documents can prove a consumer's
link with the country, or decide on the content and target of public campaigns
informing consumers about the availability of the product (as foreseen by the
Recommendation). Impacts of policy option on stakeholders
and efficiency Consumers would face costs and benefits. The
additional administrative burden of the procedure to confirm a 'link' with the
country where the consumer intends to open a bank account could discourage many
mobile consumers, particularly vulnerable ones who may find it difficult to
collect and provide the necessary documentation. Consequently, it is assumed
that this option would have little real impact on the level of unbanked
citizens. For example, consumers could be required to present a document
demonstrating that they legally work or study in the new Member State which
however can be difficult to obtain shortly after the arrival. This could delay
their access to a payment account
forcing them for instance to keep their money in a less secure place or having
limited access to them. They might also need to use more costly channels to
receive or transfer funds before they will be able to open a payment account. Moreover, legal residents
and citizens would have the right of access to a basic payment account guaranteed but without some important features, e.g.
internet banking or online shopping, for which they would need to pay extra due
to the limited scope of the Recommendation. Without the possibility of making
use of e-commerce they would continue paying higher prices for products and
services and would still have limited choice. Account providers would incur high costs and
a large administrative burden. However, there would be the additional – and
potentially substantial – administrative burden of the procedure to confirm a
'link'. Appropriate enforcement efforts would also need to be put in place in
order to avoid unjustified rejection of non-residents' applications by banks.
Nevertheless, since this option would only be applied for 'mobile' consumers,
then providers would face such an increased administrative burden albeit on a
far lesser scale. In terms of distribution of impacts, account providers in
countries where there are higher numbers of migrant workers (e.g. UK) would
face a higher administrative burden compared to those countries that have more
emigration. In the cross-border context, providers might furthermore be subject
to additional national rules defining, for instance, which national documents
are necessary in order for the link to be adequately proven. This can be an
additional cost for them which may outweigh potential benefits from entering
new markets and thus discourage them from expanding. Companies would also face benefits from
efficiency gains, although the ultimate size of these impacts would depend on
the instrument chosen. In principle, these would be similar to those described
under Option 2 and dependent on the degree of
application of the provisions of the Recommendation. However, it is likely that
they would be slightly lower than those in Option 2 as the administrative procedure
for verifying access could deter consumers from opening a payment account. Companies providing goods and services online would not benefit to
the same extent from this option as there is no guarantee of online purchasing
facilitates. Moreover, international companies, particularly those online,
would continue to suffer if the features of the account are limited to domestic
transactions. Member States would face costs and benefits
although the ultimate size of these impacts would depend on the instrument
chosen. In principle, the type of impacts would be similar to those described
under Option 2 and dependent on the degree of
application of the provisions of the Recommendation. Member States may incur
additional costs since they might be required to define legal criteria for the
'link with the country' for non-residents wishing to open a bank account, and
then ensure banks' compliance with these criteria. Quantification of costs and benefits The impact of this policy option would
largely be dependent on the degree of application of the provisions of the
Recommendation. In general, the same impacts as those described under Option 2
would be felt albeit with some, largely qualitative, differences which are
described below. They stem from the fact that under this policy option (aside
from all national residents) only those non-residents who can prove a link to
the country where they wish to open an account would have the right of access to a basic payment
account. As such, the figures provided illustrate the estimated cumulative
benefit of Option 2 when combined with this policy option. For the calculation
of the potential costs and benefits of this policy option, a discount is
applied to take into account the fact that three Member States (Belgium France
and Italy) have already fully implemented the Recommendation. Thus, they should
not be impacted by this option since both national residents and non-residents
already have the right of
access to a basic payment account in these countries. Consumers Consumers will face total costs of between
EUR 105 million and EUR 526 million in the first year, provided that there is
improved application of the provisions of the Recommendation, as foreseen,
under Option 2. These costs will be incurred in those
Member States where the Recommendation has not yet been implemented. Under this option, costs would be at the mid-
to upper-end of the scale, as the reduction in the number of unbanked (at least
relative to Option 2) would be substantial, but would still exclude those non-residents
who do not have a link with the country where they wish
to open an account (e.g. migrant workers who just arrived). In addition, the calculation discounts the three Member States (Belgium France and Italy) where the Recommendation has been fully implemented
and where both national residents and non-residents have a right to a basic
payment account. Table 2.P: Cost and
benefits for consumers (EUR millions) || 2 million consumers || 6.4 million consumers || 10 million consumers Costs || || || Account operation costs || 88 || 281 || 440 Failed transaction costs || 17 || 55 || 86 Other costs (e.g. risk of account fraud, risk of seizure of funds) || Not quantifiable || Not quantifiable || Not quantifiable Total costs || 105 || 337 || 526 Benefits || || || Benefits from reduced use of money transmission and cheques || 310 || 993 || 1552 Benefits through discounts for electronic payments || 216 || 690 || 1078 Benefits through discounts for online purchases || 0 || 0 || 0 Other benefits (increased accessibility of funds, reduced risk of theft, increased choice of goods and services, accessibility of accommodation/employment/improved confidence, benefits from switching to a cheaper account) || Not quantifiable || Not quantifiable || Not quantifiable Total benefits || 526 || 1 683 || 2 630 These figures
include both one-off costs and recurring costs. However, in practice, one-off costs for unbanked consumers have not been identified since
the cost of opening of a payment account is included in the first annual fee which the consumer has
to pay for account maintenance. All costs incurred by consumers are therefore
recurring costs. The recurring costs borne by consumers can be broken as follows: ·
Annual maintenance charge (which includes
start-up charges in the first year); ·
Costs of inappropriate use of the account; ·
There would also be non-quantifiable costs for
consumers in the form of potential losses from fraud in the event that the
account details are lost or stolen and the risk of possible seizure of funds in
the event of any court judgment. Consumers will
also face recurring annual benefits of between EUR 526 million and EUR 2630 million, provided
that there is improved application of the provisions of the Recommendation as
foreseen under Option 2. Under this option, benefits would be at the mid- to
upper-end of the scale as the reduction in the number of unbanked (at least
relative to Option 2) would be substantial but would still exclude those
non-residents who do not have a link with the country
where they wish to open an account (e.g. migrant workers who just arrived). The annual recurring benefits can be broken
down as follows: ·
Benefits from discounts from reduced use of
money transmission and cheques; ·
Benefits from discounts from electronic payments
and online purchases. Consumers would
also face non-quantifiable benefits in the form of being able to access their
funds more quickly, regardless of their geographic location; they would benefit
from an increased sense of security through lower levels of cash transactions;
an increased choice of goods and services where electronic payments are obligatory;
the ability to access employment and accommodation more easily; and a reduced
sense of financial, economic and social exclusion. Payment services providers Payment account providers will face total
costs of EUR 69 – 345 million in
the first if Option 2 were applied. These costs consist
of annual recurring costs and one-off costs. The annual recurring costs are
account operation costs. Table
2.Q: Cost and benefits for providers (EUR millions) || 2 million consumers || 6.4 million consumers || 10 million consumers Costs || || || Annual account operation costs || 69 || 221 || 345 Other costs (modifying IT systems, internal procedures, staff training). || Not quantifiable || Not quantifiable || Not quantifiable Total costs || 69 || 221 || 345 Benefits || || || Recurring annual benefits || 17 || 55 || 86 Other benefits (increased customer base, reduced cost of cash, increased capital base, improved reputation) || Not quantifiable || Not quantifiable || Not quantifiable Total benefits || 17 || 55 || 86 Payment
services providers would face recurring annual benefits of between
EUR 17 million and EUR 86 million. There would be the same further, non-quantifiable, benefits as in
Option 2 above. Governments Member States will face total costs of up to EUR 3.02 million in the first year depending on the instrument
chosen. These costs are calculated in the same way as
described in Section 6.2 (Option 2) taking into account the discounts for the
three Member States where the Recommendation has already been implemented.
Member States may incur additional costs to define legal criteria for the 'link
with the country' for non-residents willing to open a bank account, however
these are non-quantifiable. Member States will face
total benefits of between EUR 17 million and EUR 86 million
in the first year. There would also be non-quantifiable
benefits in terms of less fraud associated with paper systems and less costly
local tax collection. Table
2.R: Cost and benefits for Member States (EUR millions) || 2 million consumers || 6.4 million consumers || 10 million consumers Costs || || || One off costs of introducing legislation || 1.13 || 1.13 || 1.13 Recurring costs of monitoring and supervising application || 1.89 || 1.89 || 1.89 Total costs || 3.02 || 3.02 || 3.02 Benefits || || || Recurring annual benefits || 17 || 55 || 86 Other benefits (less benefit and tax fraud) || Not quantifiable || Not quantifiable || Not quantifiable Total benefits || 17 || 55 || 86 Other
stakeholders – utility firms Utilities providers would face total annual
benefits of between EUR 31 million and EUR 150 million
(expected to be at the upper end of the scale) provided Option 2 applies. The reduction in the number of unbanked would be substantial,
including non-residents with a link to the country. Table 2.S: Total
benefits for utility firms from lower transaction costs || 2 million consumers || 6.4 million consumers || 10 million consumers EUR 1,5/transaction || 31 || 99 || 155 5.4. Option
4: Improve the features of the basic payment account 5.4.1. Variant
A: enlarge the list of basic services to include internet banking and online
purchasing Effectiveness of
policy option This option itself would not contribute to a
significant reduction in the number of unbanked consumers unless introduced
together with Option 2. It should, however, improve consumers' access to
certain basic payment services. In particular, this option would substantially
improve consumers’ access to modern means of payment, such as those allowing
consumers to make payments over the internet and/or to manage their account
through an online banking facility in line with the European Parliament
recommendations to the Commission on Access to Basic Banking Services.[474] The opportunity to make use of e-commerce would be a major
advantage for consumers since it would give them access to a greater choice of
products (including some which are difficult to obtain offline) and lower
prices. This would boost their confidence by letting them make full use of
innovative and modern channels of purchase and communication. At the same time,
internet banking would ensure convenience in control of the account balance and
in execution of many banking operations online, e.g. direct debits. Such
features may even encourage unbanked consumers to open accounts and facilitate
cross-border activity by consumers, as they would find it easier to have a payment account in another Member State,
because they could do so online and residence would not be essential. This option could also facilitate
cross-border activity by providers as they would not necessarily need to open a
branch or establish a subsidiary in order to provide basic account services, because
newly banked consumers would be able to carry out many operations online. This
would potentially have a positive impact on competition and prices. Providers
across the EU would also need to follow similar requirements on a basic payment account based on the provisions of
the present Recommendation, which would allow for a level playing field in this
market. Depending on the policy instrument chosen and
assuming that this option would introduce common general rules on the right of access across the EU (based on
the implementation of the Recommendation), Member States would still be given
the flexibility necessary to recognise different conditions at national level. Impacts of policy
option on stakeholders and efficiency This option will enable consumers to save
both money and time. Consumer benefits would come
through several channels. First, consumers should
benefit from using more efficient payment instruments, i.e. reduced use of
money transmission mechanisms and fewer cheques. Consumers would therefore be
able to use cheaper payment instruments, such a bank transfers rather than,
more expensive payment methods, such cash or cheques. Second, consumers will be able to access and pay less for products and
services available over the internet. As argued by the European Consumer
Organisation BEUC "people without access to various means of payment
are unable to take advantage of the lower prices of goods and services that
internet sales can offer."[475]
Third, internet banking, also considered necessary by consumer organisations[476], would also allow consumers for better control of their account
balance and of the payments to be made. Fourth, consumers
should be able to benefit from discounts from using electronic payments, for
example, by establishing a direct debit to pay their electricity bill. Finally,
consumers could benefit from the reduced risk of theft or fraud associated with
cash payments (see Section 2.4). Nevertheless,
consumers’ resources would not be protected against seizure by creditors under
this option. This may be a factor discouraging some unbanked citizens, who tend
to fall into debts, from opening a basic payment account. However, the right of access in itself may still be limited at both national and
cross-border level since there would be no guarantee that the provisions of
Recommendation were applied. Consumers may face some additional costs
associated with the new account's features (online purchase facility). These
costs should not be excessive as they should be provided either free of charge
(e.g. included in the annual account fee) or at reasonable cost. Some of the
most vulnerable consumers will bear occasional and recurring costs for the
inappropriate use of the basic account, e.g. unpaid overdrafts. In France and
the UK these charges are estimated at somewhere between EUR 17 and 22 for each
failed transaction.[477] As a result of these charges and as a minimum balance is not
protected against seizure by creditors under this option, some consumers,
especially those who tend to fall in financial difficulties, may still be
discouraged from opening a payment account. Financial services providers would be able to
make some efficiency gains by moving to more efficient means of payment and
enabling account management to take place online. Moreover, they would face a
reduced demand for cash, so would not face additional costs in terms of
insurance or transportation of cash. However, these benefits would be limited,
as the right of access in
itself would not alter under this option. Providers would incur costs, as they
would need to ensure additional account features such as internet banking and
instruments allowing for internet purchases. However, such features already
exist on many current accounts so it is unlikely that the incremental costs of
making such facilitates available to basic accounts would be substantial. If
these account features were to be provided together with a basic payment account to all unbanked consumers,
then their cost could be substantial, especially for the providers in Member States
where there are still many consumers without a payment account (e.g. Romania or Bulgaria). It would be less expensive in
countries where a great majority of citizens already holds a payment account, although in these Member
States, many mobile consumers, e.g. migrant workers, who have been unbanked so
far, may request an access to a basic payment account. With internet banking
and instruments allowing for internet purchases, it would probably need to be
assessed whether a basic payment account can still be offered free of charge or
at low cost as currently envisaged by the provisions of the Recommendation. Finally, providers interested in offering
payment account services cross-border would continue to face unnecessary
barriers and costs as the rules introduced in Member States, although based on
the Recommendation's provisions would differ from country to country.
Providers, entering new markets, would have to meet these specific national
requirements and therefore their IT systems, operating procedures, and the
features of already existing products would have to be adapted accordingly.
These costs are likely to exceed potential benefits, at least in the short to
medium term, and providers may refrain from start operating across borders. Member States could make savings by moving to
more efficient means of payments, i.e. switching from cash or cheques to
electronic transfers. For this reason some public authorities stressed the
importance of online banking as a feature of basic payment accounts.[478] Benefits would come in the form of savings
on payments of social security which could be made through a bank transfer
instead of more costly means (e.g. cheques). A 2010 study estimated these
savings at EUR 7-12 per recipient per annum.[479] Such
savings may be substantial (see Section 2.1). Enterprises – in
particular utility companies such as energy and water providers – would benefit
from reductions in transaction costs since many banked consumers would switch
to cheaper online payments. More importantly, this option
would present a huge opportunity for e-commerce. If
coupled with Option 2, this option would allow consumers to take advantage of
lower prices and a greater choice of products, giving an important boost to
online businesses. Improvements are only expected over the longer-term as more
consumers become aware of the potential benefits of online shopping. A UK study found that 22% of newly banked consumers had shopped by
telephone or internet since opening their account.[480] Finally, society as a whole should benefit
through economic development and growth, albeit to a limited extent, scale due
to the fact that this option does not actually reduce the number of unbanked.
First, the development of the retail banking in less advanced countries is
unavoidable in the near future. Even if cash is still the only payment means
for a significant part of the society in Romania and Bulgaria, with the rapid
development of electronic means of payment which are generally cheaper and
safer, citizens of these and other EU countries lagging behind will quickly
catch up and will be using banking services in a universal and habitual manner
in near future. This will also ensure further economic growth in the region
since, as demonstrated in Sub-section 1.1.4, the use of electronic payments
allows for savings in public administration, private sector and for consumers.[481] Second, there is likely to be a reduced incidence of fraud and tax
avoidance since payment transactions would increasingly take place through
electronic (and traceable) payments channels. Quantification of costs and benefits The impact of this policy option would be
dependent on the application of the Recommendation (Option 2). In general, the
same impacts as those described under Option 2 would be felt albeit with some
differences which are described below. They stem from the fact that under this
policy option a basic payment account would include the possibility for the
consumer to make online purchases and to use internet banking. As such, the
figures provided illustrate the estimated incremental costs and benefits of
this option compared with Option 2. As Member States
would have to introduce these additional features of a basic payment account,
no discount factor will be applied: the number of unbanked citizens would
decline substantially even in the Member States which have already implemented
the Recommendation. Consumers Consumers would face total costs of between
EUR 22 million and EUR 108 million in the first year. Table 2.T shows the incremental costs and
benefits of this Option compared to Option 2. Under
this Option, costs would be close to the upper end of the scale as the
reduction in the number of unbanked (at least relative to Option 2) is likely
to be larger. Table
2.T: Incremental costs and benefits for consumers (EUR millions) || 2 million consumers || 6.4 million consumers || 10 million consumers Costs || || || Account operation costs || 19 || 62 || 97 Failed transaction costs || 2 || 7 || 11 Other costs (e.g. risk of account fraud, risk of seizure of funds) || Not quantifiable || Not quantifiable || Not quantifiable Total costs || 22 || 69 || 108 Benefits || || || Benefits from reduced use of money transmission and cheques || 88 || 282 || 440 Benefits through discounts for electronic payments || 28 || 89 || 139 Benefits through discounts for online purchases || 120 || 384 || 600 Other benefits (increased accessibility of funds, reduced risk of theft, increased choice of goods and services, accessibility of accommodation/employment/improved confidence, benefits from switching to a cheaper account) || Not quantifiable || Not quantifiable || Not quantifiable Total benefits || 236 || 754 || 1179 These figures
include both one-off costs and recurring costs. However, in practice, no one-off costs for unbanked consumers have been identified since
the cost of opening of a payment account is included in the first annual fee which consumer has to
pay for account maintenance. All costs incurred by consumers are therefore
recurring costs. The recurring costs borne by consumers can be broken down as follows. ·
Annual maintenance charge (which includes
start-up charges in the first year); ·
Costs of inappropriate use of account; ·
It is assumed that even though new features of a
basic payment account would be introduced, these would only insignificantly increase the account operation
costs for consumers and mostly due to the necessary payment instruments by
which a consumer could purchase online. These additional potential costs are
not quantifiable since the cost of an annual maintenance of a payment account estimated at EUR 51 would
probably be sufficient to already cover the internet banking facility and the
possibility for consumers to buy online; ·
There would also be other non-quantifiable costs
for consumers in the form of potential losses from fraud in the event that the
account details are lost or stolen as well as the risk of possible seizure of
funds in the event of any court judgment. Consumers will also face incremental
recurring annual benefits of between EUR 236 million
and more than EUR 1179 billion
as a result of the right of access to a basic payment account. Under this
Option, the benefits would however be close to the upper end of the scale as
the reduction in the number of unbanked (at least relative to Option 2) would
be greater following the introduction of the new features of a basic payment
account. The annual recurring
benefits can be broken down as follows. ·
Benefits from discounts from reduced use of
money transmission and cheques. ·
Benefits from discounts from electronic payments
and online purchases. ·
Consumers would also face non-quantifiable benefits
in the form of lower prices in internet and less expensive transfer of funds
via internet banking. Other non-quantifiable benefits would include: quicker
access to funds regardless of consumer's geographic location, an increased
sense of security through lower levels of cash transactions, an increased
choice of goods and services where electronic payments are obligatory which
would become available, the ability to access employment and accommodation more
easily and a reduced sense of financial, economic and social exclusion. Payment services providers Payment account providers will face total
costs of between EUR 15 million and EUR 74 million in
the first year as a result the right of access to a
basic payment account. Table 2.U shows the incremental costs and benefits
compared to Option 2. The annual recurring costs are as account operation
costs. Table
2.U: Incremental costs and benefits for providers (EUR millions) || 2 million consumers || 6.4 million consumers || 10 million consumers Costs || || || Annual account operation costs || 15 || 48 || 74 Other costs (modifying IT systems, internal procedures, staff training). || Not quantifiable || Not quantifiable || Not quantifiable Total costs || 15 || 48 || 74 Benefits || || || Recurring annual benefits || 2 || 7 || 11 Other benefits (increased customer base, reduced cost of cash, increased capital base, improved reputation) || Not quantifiable || Not quantifiable || Not quantifiable Total benefits || 2 || 7 || 11 It is assumed that even though new features of a basic payment
account would introduced, these would only increase the account operation costs
for providers by a small amount and mostly due to the introducing payment
instruments by which a consumer could purchase online. These additional
potential costs are not quantifiable: the estimated EUR 51 annual maintenance
cost of a payment account often
covers internet banking and online purchasing facilities. Payment
services providers would face recurring annual benefits of between EUR 2 million and EUR 11 million. There
would be the same further, non-quantifiable, benefits as in Option 2 above. Governments It is assumed that this Option can only be
implemented in conjunction with Option 2. If this is the case, then Member
States will not face any incremental costs under this
option in the first year. Member States will face total
benefits of between EUR 2 million and EUR 11 million in
the first year. There would also be non-quantifiable
benefits in terms of less fraud associated with paper systems and less costly
local tax collection. Table
2.V: Incremental cost and benefits for Member States (EUR millions) || 2 million consumers || 6.4 million consumers || 10 million consumers Costs || || || One off costs of introducing legislation || 0 || 0 || 0 Recurring costs of monitoring and supervising application || 0 || 0 || 0 Total costs || 0 || 0 || 0 Benefits || || || Recurring annual benefits || 2 || 7 || 11 Other benefits (less benefit and tax fraud) || Not quantifiable || Not quantifiable || Not quantifiable Total benefits || 2 || 7 || 11 Other
stakeholders E-commerce businesses would benefit from more
consumers buying online. It is difficult to quantify the possible scale of
benefits that it could bring to internet shops since it is difficult to
estimate how many consumers would make use of online shopping and how much they
would be able to spend there. Utilities providers would face incremental
benefits of between EUR 16 – 80 million
in the first year. Table 2.W: Total
incremental benefits for utility firms from lower transaction costs || 2 million consumers || 6.4 million consumers || 10 million consumers EUR 1.5/transaction || 16 || 51 || 80 5.4.2. Variant
B: enlarge the list of basic services to include a small overdraft or a
'buffer' facility Effectiveness of
policy option This Option could slightly contribute to a
reduction in the number of unbanked consumers. Depending on the effectiveness
of Option 2, it would also improve the quality of consumers' access to certain
basic account services. This option would, in theory, be effective in
increasing the confidence of vulnerable consumers who would have access to
additional financial resources in the form of an overdraft or a small ‘buffer’,
even if very limited, in case they find themselves in financial difficulties.
This additional feature could attract especially vulnerable consumers who often
have to struggle to make ends meet before their benefits are paid. However, it
would need to be ensured that banks would not charge consumers excessive fees
for making use of the overdraft or ‘buffer’ facility. This option would not
ensure that consumers could have access to all basic payment means since it
does provide for internet banking and online purchases tools. Moreover, the fact that an overdraft is
provided would mean that the opening of the account (with the overdraft
facility) would be subject to the Consumer Credit Directive, unless it was for
less than EUR 200. In practice, several Member States have applied the
Directive to credits lower than EUR 200. Conversely, the addition of an
overdraft to a basic payment account could reduce access since providers would
be likely to hold the consumer to an equivalent standard of creditworthiness.
As a result, not many vulnerable consumers would be admitted to open a bank
account with an overdraft, while the banks' costs to introduce this facility
and to cover related risks are likely to be very high. Therefore, this option
may actually be disproportionate to the set objectives. Even though a level playing field for
providers would be guaranteed across Europe based on the principles of the
Recommendation, providers would not necessarily be encouraged to offer basic
payment accounts in other Member States under this option. If a consumer does
not arrange an overdraft on his account, it would be less burdensome and costly
for the bank to recover the debt from a domestic than foreign user. Because of
this, and due to risks related to unpaid overdrafts, credit institutions could
refrain from providing cross-border payment accounts thus preventing consumers from greater access to
cross-border basic banking services. Under this option, due higher risks of fraud
and default for providers related to the overdraft and ‘buffer’ facility, more
stringent rules of verification of information on applicants could be required,
as with providers offering consumer credit. These rules could make the right of access to a basic payment account more difficult for consumers
with negative credit histories. Similarly, to provide access to credit, even on
a limit scale, would be contrary to the principles of responsible lending and
borrowing, which have been advocated by the Commission in the field of credit.[482] Depending on the policy instrument chosen and
assuming that this option would introduce common general rules on the right of access across the EU (based on
the implementation of the Recommendation), Member States would still be given
the flexibility necessary to recognise different conditions at national level. Impacts of policy
option on stakeholders and efficiency This option would give clear short term
benefits to users of basic payment accounts since it would allow them to go beyond available account
balance when necessary. These benefits would be lower if banks were to impose
fees for using the overdraft or buffer facility. However, in the longer term,
there is a risk that consumers would fall into indebtedness and, even though
the amounts are small, could risk their future credit rating and future access
to other products and services. An overdraft or ‘buffer’ facility would
substantially increase the costs of a basic payment account for providers and therefore it is no surprise that financial
industry is not in favour of it.[483] Even
if only a very limited overdraft or buffer were offered with a basic payment account, it would still be a major
risk for banks. The related costs would rise to a great extent in the Member
States with many unbanked citizens, such as Romania and Bulgaria, but could be
also substantial in those where many migrant workers were likely to open a
basic payment accounts (e.g. UK). It could also be more expensive for banks to
verify information on applicants; the necessary procedures would need to be
more stringent since the risk of fraud when an account is equipped with an
overdraft or buffer facility is much higher. Due to the higher costs of a basic
payment account when an overdraft or ‘buffer’ facility are included, and if the
accounts are still to be provided free of charge or at low cost, as it is
currently stipulated in the Recommendation, the losses of banks would be
significant and could deter provision of such accounts. E-commerce businesses would not necessarily
benefit from this option, since it does not introduce instruments to facilitate
online shopping. Consumers would need to pay extra for this. Due to the
insignificant impact on the number of unbanked, enterprises would be unable to
make major cuts on the cost of paying of wages to employees. Member States would need to bear the cost of
implementing the new legislation on the right of access to a basic payment account (depending on the instrument to
be chosen). They would not be able to make particular savings in using cheap
electronic means to transfer benefits to consumers’ payment
accounts. Finally, society as a whole would be unlikely
to benefit greatly through economic development and growth because this option
would have little impact on the number of unbanked and could even increase this
figure. Quantification of
costs and benefits The impact of this policy option would
largely be dependent on the degree of application of the provisions of the
Recommendation (Option 2). In general, under this option consumers would have
access to a small overdraft or a buffer facility as an additional feature of a
basic payment account, and this could lead to greater rather than less
exclusion. As such, the figures provided illustrate the estimated incremental
costs and benefits of this option compared with Option 2. For the calculation
of the potential costs and benefits of this policy option, a discount is
applied to take into account the fact that in one Member States which has
already implemented the Recommendation (France) a small overdraft or a buffer
facility is already available together with a basic payment account. Thus,
France should not be impacted by this option since both national residents and
non-residents can have access to a basic payment account with this additional
feature. Consumers Consumers will face total costs of between
EUR -11 million and EUR -57 million in the first year. However, given that these costs are
negative, these are in fact benefits. These costs will be incurred in those
Member States where a small overdraft or a buffer facility in not provided as
an additional feature of a basic payment account: Belgium, Sweden, Germany,
Hungary, Austria, Czech Republic, Estonia, Greece, Italy, Lithuania,
Luxembourg, Latvia, Poland, Slovakia, Slovenia, Spain, Cyprus, Malta, Romania,
Bulgaria, the Netherlands, Finland, Denmark, Ireland, the UK and Portugal. Under this Option, the costs would be towards
the lower end of the scale as the reduction in the number of unbanked (at least
relative to Option 2) would be lower or even negative. This is due to the
availability of overdraft or buffer facility within a
basic payment account. In addition, the calculation
discounts the one Member States (France) which has
already implemented the Recommendation and where a
small overdraft or a buffer facility is already available. Table
2.X: Incremental cost and benefits for consumers (EUR millions) || 2 million consumers || 6.4 million consumers || 10 million consumers Costs || || || Account operation costs || -2 || -7 || -11 Failed transaction costs || -9 || -29 || -46 Other costs (e.g. risk of account fraud, risk of seizure of funds) || Not quantifiable || Not quantifiable || Not quantifiable Total costs || -11 || -36 || -57 Benefits || || || Benefits from reduced use of money transmission and cheques || -8 || -26 || -40 Benefits through discounts for electronic payments || -6 || -18 || -28 Benefits through discounts for online purchases || 0 || 0 || 0 Other benefits (increased accessibility of funds, reduced risk of theft, increased choice of goods and services, accessibility of accommodation/employment/improved confidence, benefits from switching to a cheaper account) || Not quantifiable || Not quantifiable || Not quantifiable Total benefits || -14 || -44 || -68 These figures
include both one-off costs and recurring costs. However, in practice, no one-off costs for unbanked consumers have been identified since
the cost of opening of a payment account is included in the first annual fee which consumer has to
pay for the account maintenance. All costs incurred by consumers are therefore
recurring costs. The recurring costs borne by consumers are negative for this
Option because, relative to Option 2, fewer unbanked consumers will be able to
access an account. These costs are those in Variant A above, and also: ·
It is possible that a
small overdraft or a buffer facility provided by banks together with a basic
payment account could substantially increase the cost of a basic payment
account for consumers since banks would need to calculate the risk of not
recovering overdrafts. This cost is however not
quantifiable; further, the estimated EUR 51 annual maintenance cost may
sometimes already cover a small overdraft or buffer
facility. ·
Consumers may face additional non-quantifiable costs in the form of fees charged by banks for
unpaid overdrafts. There would also be non-quantifiable costs for consumers in
the form of potential losses from fraud in the event that the account details
are lost or stolen as well as the risk of possible seizure of funds in the
event of any court judgment. Consumers will however also face recurring
annual benefits of between EUR -14 million and more
than EUR -68 million. Under this option, the benefits would, however, be
negative. This is due to the fact that providers would assess the
creditworthiness of borrowers in line with rules on credit which would make
access more difficult. Consequently,
benefits of increased access are actually a cost here because the new account
features will have a negative impact on access. The
annual recurring benefits are those found in Variant A above. Consumers will however also face recurring
annual benefits of between EUR -14 million and more
than EUR -68 million. This figure is negative because compared to Option 2 it
would lead to more unbanked consumers. Consequently, benefits of increased
access are actually a cost here because it will lead to less access. Under this
option, the benefits would, however, be negative. This is due to the fact that
providers would assess the creditworthiness of borrowers in line with rules on
credit. The annual recurring
benefits are those found in Variant A above. Payment services providers Payment account providers will face total
costs of between EUR -2 million and EUR -9 million in
the first year. These costs are negative here as the
providers would not have to open accounts for as many consumers and could
reject them on the basis of inadequate creditworthiness. However, since a small
overdraft or a buffer facility is already available in one Member State, it
will be discounted from the calculation of costs for the payment services
providers. These costs consist of annual recurring costs and one-off costs. Table
2.Y: Incremental cost and benefits for providers compared to Option 2 (EUR
millions) || 2 million consumers || 6.4 million consumers || 10 million consumers Costs || || || Annual account operation costs || -2 || -7 || -9 Other costs (modifying IT systems, internal procedures, staff training). || Not quantifiable || Not quantifiable || Not quantifiable Total costs || -2 || -7 || -9 Benefits || || || Recurring annual benefits || -0.4 || -1 || -2 Other benefits (increased customer base, reduced cost of cash, increased capital base, improved reputation) || Not quantifiable || Not quantifiable || Not quantifiable Total benefits || -0.4 || -1 || -2 One-off costs
would be incurred by providers assessing the risks of granting the consumer an
overdraft or buffer facility. The annual recurring costs are account operation
costs. It is possible that a
small overdraft or a buffer facility provided by banks in addition to a basic
payment account would substantially increase the cost of providing a basic
payment account for providers. This cost is not
quantifiable. Payment services providers would face
recurring annual benefits of between EUR -0.4 million
and EUR -2 million. These
benefits are however negative here as the providers would not have to open
accounts for as many consumers and could reject them on the basis of inadequate
creditworthiness. There would be the same further,
non-quantifiable, benefits as in Option 2 above. Governments Member States will face total costs of up to EUR 0.25 million in the first year depending on the
instrument chosen. This cost would not exist if this option were combined with
Option 2. There could also be risks of growing over-indebtedness. Member States will face total benefits of between EUR -0.4 million
and EUR -2 million in the first year. These benefits are negative since there would be more unbanked
consumers relative to Option 2 and thus fewer benefits for governments. There
would also be non-quantifiable benefits in terms of less fraud associated with
paper systems and less costly local tax collection. Table
2.Z: Incremental cost and benefits for Member States (EUR millions) || 2 million consumers || 6.4 million consumers || 10 million consumers Costs || || || One off costs of introducing legislation || 0.09 || 0.09 || 0.09 Recurring costs of monitoring and supervising application || 0.16 || 0.16. || 0.16 Total costs || 0.25 || 0.25 || 0.25 Benefits || || || Recurring annual benefits || -0.4 || -1 || -2 Other benefits (less benefit and tax fraud) || Not quantifiable || Not quantifiable || Not quantifiable Total benefits || -0.4 || -1 || -2 Other
stakeholders – utility firms Utilities providers will face total benefits
of between EUR -0,8 million and EUR -4 million in the
first year. Under this Option, the benefits for utility
firms would however be negative as the reduction in the number of unbanked (at
least relative to Option 2) would be lower due to the risk of exclusion because
of providers' assessing a consumer's ability to repay. Table
2.AA: Incremental total benefits for utility firms from lower transaction costs
(EUR millions) || 2 million consumers || 6.4 million consumers || 10 million consumers EUR 1,5/transaction || -0,8 || -3 || -4 5.4.3. Variant
C: ensure a minimum account balance that cannot be seized. Effectiveness of
policy option This option would contribute to a very small
reduction in the number of unbanked consumers as the number of unbanked
consumers who are at danger to get their balance seized is rather small. On the
other hand, this option would be costly for banks who would be required to protect
consumers' balance against seizure. Therefore, this option seems to be
disproportionate to the set objectives. Depending on the effectiveness of
Option 2, it should, however, improve slightly the quality of consumers' access
to certain basic account services This option would be effective in decreasing,
albeit very slightly, the number of unbanked consumers and especially those who
tend to fall into financial difficulties. Many of them have reservations about
opening a payment account because they are afraid that their balance could be
seized by creditors in case they fall into debt. Under this option, the balance
would be protected to a certain extent. A payment account covering this feature
could attract some vulnerable consumers and would be positive in giving them
confidence so they are able to participate fully in the modern banked society.
They could also receive and transfer funds (which is usually cheaper than other
payment methods) from their payment account and therefore it would help them avoid paying excessive
fees. They would still however have no access to all basic means of payment, as
internet shopping facilities are not included in this option. Banks might find it more difficult to provide
cross-border services under this option since they would need to follow
national rules protecting the basic payment account’s balance against seizure, unless these rules are harmonised
at EU level. An uneven playing field resulting from divergent national measures
could discourage credit institutions from cross-border activity in this area.
Without EU harmonisation, consumers may also refrain from accessing
cross-border payment accounts
since they may have difficulties in understanding whether their balance is
equally protected in another Member State. Depending on the policy instrument chosen and
assuming that this option would introduce common general rules on the right of access across the EU (based on
the implementation of the Recommendation), Member States would still be given
the flexibility necessary to recognise different conditions at national level. Impacts of policy
option on stakeholders and efficiency This option would be beneficial to users
because a minimum balance on their basic payment accounts would be protected against seizure by creditors. Therefore,
even if in debt, consumers would still have access to some minimum resources
allowing them to pay for basic needs. However, since this additional feature
would be costly for banks, consumers are likely to pay more for a basic payment
account despite the Recommendation's requirement that it should be free or at a
reasonable cost. This additional cost could further discourage vulnerable
unbanked consumers. Financial services providers would incur
additional costs if they had to ensure non-seizable minimum balances on basic payment accounts. They would need to
introduce additional procedures necessary to protect this balance. Since the
costs of the maintenance of a basic payment account would increase for banks, it might not be feasible for them
to offer this product free of charge or at low cost. If this were required by
law (as currently envisaged by the Recommendation) then the losses of financial
institutions could be substantial. To diminish these costs, banks might refrain
from offering basic payment accounts
cross-border and therefore miss potential new business opportunities and
profits. Companies, or other institutions which under
national law are privileged creditors, would face substantial costs if they are
not allowed to seize the resources from the debtor's account to which they
would normally have a right. This option would significantly affect Member
States in terms of costs related to the implementation of the new rules
(depending on the instrument to be chosen). The obligation to protect a minimum
balance would require considerable, costly changes to national civil and
commercial legislation in many Member States. However, account payments have
proved to be the most economical channel to transfer benefits and wages, and
therefore obvious cuts could be achieved by public administrations and
businesses if they are able to make more payments by these means. The financial
impact of this policy option on Member States depends also on the
implementation of the Recommendation (Option 2) under which public authorities
are required to organise public campaigns raising awareness about the
availability of basic payment accounts. Finally, society as a whole would benefit,
through economic development and growth, but only to a limited extent, as this
option would only slightly reduce the number of unbanked citizens. Quantification of
costs and benefits The impacts of this policy option would
largely be dependent on the degree of application of the provisions of the
Recommendation (Option 2). In general, the same impacts as those described
under Option 2 would be felt, with a few differences. They stem from the fact
that under this option, consumers would have the right
of access to a basic payment account with a minimum account balance that cannot be seized. As such, the figures provided illustrate the estimated incremental
costs and benefits of this option compared with Option 2. For the calculation
of the potential costs and benefits of this policy option, a discount is
applied to take into account the fact that in one Member State (France) an
account with a minimum balance that cannot be seized is
already available. Thus, it should not be affected by
this option. Consumers Consumers will face total costs of between
EUR 9 million and EUR 45 million in the first year. These costs will be incurred in those
Member States where an account with a minimum balance
that cannot be seized is not available. The costs would be at the lower end of the scale as the reduction in
the number of unbanked (at least relative to Option 2) would be small. Table
2.BB: Incremental costs and benefits for consumers compared to Option 2 (EUR
millions) || 2 million consumers || 6.4 million consumers || 10 million consumers Costs || || || Account operation costs || 8 || 24 || 38 Failed transaction costs || 1 || 5 || 7 Other costs (e.g. risk of account fraud, risk of seizure of funds) || Not quantifiable || Not quantifiable || Not quantifiable Total costs || 9 || 29 || 45 Benefits || || || Benefits from reduced use of money transmission and cheques || 27 || 85 || 133 Benefits through discounts for electronic payments || 19 || 59 || 93 Benefits through discounts for online purchases || 0 || 0 || 0 Other benefits (increased accessibility of funds, reduced risk of theft, increased choice of goods and services, accessibility of accommodation/employment/improved confidence, benefits from switching to a cheaper account) || Not quantifiable || Not quantifiable || Not quantifiable Total benefits || 45 || 145 || 226 These figures
include both one-off costs and recurring costs. However, in practice, no one-off costs for unbanked consumers have been identified since
the cost of opening of a payment account is included in the first annual fee which consumer has to
pay for the account maintenance. All costs incurred by consumers are therefore
recurring costs. The recurring costs borne by consumers are those in Variants A
and B above, and also: ·
It is possible that an account with a minimum balance that cannot be seized
could slightly increase the cost of a basic payment account for consumers since
banks may want to charge consumers for this additional feature, but this cost is not quantifiable. Consumers will also face recurring annual
benefits of between EUR 45 – 226 million.
Under this Option, the benefits would however be at the lower end of the scale
as the reduction in the number of unbanked consumers is expected to be very
small. The annual recurring
benefits are those in Variants A and B above. Payment services providers Payment account providers will face total
costs of between EUR 6 million and EUR 30 million in the first year. These
costs consist of annual recurring costs and one-off costs. The annual recurring
costs are account operation costs. It is possible that a basic payment account with a minimum
balance that cannot be seized could slightly increase
the cost of operation of a basic payment account for providers, but this cost is not quantifiable. Table
2.CC: Incremental cost and benefits for providers (EUR millions) || 2 million consumers || 6.4 million consumers || 10 million consumers Costs || || || Annual account operation costs || 6 || 19 || 30 Other costs (modifying IT systems, internal procedures, staff training). || Not quantifiable || Not quantifiable || Not quantifiable Total costs || 6 || 19 || 30 Benefits || || || Recurring annual benefits || 1 || 5 || 7 Other benefits (increased customer base, reduced cost of cash, increased capital base, improved reputation) || Not quantifiable || Not quantifiable || Not quantifiable Total benefits || 1 || 5 || 7 Payment
services providers would face recurring annual benefits of between EUR 1
million and EUR 7 million.
There would be the same further, non-quantifiable, benefits as in Option 2
above. Governments Member States will face total costs of up to EUR 0.25 million in the first year depending on the
instrument chosen. Member States will face total
benefits of between EUR 1.5 million and EUR 7 million
in the first year. There would also be non-quantifiable
benefits in terms of less fraud associated with paper systems and less costly
local tax collection. Table
2.DD: Incremental cost and benefits for Member States (EUR millions) || 2 million consumers || 6.4 million consumers || 10 million consumers Costs || || || One off costs of introducing legislation || 0.09 Recurring costs of monitoring and supervising application || 0.16 Total costs || 0.25 Benefits || || || Recurring annual benefits || 1.5 || 5 || 7 Other benefits (less benefit and tax fraud) || Not quantifiable || Not quantifiable || Not quantifiable Total benefits || 1.5 || 5 || 7 Other
stakeholders – utility firms Utilities providers will face incremental
benefits of between EUR 3 million and EUR 13 million in
the first year (expected to be at the lower end of the
scale) as the reduction in the number of unbanked citizens is expected to be
relatively low. Table
2.EE: Incremental benefits for utility firms from lower transaction costs || 2 million consumers || 6.4 million consumers || 10 million consumers EUR 1,5/transaction || 3 || 9 || 13 5.4.4. Variant
D: Ensure that the features of payment account are not of a discriminatory
nature. Effectiveness of
policy option This would contribute to a reduction in the
number of unbanked consumers. Depending on the effectiveness of Option 2, it
should also improve the quality of consumers' access to certain basic account
services, especially in the cross-border context. This option would be effective in ensuring
that basic payment accounts offered by banks, both to residents and
non-residents, do not contain any discriminatory conditions, e.g. they do not
prohibit the use of certain payment services in another Member State. This
would certainly give consumers more confidence and attract more users since
they could easily use their basic payment account not only in a national, but
also in a cross-border dimension without distinctions being made. This would
encourage users to check for cross-border offers of basic financial services,
thus contributing to the Single Market for retail financial services.
Nevertheless, consumers would not have access to all basic payment means and
they would need to pay for these additionally, for example, no facility for
online purchases or internet banking is envisaged under this option. It would also be easier for providers to
offer services in other Member States since the rules, based on the same
principles of the Recommendation (Option 2), would not differ substantially
from one country to another. This would create a more level playing field for
providers of basic payment accounts. Depending on the policy instrument chosen and
assuming that this option would introduce common general rules on the right of access across the EU (based on
the implementation of the Recommendation), Member States would still be given
the flexibility necessary to recognise different conditions at national level. Impacts of policy
option on stakeholders and efficiency This option would bring particular benefits
to consumers who could use their basic payment accounts (e.g. debit cards, bank
transfers) easily and under the same conditions across the EU. This is broadly
supported by users' representatives.[484] This
would give consumers more freedom and potentially benefits from shopping in
other Member States, even if online shopping would not be guaranteed under this
option. This option is not likely to bring any major benefits to e-commerce
businesses. However, the reduction in the number of unbanked citizens could
benefit businesses through a reduction in the use of cash. Under this option, providers would bear the
costs necessary to ensure that a basic payment account operates under the same
conditions at national and EU level. For example, consumers would be able to
use their debit cards freely in other Member States without additional fees as
well as make payments and transfers just like domestically. Such conditions are
a standard with a regular payment account in the EU, but since a basic payment account is a low-cost
product, banks may want to avoid offering the same conditions for this product
in order to reduce costs. This situation was observed, for instance, in the
Netherlands.[485] Further, higher costs for banks implied by this option may
discourage them from operating in other Member States due to the potentially
low or non-existent profitability of cross-border activity. Member States would incur costs related to
the implementation and enforcement of these new rules banning the
discriminatory practices of banks. Public institutions would save by paying
benefits to payment accounts of
beneficiaries instead of using more costly means. Finally, society as a whole would benefit
from economic development and growth due to a reduction in the number of
unbanked citizens. It would also help to create a more efficient and mobile
population as consumers would be able to use payment services throughout the EU
more easily. Quantification of
costs and benefits The impacts of this policy option would
largely be dependent on the degree of application of the provisions of the
Recommendation (Option 2). In general, the same impacts as those described
under Option 2 would be felt, albeit with some differences, which are described
below. The use of a basic payment account (e.g. debit card) could not be
restricted by the provider to the country where the account is opened. Consumer
would be able to make use of the basic payment account in all EU Member States
while providers would be allowed to impose additional, but not unreasonable,
fees for the use of the account. As such, the figures provided illustrate the
estimated incremental costs and benefits of this option compared with Option 2.
For the calculation of the potential costs and benefits
of this policy option, no discount factor is applied: no Member State has introduced
non-discriminatory rules with regards to account use at both national and
cross-border levels. Thus, it is assumed that all
Member States would be affected by this policy option. Consumers Consumers will face total costs of between
EUR 22 million and EUR 108 million in the first year
(likely to be at the mid- to upper-end of this), as the
reduction in the number of unbanked (at least relative to Option 2) is expected
to be relatively high. This is due to fact that consumers will be able to use
the basic payment account in the whole EU which may be especially useful to
migrant consumers. Table
2.FF: Incremental cost and benefits for consumers (EUR millions) || 2 million consumers || 6.4 million consumers || 10 million consumers Costs || || || Account operation costs || 19 || 62 || 97 Failed transaction costs || 2 || 7 || 11 Other costs (e.g. risk of account fraud, risk of seizure of funds) || Not quantifiable || Not quantifiable || Not quantifiable Total costs || 22 || 69 || 108 Benefits || || || Benefits from reduced use of money transmission and cheques || 40 || 128 || 200 Benefits through discounts for electronic payments || 28 || 89 || 139 Benefits through discounts for online purchases || 0 || 0 || 0 Other benefits (increased accessibility of funds, reduced risk of theft, increased choice of goods and services, accessibility of accommodation/employment/improved confidence, benefits from switching to a cheaper account) || Not quantifiable || Not quantifiable || Not quantifiable Total benefits || 68 || 217 || 339 These figures
include both one-off costs and recurring costs. However, in practice, no one-off costs for unbanked consumers have been identified, since
the cost of opening of a payment account is included in the first annual fee which consumer has to
pay for account maintenance. All costs incurred by consumers are therefore recurring
costs. The recurring costs are those in Variants A, B and C above, and also: It is possible that a basic account of
which use is not limited to the country where it is opened could slightly increase its cost for consumers since banks may want
to charge consumers for the possibility to use the account abroad. This cost is however not quantifiable and in addition it is possible
that in fact in many Member States the cost of an annual maintenance of a payment account estimated at EUR 51 would
already cover the possibility to use the account abroad. Consumers will also face recurring annual
benefits of between EUR 68 million and EUR 339 million (likely to be at the mid- to
upper-end of the scale) as the reduction in the number of unbanked (at least
relative to Option 2) is expected to be relatively high. This is due to fact
that consumers will be able to use the basic payment account in the whole EU
which may be especially useful to migrant consumers. The
annual recurring benefits are those in Variants A, B and C above. Payment services providers Payment account providers will face total
incremental costs of between EUR 19 million and EUR 94 million in the first year.
These costs consist of annual recurring costs and one-off costs. The annual
recurring costs are account operation costs. A basic payment account which can be used
identically across the EU could increase the cost of
operation of a basic payment account for providers, but this cost is not quantifiable. Payment
services providers would face negative annual benefits of up to EUR -9 million.
This is because there would be lower profits as revenues declined due to higher
costs of managing cross-border transactions. Table
2.GG: Incremental cost and benefits for providers (EUR millions) || 2 million consumers || 6.4 million consumers || 10 million consumers Costs || || || Annual account operation costs || 19 || 60 || 94 Other costs (modifying IT systems, internal procedures, staff training, lost revenues). || Not quantifiable || Not quantifiable || Not quantifiable Total costs || 19 || 60 || 94 Benefits || || || Recurring annual benefits || -1.8 || -6 || -9 Other benefits (increased customer base, reduced cost of cash, increased capital base, improved reputation) || Not quantifiable || Not quantifiable || Not quantifiable Total benefits || -1.8 || -6 || -9 Governments Member States will face total costs of up to EUR 0.38 million in the first year. Member States will face incremental benefits of between EUR 2
million and EUR 11 million in the first year above the
costs of Option 2. There would also be non-quantifiable
benefits in terms of less fraud associated with paper systems and less costly
local tax collection. Table
2.HH: Incremental cost and benefits for Member States (EUR millions) || 2 million consumers || 6.4 million consumers || 10 million consumers Costs || || || One off costs of introducing legislation || 0.14 Recurring costs of monitoring and supervising application || 0.24 Total costs || 0.38 Benefits || || || Recurring annual benefits || 2 || 7 || 11 Other benefits (less benefit and tax fraud) || Not quantifiable || Not quantifiable || Not quantifiable Total benefits || 2 || 7 || 11 Other
stakeholders – utility firms Utilities providers will face incremental
benefits of between EUR 4 million and EUR 20 million
annually (expected to be closer to the upper-end of the
scale). Table
2.II: Incremental benefits for utility firms from lower transaction costs || 2 million consumers || 6.4 million consumers || 10 million consumers EUR 1.5/transaction || 4 || 13 || 20 Annex
III
Presentation and ease of comparison of bank fees 1. Existing
policy and legislative framework 1.1. Member State level
initiatives The 2011 study on bank fee information at
national level[486]
carried out on behalf of the European Commission provided an EU-wide inventory
of initiatives addressed at improving transparency and comparability of payment
account fees. These are detailed below. Glossaries
or standard terminologies[487] In 2011, 65 glossaries were in place in the
EU.[488] An increasing number of initiatives relating to glossaries over
time have been observed across Member States: 16 glossaries date from between
2001 and 2007 and following the financial crisis, 19 initiatives have been
launched since 2008, with 9 from 2009 or later. None of the glossaries identified were
specific to bank current accounts and generally encompassed different types of
accounts (current, savings, etc.) as well as general financial terms (including
at macro level). A glossary specific to cards terminology is in place in
Slovenia. Glossaries vary significantly according to the accounts concerned
(current, savings, etc.), the targets (consumers versus professionals) and the
type of format (simple list of terms versus interactive tools). No glossary was backed by legislation, except
for the broader initiatives in Italy and Portugal encompassing disclosure of
information on fees. For 59 glossaries, information on the organisations that
had produced the glossary is available. The initiators of these initiatives are
distributed as follows: 24 glossaries (40%) are issued by commercial entities
(including financial portals, financial advisers, commercial websites) of which
4 are banks; 15 (25%) are issued by authorities and regulators of which 8 are
central banks; 10 (17%) are issued by banking associations; 8 (14%) are issued
by non-profit associations of which 4 are consumer associations and 2 (3%) are
jointly issued by a banking association and a consumer association. Glossaries
are not in place (either through legislation or via a voluntary commitment) in
the following member States: Cyprus, Germany, Lithuania, Luxembourg,
Netherlands, Poland and Sweden. Glossaries targeting foreign consumers and
providing a translation of terms into other languages, in addition to
definitions, are operating in the Czech Republic, Italy, Portugal and Slovakia. Generally, none of the glossaries represent standard
terms that are binding for the financial sector, e.g. in lists of fees
communicated to consumers. Belgium and Italy make two exceptions, as the
initiatives in these countries aim at increasing transparency of lists of fees.
Examples: In Belgium, a self-regulatory initiative on a common glossary is
currently being prepared by the financial sector with the aim of having lists
of fees based on the terminology used in this glossary. A law in Italy provides that a glossary of terms must be included at the
end of the list of fees. The glossary contains the same 15 terms, standardised
for all banks and for all payment accounts offered to consumers. The glossary
has been drafted in cooperation with experts in communications, to ensure that
the explanations are clear, understandable and user friendly. Ireland's consumer agency created the “It’s your money”
website focusing on money matters and financial services, also including a
glossary, a comparison tool and an information initiative. In Malta the financial regulator created “My Money Box”
an initiative providing a glossary, a comparison tool and financial
information. This tool is perceived to be a very efficient and effective way to
compare bank charges. The Slovak Ministry of Finance has set up a website, “Fininfo”, focusing on money matters and financial services. It includes a
glossary, financial education tools (e.g. financial literacy test) and
information for consumers. In the Netherlands, particular attention is devoted to financially
excluded, illiterate and elderly people who have more difficulty using the
internet. Such focus and the limited number of initiatives identified might be
related to the fact that in the Netherlands the retail banking fees are among
the lowest in Europe and there is no issue related to the lack of transparency
and comparability. Table
3.A: Glossaries Type of initiative || Countries Legislative Self-regulation || Italy Belgium Non legislative intervention || Austria, Bulgaria, the Czech Republic, Denmark, Estonia, Greece, Spain, Finland, France, Hungary, Ireland, Latvia, Malta, Portugal, Romania, Slovenia, Slovakia and United Kingdom No intervention || Cyprus, Lithuania, Luxembourg, Netherlands, Poland and Sweden Disclosure of information on fees This type of initiative includes obligations
to disclose lists of fees and standard sheets for the presentation of tariffs.
For the disclosure of information, the period 2009 - 2011 shows a particular
development in the use of these initiatives: 12 initiatives originate during
the 90s, 15 initiatives were initiated between 2000 and 2008, and 19 since
2009. Out of 43 initiatives for which the
information is available, 25 (58%) correspond to a legal obligation while 18
(42%) result from self-commitment (e.g. through banking codes) by the financial
sector. Legal obligations were more numerous than other types of initiatives
until 2008, while there has been a balance between the two approaches since
2009. Whether legally binding or voluntary, these initiatives aim to provide
information in a standard format by making available up-to-date lists of fees
at bank branches and/or on websites. In many cases, these initiatives are
specific to neither current accounts nor to transparency requirements as they
set out general rules of conduct of banks towards customers. No initiatives on
disclosure are in place in Lithuania and Poland. Examples: France and the UK (and to some extent of Italy, Belgium and Portugal)
reflect recent initiatives that go beyond the sole obligation to display lists
of fees: they specifically aim at increasing the transparency and comparability
of bank fees through a certain degree of standardisation of the structure
and/or wording of the presentation of lists of fees and/or of monthly/annual
statements of fees paid. In France[489] and the UK[490] initiatives also have the advantage of being based on
self-commitment by industry, but steered and monitored ex-post by authorities
thus favouring effective market implementation. Table
3.B: Disclosure of list of fees Type of initiative || Countries Legislative Self-regulation || Austria, Belgium, Bulgaria, the Czech Republic, Denmark, Germany, Greece, Hungary, Italy, Luxembourg, Latvia, Malta, Portugal, Sweden, Slovenia, and Slovakia France, UK Non legislative intervention || Cyprus, Spain, Estonia, Finland, Ireland, Netherlands, Romania No intervention || Lithuania and Poland Comparison tools This type of initiative covers the list of
fees and interactive tools aimed at facilitating an informed choice amongst
different offers proposed by banks. Most initiatives are operated by for-profit
organisations. Approximately 30% are run by public authorities, not-for-profit
organisations, or in collaboration between for-profit and not-for-profit
organisations. A total of 126 initiatives were identified in
the EU. For 66 tools (52%), information about the duration of their operation
was not available. Of the remaining 60 tools, a large majority (41 or 68%) came
into operation between 2005 and 2010 and one tool started to operate in 2012.
Comparison tools are present in all countries surveyed, with the exception of
Luxembourg, and they are one of the two most common initiatives: 26% overall
and close to 50% in Germany, Poland and UK. The only country in which
legislation has supported the creation of a comparison tool is Denmark: a tool
was set up here by the "Money and Pension Panel",
a board established by the Danish Parliament in June
2007 (Act No. 576 of 6 June 2007). The number of tools owned and run by for-profit
organisations is approximately 97 (77%). Organisations are mainly active in
advertising/marketing, internet publishing, provision of information on finance
or newspapers. 9 tools (7%) run by not-for-profit organisations (8 consumer
associations and the Arbeiter Kammer in AT) have been identified. 6
tools (5%) are run by national banks, 4 (3%) are run by consumer councils and 4
(3%) are run by financial supervision authorities. 5 tools (4%) result from
cooperation between actors. Examples: In Germany, The Girokonto Anbieter
Vergleich comparison
tool is based on ratings from Stiftung Warentest, a German consumer
organisation founded by the German government in 1964 and involved in
investigating and comparing goods and services in an unbiased way. This offers
a kind of guarantee of quality and reliability of the information provided by
the tool. In Italy, the “Pattichiari” website presents a glossary, a comparison tool and financial
information while the website of the consumer association Altroconsumo includes
a comparison tool and financial information. In Sweden, the “Konsumenternas” website of the Consumers Bureau for Bank
and Finance and the Consumers Bureau for Insurance provides a comparison tool
and information focusing on money matters and financial services. In Slovenia and Slovakia, banks have the obligation to provide updated
lists of fees, which are used in a comparison tool owned by the authority. The five tools resulting from cooperation between relevant actors are:
in Belgium, the consumer association runs a tool with the assistance from the
ministry; in Denmark, the bank association and the Consumer Council run a tool
together; in Estonia, the financial supervision authority runs a tool in
cooperation with the banking association; in Italy, a consortium of banks
jointly runs a tool; and in the UK the major banks run a tool developed in
cooperation with the Office of Fair Trading. Table 3.C:
Comparison tools Type of initiative || Countries Legislative Self-regulation || Denmark - Non legislative intervention || Austria, Belgium, Cyprus, the Czech Republic, Germany, Estonia, Greece, Spain, Finland, France, Hungary, Ireland, Italy, Lithuania, Latvia, Malta, Netherlands, Poland, Portugal, Romania Sweden, Slovenia, Slovakia and United Kingdom No intervention || Luxembourg Financial education and information initiatives These types of initiatives are very diverse,
as are their initiators. Most of them were started recently (57% since 2008).
None of the initiatives identified is backed by legislation. Few initiatives
focus on current accounts as such (15 or 12%) and only one of them - in
Bulgaria - exclusively focuses on fees. The majority (114 or 88%) have a
broader focus addressing money and finance issues (e.g. credit and deposit
products), family budget, or the economy. Enforcement actions Enforcement actions involve making
recommendations and imposing fines. They were identified specifically in
relation to the transparency of bank fees in several countries though they are
usually utilised as a policy tool for monitoring and making recommendations rather
than for imposing fines. Market studies In many countries, stakeholders conduct
regular or occasional comparative studies, scoring of operators, mystery
shopping, etc. These initiatives contribute to providing public authorities
with a more accurate knowledge basis to support further policy making. Combined initiatives Amongst all types of initiative identified,
several belong to the same owner or initiator. Whilst in some cases, these
initiatives are run independent of one another, in a number of other cases,
they are strongly co-dependent on each other. This is particularly true in the
case of websites combining two or more of the following initiatives: a
glossary, a comparison tool, information or educational initiatives and market
studies or other initiatives, e.g. a petition. These websites offer the advantage of having
a whole range of information readily available and tools for consumers wishing
to better use and understand financial products, including current accounts.
The owners or initiators of these websites were observed to be public
authorities (consumer agencies, financial regulators, etc.), consumer
associations or commercial owners. Examples: In Estonia, the financial regulator has created the “Minuraha” (My
money) website which targets consumers, and which includes a glossary, several
comparison tables (current accounts, credit cards, etc.), calculators (budget,
etc.), education tools (e.g. financial knowledge tests), financial information
and results of a consumer survey on financial consumption and consumer opinion
on transparency of fees. It is interesting to highlight that there is also a
simplified version of the website for young people, “Kool minuraha” (My money
School); In Italy the website of the consumer association Altroconsumo includes a
comparison tool and financial information; the consumer association ZPS
provides a website that includes a glossary, a comparison tool and information. From this overview of existing national
legislation or self-regulation approaches, it emerged that: ·
Several diversified tools are implemented in
each country. These initiatives appear to be very different from each other. As
underlined by the study, only a very few best practices can be identified among
the existing initiatives. These include the initiatives taken in Italy and
Belgium on glossaries. ·
In absolute terms, most of the tools launched in
the EU are intended to increase financial education (27%); conversely, very few
are enforcement actions. Several comparison tools are set up (26%). However,
only 10% of initiatives aim to enhance the disclosure of lists of fees and 13%
are intended to set up common glossaries. In many cases it was noted that
comparison tools were used in combination with glossaries and lists of fees.
This may be due to the fact that standardisation brought by glossaries and
lists of fees may facilitate comparison. ·
With respect to comparison tools, the different
sources - mainly commercial in nature, raise the issue of objectivity regarding
the fee information provided by such tools. ·
The breakdown of data confirms the trends
observed at EU level, notably that in most countries the least common
initiatives are those relating to enforcement (9%) and to the disclosure of
list of fees (10%). ·
Initiatives aimed at disclosing the lists of
fees are usually backed by legislation (83%). Enforcement actions are entirely
backed by legislation. In general, however, only a minority of the overall
national initiatives (18.5%) are backed by legislation. ·
An increase in the number of all initiatives has
been observed in recent years. There is a possibility that – in addition to a
real increase in the number initiatives – the observed increase reflects the
improving availability of information about such initiatives, due to an
increased need for transparency in retail financial services. 2. Problems Data on price variations in the current
account market The Commission conducted a study in 2009.[491] The objective was to determine the transparency of fees charged for
a payment account, compare prices for the services linked to a payment account
and to improve the Commission's understanding of the underlying factors behind
price differences within and across Member States. The study covered all Member
States and provided a comparable set of average prices for payment accounts.
Table 3.E below provides a list of prices for the average domestic profile used
in the 2009 Commission study adjusted for purchasing power. Prices range from
EUR 41.17 in the Netherlands to EUR 243,64 in Italy. The EU average price is
EUR 111.62. 10 Member States have above average prices. Following its publication, this study was
mainly criticised because it created eight hypothetical EU usage profiles
reflecting different consumption patterns, which served as a basis to derive
average prices per Member State. This was a good means to isolate the impact of
different fee amounts between Member States, on a comparable basis. However the
disadvantage of this approach was that average prices may not accurately
reflect the situation in any Member State given that consumption patterns used
could not reflect domestic consumption patterns accurately. The study also reported average prices for
domestic profiles, for which underlying transaction volumes were collected from
available domestic sources. EU average consumption patterns were calculated as
the weighted average of domestic consumption volumes. While the use of domestic
profiles should have produced more realistic results for the annual average
cost of an account within each Member State, difficulties encountered in
collecting relevant information on volumes of transactions to determine
domestic usage patterns may have led to sub-optimal results. Nevertheless, the study provides a unique
source of comparable information on current account prices in EU Member States.
It is a valuable source of information for policy-making. Table 3.D: Weighted
average price per profile per country (€/year) € /year || Domestic profiles || European profiles || passive || average || active || basic || passive || average || active || basic Austria || 99,54 || 140,47 || 197,46 || 83,95 || 100,63 || 144,60 || 206,10 || 93,68 Belgium || 29,05 || 58,15 || 82,07 || 16,28 || 30,75 || 62,41 || 94,39 || 16,59 Bulgaria || 17,14 || 26,94 || 42,83 || 9,30 || 16,78 || 48,57 || 108,29 || 17,32 Cyprus || 6,52 || 84,59 || 184,99 || 48,74 || 6,45 || 70,41 || 201,12 || 70,51 Czech Republic || 39,65 || 95,37 || 156,52 || 54,81 || 41,11 || 112,84 || 196,18 || 74,87 Denmark || 37,92 || 74,27 || 128,41 || 38,91 || 33,69 || 63,76 || 105,35 || 29,19 Estonia || 25,57 || 50,51 || 93,08 || 46,98 || 27,38 || 69,39 || 137,67 || 71,33 Finland || 44,65 || 104,42 || 206,56 || 94,04 || 45,00 || 82,25 || 150,06 || 67,00 France || 91,35 || 154,11 || 232,15 || 91,21 || 92,45 || 152,14 || 226,43 || 80,51 Germany || 62,85 || 89,13 || 114,71 || 78,92 || 66,16 || 100,34 || 145,41 || 86,16 Greece || 14,81 || 53,98 || 111,67 || 45,06 || 14,13 || 109,57 || 292,07 || 98,34 Hungary || 28,39 || 76,20 || 144,42 || 64,08 || 28,19 || 78,75 || 149,99 || 75,10 Ireland || 56,40 || 81,85 || 118,39 || 37,17 || 58,30 || 82,99 || 134,36 || 40,77 Italy || 134,99 || 253,14 || 401,72 || 143,19 || 117,02 || 295,66 || 602,70 || 210,05 Latvia || 63,26 || 115,24 || 192,28 || 107,33 || 68,59 || 194,77 || 407,86 || 218,98 Lithuania || 11,20 || 34,76 || 112,92 || 14,69 || 21,02 || 117,29 || 260,77 || 120,49 Luxembourg || 40,37 || 56,64 || 95,99 || 25,64 || 40,55 || 73,82 || 135,83 || 56,81 Malta || 53,21 || 71,85 || 99,47 || 45,38 || 51,79 || 60,55 || 79,93 || 41,21 The Netherlands || 30,13 || 45,95 || 55,60 || 28,85 || 30,10 || 45,87 || 55,52 || 29,17 Poland || 45,97 || 73,21 || 114,01 || 50,55 || 44,43 || 71,87 || 116,11 || 50,24 Portugal || 26,01 || 44,89 || 81,97 || 13,19 || 27,29 || 56,41 || 114,59 || 26,81 Romania || 30,28 || 82,59 || 141,90 || 69,79 || 21,20 || 75,36 || 163,01 || 64,51 Slovakia || 44,49 || 73,68 || 125,08 || 55,59 || 48,01 || 103,52 || 195,74 || 88,61 Slovenia || 43,50 || 100,40 || 200,76 || 70,13 || 44,32 || 84,61 || 157,16 || 54,15 Spain || 104,72 || 178,21 || 303,57 || 134,06 || 101,94 || 211,56 || 411,66 || 193,14 Sweden || 25,16 || 61,84 || 128,21 || 53,35 || 25,77 || 66,94 || 147,41 || 59,16 United Kingdom || 94,99 || 103,20 || 111,40 || 28,34 || 64,96 || 77,46 || 86,70 || 32,54 EU15 || 76,10 || 112,98 || 160,00 || 61,76 || 67,01 || 115,18 || 187,28 || 75,24 NMS12 || 34,57 || 79,23 || 139,85 || 54,85 || 34,33 || 86,09 || 166,67 || 69,34 EU27 || 74,41 || 111,62 || 159,18 || 61,47 || 65,68 || 114,00 || 186,45 || 74,98 Source: Data collection for prices of current accounts provided to
consumers, 2009, Van Dijk Management Consultants Table 3.E: PPP
adjusted weighted average price domestic average profile per country (€/year) Member State || Average Prices € || Price level indices (EU27=100) || PPP Adjusted Prices € || Rank Highest First Italy || 253,14 || 103,9 || 243,64 || 1 Spain || 178,21 || 94,2 || 189,18 || 2 Latvia || 115,24 || 68,2 || 168,97 || 3 Romania || 82,59 || 49,8 || 165,84 || 4 Czech Republic || 95,37 || 69,8 || 136,63 || 5 France || 154,11 || 115,2 || 133,78 || 6 Poland || 73,21 || 57,1 || 128,21 || 7 Hungary || 76,2 || 60 || 127 || 8 Austria || 140,47 || 112,3 || 125,08 || 9 Slovenia || 100,4 || 84,5 || 118,82 || 10 EU || 111,62 || 100 || 111,62 || - Slovakia || 73,68 || 68,1 || 108,19 || 11 United Kingdom || 103,2 || 97,4 || 105,95 || 12 Malta || 71,85 || 72,9 || 98,56 || 13 Cyprus || 84,59 || 89,8 || 94,2 || 14 Finland || 104,42 || 120,1 || 86,94 || 15 Germany || 89,13 || 106,7 || 83,53 || 16 Estonia || 50,51 || 69,2 || 72,99 || 17 Ireland || 81,85 || 120 || 68,21 || 18 Bulgaria || 26,94 || 44,5 || 60,54 || 19 Greece || 53,98 || 92,7 || 58,23 || 20 Lithuania || 34,76 || 62,3 || 55,79 || 21 Sweden || 61,84 || 111,8 || 55,31 || 22 Portugal || 44,89 || 84,3 || 53,25 || 23 Denmark || 74,27 || 140,5 || 52,86 || 24 Belgium || 58,15 || 114,1 || 50,96 || 25 Luxembourg || 56,64 || 120,2 || 47,12 || 26 Netherlands || 45,95 || 111,6 || 41,17 || 27 Source: 2009 VDMC Study (Prices); Eurostat
(Price Level Indices) Other national studies have provided
different values for average prices of payment accounts. A study carried out in
Italy in 2011[492] calculated the average price of a payment account at approximately
EUR 110.2 (2009: EUR 113.6; 2008: EUR 114.3), which is far below the cost calculated in the Commission study.
These differences do not necessarily result from inaccuracies in the different
methodologies used, but rather reflect differences in the approach used to
determine a relevant basket of services, identify usage profiles and collect
information on prices. A study carried out in France in 2010[493] was
based on a similar methodology as the Commission's study above, but was limited to comparing average prices for Belgium, France,
Germany, Italy, Netherlands, Spain and the United Kingdom. The study attempted
to adjust the weaknesses it identified in the methodology used in the
Commission's study. This study identified significant
price variation between the countries analysed. Average prices of a payment account
reported were as follows: Italy (EUR 191); Spain (EUR 177); France (EUR 157);
Germany (EUR 133); Belgium (EUR 116); United Kingdom (EUR114); Netherlands (EUR
68). The average price for the sample stood at EUR 137. Although these amounts
were calculated after having been adjusted for methodological weaknesses
identified in the Commission study above, they broadly exhibit the same
variation as the Commission's prior results. Pricing
Models We have applied the models in Table IV of
Chapter 2 of the main Impact Assessment to selected Members States to identify
prevailing pricing models and main sources of fee revenue. This information is
summarised in table 3.4 below. Table 3.F: Prevailing pricing
characteristics in selected Member States Member State || Prevailing pricing models Austria || – Many packaged and bundled offers that incorporate specific services or benefits tailored to customer needs – Majority of banks offer different types of current account pricing models that range from free current accounts that have no fixed charges to more expensive current accounts. Belgium || – The account based (annual fee model) is the most common one in Belgium, although some offers may include fees for operations such as withdrawal at the counter or paper-based credit transfers. – Indirect revenue based (free-if-in-credit) offers have appeared recently. – Current accounts represented 27% of the Belgian retail banking sector gross income in 2009, which was the same as the EU average. Bulgaria || – Bulgarian banks charge for all cash withdrawals, both at the branch and ATM, and with €9 profit per retail current account. – Different pricing models, e.g. monthly and transaction-based fee models (most common), packaged/ bundled offerings etc. are applied by banks. Germany || – Packaged-based pricing model is most common. Denmark || – Packaged / bundled offerings make it difficult for customers to compare prices. Spain || – A number of pricing models are used including transaction based, account based or indirect-fee based (free if in credit). – Bank profitability derived from current accounts is not important in Spain compared to other sources of income in the retail banking sector, in particular compared to mortgages (at least before the crisis). – General profitability of the banking sector fell significantly between 2008 and 2012. Finland || – Package-based pricing model – It is customary that a person’s main current account is within the same bank where they have their mortgage, although this is not a rule, more like a convenience. As the banks offer similar products, main competition is on mortgages that often determine the credit institutions where a person holds their current account. This is also because if a customer has their mortgage in the same bank as their current account, they often receive a discount on their basic banking charges through a ‘loyal customer’ or a bonus programme offered by the bank. – Cross-subsidisation. A study conducted by Bank of Finland regarding banks’ costs and revenues on retail payments indicates that banks can cover only about half of their total costs on payments with direct payment revenues from their clients. In addition to service fees, costs on retail payments are covered from interest margin revenues and other loan client fees. France || – Package-based and transactions-based – Margin on payment incidents is 83% on average, with the highest figure being for penalty charges (90%). According to UFC’s estimations, those penalty charges bring 1.8 Billion Euros to French banks. Some industry representatives assert this figure is about 3.5 Billion Euros. – In France, mortgages provide lower margins for banks – mortgages are typically used as a flagship product to attract and retain a customer in a highly competitive market. At the same time, remuneration of many savings products is highly regulated. Day to day banking is therefore more expensive – it represents a larger share of banks’ revenue (20% of net bank product against 14% in Germany and less than 10% in other Eurozone countries). Italy || – Payment accounts have a “minimum cost” for clients of 34,20 / account corresponding to a tax levy charged for current accounts. This levy is usually charged in instalments every quarter. – Most payment accounts use a transaction based pricing model where the customer pays for the services and products offered (fixed charges) such as the debit card, credit card, internet access, etc. Latvia || – Most banks seem to use a combination of transaction based model with the indirect revenue based (free-if-in-credit) model and in few cases monthly fees. Lithuania || – Transaction based model – In 2011, introduction of optional package pricing by payment service providers. – The emergence of cost based pricing models due to public authorities’ concern that consumers should be consistently guided to cost-efficient solutions. Luxembourg || – Transaction (Fee) based model Netherlands || – Package-based. Pricing of the most common products (received/ sent credit transfers, direct debits, debit cards, etc.) is based on a monthly or yearly fee and transactions are not individually priced. – Banks generally lose money on payment services but this is normally offset by customers that take out additional products i.e. mortgages. Poland || – Most banks pursue transaction-based model charging customers per transaction (or block of transactions), for instance per direct debit or domestic transfers. For certain type of personal accounts, monthly fees may be a main source of income while most of transactions are free of charge. – Mortgages are the main profitability driver for banks. Portugal || – Account-based i.e. based on balance – Quarterly fees paid by customers on basis of average credit balance in current accounts. – The higher the balance the lower the fees. – No fees, if balance higher than a certain amount (circa €3,500). United Kingdom || – Most popular model is indirect revenue-based (free-if-in-credit). – Fee based model – packaged services. – Transaction based model – mainly prevalent in N. Ireland. – Current accounts are gateway products. – Evidence suggests (although likely to vary according to bank) that current account provision is not profitable on a stand-alone basis. Source: Study on the
economic impact of bank free transparency and switching options (See Annex I,
par. 1.1) 3. Consequences 3.1. Consequences for Consumers Low
consumer confidence As mentioned in the
problems section above, consumer confidence is dented by the appearance of a
weak relationship between the price of an account and the underlying cost of
providing it. This perception is strengthened by product cross-subsidisation,
where profits generated from a financial product are used to subsidise a loss
maker. In this case consumers tend to focus their attention on higher priced
items and perceive charges as unfair. Customer cross-subsidisation is a
practice which often affects lower income earners and more vulnerable sections
of society in what is perceived by consumers as a means to increase profit
levels for credit institutions. However this is not only
a perception issue. Broad price differentials are observed for comparable
payment account offers within Member States domestic markets raising real
doubts as to the proper functioning of market forces. Risk
of consumer detriment While many payment
accounts offer equal or only a marginally different mix of services, they are
not a homogeneous product. First they are heavily branded and are often
differentiated through the use of product-specific terminology. Second credit
institutions do not establish the price of a payment account based on their
input costs, but take account of a wide range of variables such as the ability
to cross-sell other products within their range, the ability to establish
long-standing bank-customer relationships. Third consumers have
difficulty understanding information about payment account offers. This results
in sub-optimal market outcomes and a loss in consumer welfare. This happens
either when consumers purchase a payment account that does not match their
needs or when they pay more than they would have for the same product had they
been better informed. Restricted
product choice Information asymmetry raises search costs for
consumers and the difficulty in comparing bank offers discourages shopping
around for a payment account, as many consumers reach the conclusion that bank
accounts are all the same.[494] Product choice is not only exercised upon a
first time purchase but should also be available to consumers who may consider
moving their account to another credit institution. 3.2. Consequences for banks Barriers
to market entry and expansion Different regulatory
frameworks and bank infrastructures established along national boundaries
contribute to the fragmentation of the market and raise barriers to entry
across borders. Access to cross border markets involves the cost of setting up
infrastructure or taking over existing ones as well as to adapt to different
levels of compliance and regulation together with adapting to different market
conditions, prevailing pricing structures as well as other costs related to
entering a market such as marketing. The experience of Banco Santander's
internationalisation strategy provides a good example of credit institutions
who have undertaken growth strategies cross-border. When planning to establish
its presence across continental Europe during the 1990s Banco Santander saw
Europe as several different markets with high entry barriers, rather than as a
single banking and financial market.[495] The degree of economies
of scale that can be achieved by for example setting up common infrastructures
for legal compliance and back office operations is significantly hindered by
the wide variations in regulatory requirements within the EU. 3.3. Summary of problems and
consequences Table 3.G: Problems
and consequences Problems || Consequences · Complex products and fee structures => A wide range of fees => Complex pricing models => Unclear and non-comparable information on services and fees · Price dispersion in payment accounts within and across Member States; prices unrelated to underlying costs · Psychological factors (negative perceptions) · Ineffective, inconsistent or non-existent regulatory framework · Varying degrees of consumer protection across the EU || · Risk of consumer detriment => information asymmetries increase and consumers find it harder to take informed purchase decisions => non-comparable pricing may prevent efficient competition => consumers purchase a payment account that does not match their needs or does not provide value for money => reduced consumer confidence · Restricted cross-border activity => regulatory and market differences hinder the internal market => increased costs for credit institutions operating in several Member States => Non-level playing field between market actors => Restricted market entry/expansion => Missed business opportunities · Restricted product choice => reduced product choice for financial and non-financial products and services => higher prices for financial and non-financial products and services => higher costs of shopping around · Low consumer satisfaction => lower consumer confidence 4. Objectives
The over-arching objective of this initiative
is to create an efficient and competitive Single Market (Article 114.1 of the
Treaty) with a high level of consumer protection (Article 114.3 of the Treaty)
that fosters economic growth while improving social inclusion. The general objectives of the three problem
areas are: ·
enhancing consumer confidence; ·
broadening consumer choice both in terms of the
quality of the products available and in terms of price reductions; ·
facilitating financial inclusion and thereafter
customer mobility; ·
facilitating the cross-border activity of
payment account providers; and ·
ensuring a level playing field between market
actors. In relation to ease of comparison of bank
fees, the specific objective is to ensure that EU consumers receive clear,
complete and comparable information on bank fees. The operational objectives are to ensure
that: ·
Consumers are able to understand bank offers and
assess value for money ·
Payment account offers are easily comparable ·
Help consumers choosing the offer best matching
their needs ·
Increase consumers awareness of charges actually
paid ·
The burden of switching to consumers is reduced 5. Policy
Options, impact analysis and comparison 5.1. Description of the options
for policy instruments Each of the above options
could be given effect through a variety of different policy instruments. These
include an industry self-regulation (Code of Conduct), Community level
non-binding measures such as a Recommendation or Communication, or binding
Community measures such as Community legislation in the form of a Regulation or
Directive. Table 3.6 explores the feasibility of giving effect to each of our
policy options through each of the available policy instruments. Table 3.H: Description of options for policy instruments Policy options: content vs instrument || Self-regulation || Recommendation || Communication || Directive || Regulation 1. No action || 0 || 0 || 0 || 0 || 0 2. Standard price list || X || X || || X || X 3. National glossaries for fee terms || || || || || 3(A) non-harmonised terminology || X || X || || X || X 3(B) fully harmonised terminology || X || X || || X || X 4. Comparison websites || || || || || 4(A) Single national website || || X || || X || X 4(B) Accreditation scheme || || X || || X || X 5. Representative examples || || || || || 5(A) set-up by banks || X || X || || X || X 5(B) prescribed by M. States || X || X || || X || X 6. Cost simulation || || || || || 6(A) set-up by banks || X || X || || X || X 6(B) prescribed by M. States || X || X || || X || X 7. EU standardised forms for ex-ante information (price list) || || X || || X || X 8. Banks obliged to provide ex-post information || || || || X || X 9. EU standardised forms for ex-post information on fees || || X || || X || X 5.1.1. Option
1: No action Effectiveness
of policy option Without action the comparability and
presentation of payment account fees would not be improved remaining unclear to
consumers. The current level of market fragmentation would increase as Member
States continue to take uncoordinated action to address the issues identified
in the problem section. While it is recognised that incremental – and welcome -
improvements are being made in some Member States, notably France, the United
Kingdom, Ireland, Italy and more recently Spain where recent measures enhance
ex-ante and ex-post presentation requirements for fees, this is not universal.
The consequence of asymmetric development is a broadening gap between consumer
protection in Member States, which is contrary to the development, long term,
of the single market. From a policy and regulatory point of view
this option hinders regulatory convergence between Member States. It also
prevents further integration since the harmonising impact of options presented
below, albeit with a longer-term view, would not take effect. There are
potential commonalities brought about by the development of online distribution
channels which increasingly shape the purchasing habits of consumers, their
expectations for increased convenience and an increasing number services that
go beyond historical banking habits set within national cultures. These
developments will bring about more convergence in the bank-client relationship,
to which EU level regulatory responses may be increasingly appropriate. Impacts
of policy option on stakeholders and efficiency If no action is taken then further
development of the internal market for payment accounts would be hampered. In
the longer-term, additional regulatory action at national level would render EU
action more costly to Member States and the retail banking industry. In
addition, the current account market would not take full benefit of the
advances at EU level in the payments market achieved through SEPA. Citizens
would not be able to clearly distinguish between price advantages brought about
by SEPA for direct debits and credit transfers if the price of the underlying
payment account remains opaque, continues to exhibit significant differences in
prices for equivalent payment account offers and remains a complex product. Meanwhile credit institutions wishing to
establish business across borders will continue to have to comply with different
sets of rules and incur costs in adapting their processes and operations to
different national requirements. Consumers living in Member States where bank
infrastructures are less developed and the provision of daily banking services
is more costly will not benefit from the arrival of new market entrants who
operate lean processes and provide good service at competitive prices. 5.1.2. Option 2: A standard price
list covering the 20 most representative fees or covering at least 80% of key
charges incurred Effectiveness
of policy option The mandatory provision of price lists using
standardised terminology as a means to disclose fees ex-ante facilitates the
comparison of different bank offers. This option would contribute towards
establishing a level playing field between credit institutions competing in the
payment account market and empower consumers provided the fees contained
therein covered a significant part of the expenditure actually incurred. Fees common to all Member States would be
identified at EU level and supplemented nationally to cover the 20 most
representative fees or at least 80% of key charges incurred. Common presentation
requirements, which could include the introduction of a single form for ex-ante
disclosure of payment account fees, would be
established at EU level. EU action would also cover dissemination requirements
to ensure that fee information is easily accessible to consumers. Presenting all possible fees in a list,
whether within leaflets or brochures available in bank branches or in a
downloadable format over the internet, would virtually capture all bank
customers and provide them with a comprehensive set of fee information.
However, it may prove cumbersome and cause consumers to ignore the information.
"Long and overly complex information risks being of little value to
consumers. Moreover excessive information can lead consumers to feel
overwhelmed."[496] Similar provisions[497] have
existed in France since 2005, requiring banks to display fees prominently and
to make brochures available to the public fee free of charge. A French report[498] notes that a survey carried out by the consumer organisation UFC
Que Choisir, found in a sample of 12 institutions that fee brochures were 24
pages long and contained 303 fee line items. They also only presented fee items
in isolation, lacking information on the nature of related services. In the
same report 63% of bank clients were unsatisfied by the complexity of fee
brochures, and 16% were very unsatisfied. In addition, a majority of
responses to the public consultation on payment accounts[499] from consumers, financial services industry and public authorities,
have indicated that the full standardisation of fee terminology could bring
about the unintended consequence of standardising products. They also mentioned
the risk of information overload to consumers. Fee lists containing a smaller
number of fees may more appropriately provide concise and digestible
information and actually help improve consumers' understanding of fees.
Therefore it appears more appropriate to focus on a core set of fees rather
than attempt to cover all fees within a standard form price list. However in order to achieve the objectives of
raising consumer confidence and increasing consumer choice, the fees retained
should represent the major part of the expenditure actually incurred. EU action
would address this issue by setting up a double criterion on the scope of fees
to be included in standard price lists based on either the 20 most
representative fees or a lower number of most frequent fees, provided they
cover at least 80% of typical average expenditure incurred on a payment
account. For example, since 2011 France has established a mandatory list of 10
standard fees, which it estimates would cover up to 80% of fees incurred by
account holders. Regular monitoring and review provisions should also address
the risk that pricing structures would by modified to escape required
disclosures, by moving charges to fees not contained in the standard price
list. Further, those fees common to all Member
States would be determined at EU level and then supplemented nationally. Impacts
of policy option and efficiency Consumers would benefit from information that
is concise and easy to compare between different bank offers. The tools made available
to consumers to compare bank offers would not have a positive impact if the
time invested in going through lengthy lists of fees for different banks
outweighed the benefit of choosing the offer that presents best value. This is
in line with consumers' general view that emerged during the public
consultation, recognising that harmonisation of terminology should be limited
to core terms and give due attention to the risk of excessive information. EU legislation would impose requirements on
credit institutions to make use of standard fee terminology and to make
available and exhibit prominently standard fee lists. Credit institutions in
all but four Member States where standard fee terminology is already in use,
would incur costs to comply with the requirement to standardise fee terms. However, as indicated, initiatives aimed at making banks disclose lists of fees already exist in 14 Member States. Industry codes or general banking
practice cover the provision of fee information as part of contractual terms
and conditions in 7 Member States. Therefore, the marjority of credit
insititutions currently already comply in part with such requirements that
would feature in EU legislation. Generally costs to Member States are not
expected to be significant for this option. However when compared to option 7,
which foresees full standardisation of all fee terminology the cost of option 2
are higher as a result of additional recurring effort to review to set of cost
fees, which would not be relevant to option 7. Finally, the impact
on an EU level supervisory authority should be considered in terms of
coordinating the work of national supervisors, supporting the identification of
common fees across the EU and ensuring that EU harmonisation criteria relating
to the selection of complementary fees within Member States,. An EU level
authority would also be charged with setting technical standards, issuing
guidelines and coordinating longer term integration of the internal market. Quantification
of costs and benefits ·
Standard, comparable fee information contained
in standardised price lists would benefit consumers who sought better offers in
the market. For the purposes of this assessment we estimate that changes in
switching behaviour could result in a benefit to consumers of EUR 584.87
million, measured over the period from 2013 to 2022. ·
Credit institutions and to a lesser extent,
public authorities would be expected to incur costs as a result of the
introduction of standard price lists. ·
Total initial outlay for credit institutions is
estimated at a range between EUR 95.95 – EUR 163.03 million. Relevant
costs include updates to marketing and promotional material, changes to IT
systems to produce price lists in standard form, costs linked to internal
communication and training and input by industry to set up the list of fees
with competent authorities. ·
Total recurring costs to credit institutions are
estimated to cost between
EUR 183.17 – EUR 255.79 million between 2013 and 2022
mainly comprising additional staff costs due to incremental compliance
requirements. ·
One-off costs to Member States comprise
identifying major fee items and implementing EU legislation are not considered
material, assuming that credit institutions would provide major input into the
selection process. ·
Recurring costs to Member States from 2013 to
2022 are estimated at a range between EUR 0.60 – EUR 1.17 million and
mainly comprise the cost of revising fee lists and monitoring and enforcement
of legislation. Table 3.I: 20 most
representative fees or 80% of key charges incurred Total EU benefits (million EUR) || Consumer benefits: Changes in switching behaviour Total consumer benefits: || 584.87 584.87 Total EU costs (million EUR) || Min || Max Credit institution costs: One-off: Recurring: Total credit institution costs: || 95.95 183.17 279.12 || 163.03 255.79 418.82 Member State costs: One-off: Recurring: Total Member State costs: || 0.05 0.60 0.65 || 0.08 1.17 1.25 A detailed
description of the calculation basis and assumptions used in quantifying the
above costs and benefits table (and each costs and benefits table throughout),
is provided in Annex VI. 5.1.3. Option 3: Introduce the
requirement to develop glossaries for bank fee terms Effectiveness
of policy option Glossaries of fee terms are useful tools to encourage
a better understanding of the meaning of fees, which in turn contributes
towards empowering consumers to overcome inertia and widens their choice of
bank offers. A glossary is an educational tool which can be combined with other
options considered. In the public consultation, most financial services
industry replies considered glossaries a useful tool mainly in terms of
enhancing consumers' financial education. Consumer organisations recognised
that glossaries are not always considered really helpful, especially if not
accompanied by standardised terminology or without adequate circulation among
conumers (BEUC, UFC-Que Choisir?, Which?) Glossaries should not be considered
as a stand-alone option since they do not provide information about bank offers
as such, neither in terms of prices nor of the services offered. This option
could be combined with options 2, 4, 5, 6, 7 and 8. Glossaries that are intended to cover all fee
terms also share the concern described in the previous section that they may be
cumbersome and lead to information overload. Consumers, who would be the main
beneficiaries of such a tool, may shy away from lenghty documents, in
particular if they only constitute a limited part of their search efforts,
given that they do not provide specific information on bank offers. This is
likely to restrict their use and limit any consequent benefit. This option assumes that Member States would
establish a single reference glossary to be used within their territory. Under
this option we consider two alternative approaches being:a) a single glossary
within each Member State containing single, harmonised definitions and b) a
single glossary within each Member State collecting different definitions for
fees in use within credit institutions. If structured in a way to categorise
fees appropriately as well as the underlying services, the latter may assist a
consumer in comparing the terminology used by different banks. This would
require more effort and be more time consuming than if the glossary were to be
populated by standardised terms. In addition it is more likely to result in
information overload. Impacts
of policy option on stakeholders and efficiency This option may assist consumers in
developing an understanding of what fees mean. Moreover, drawing on recent
experiences in France[500], setting up glossaries may assist in bringing about a harmonisation
of practices of different credit institutions as regards their use of bank fee
terminology, thus creating a clearer landscape for bank fees. National level glossaries are not widespread,
existing in only two Member States. If required, this option would impact upon
a large number of Member States and could prove quite ambitious, given the
diversity of terms in use. Setting up a glossary of unique standardised terms
and its regular update would require the close involvement of credit
institutions and their representative associations together with consumer
organisations and coordination by competent public authorities. Therefore it is
expected to generate high one-off costs. In the public consultation, Member States
expressed diverging views on the possible development of glossaries. Most of
them stressed the usefulness of these tools when developed at the national
level; some respondents supported EU level intervention in this area, while
noting the difficulty to accomplish it; others, considered any intervention to
improve glossaries unnecessary. Common costs to both alternative approaches
include, the cost of publicising the existence of the glossary for public
authorities and credit institutions. Quantification
of costs and benefits Benefits related to potential changes in
switching behaviour have not been estimated for the introduction of glossaries,
given that they are not a stand-alone option. ·
Variant A: Glossaries containing non-harmonised
terminology While glossaries provide definitions of
services and related fees that enable consumers to better understand the
information provided to them with their payment account, they are not
considered to derive direct quantifiable benefits in terms of changes to
consumer behaviour either by managing their payment account better or by
choosing to seek better offers. One-off costs to credit institutions
include internal communication and training costs for front office and
marketing staff, updating websites and IT applications to be able to make
available glossaries. Total initial outlay for credit institutions is estimated
at between EUR 11.66 – EUR 23.58 million. Total recurring costs to credit
institutions are estimated to cost between EUR 149.67 –
EUR 192.32 million from 2013 to 2022. Initial one-off costs to public
administrations are not material for this option as significant effort is not
expected of public authorities. Recurring costs to Member States are estimated
at a range of between EUR 0.84 million and EUR 1.61 million, comprising the
cost of updating the glossary and costs associated with monitoring and
enforcing legislation. Table 3.J:
Non-harmonised glossaries Total EU costs (million EUR) || Min || Max Credit institution costs: One-off: Recurring: Total credit institution costs: || 11.66 149.67 161.33 || 23.58 192.32 215.90 Member State costs: One-off: Recurring: Total Member State costs: || 0.02 0.82 0.84 || 0.05 1.56 1.61 ·
Variant B: Glossaries based on fully harmonised
terminology As noted in variant A, no quantifiable
benefits are associated directly with this option. One-off costs to credit institutions are
estimated at between EUR 40.35 - EUR 72.76 million. This figure takes account
of internal communication and training costs to familiarise front office and
marketing staff with new standard definitions and explanatory material for
customers linking terminology in use by a credit institution to standard terms
in the glossary. Total recurring costs to credit institutions are estimated to
cost between EUR 334.11 – EUR 442.78 million from 2013 to 2022. Initial one-off costs to public
administrations are estimated at between EUR 0.08 million and EUR 0.11 million.
These comprise effort on the part of public authorities to set up fully
harmonised definitions of fee terminology. Recurring costs to Member States are
estimated at a range of between EUR 0.99 million and EUR 1.95 million, which
take into account additional effort in maintaining the glossary as well as
costs associated with monitoring and enforcing legislation. Table 3.K: Fully harmonised glossaries Total EU costs (million EUR) || Min || Max Credit institution costs: One-off: Recurring: Total credit institution costs: || 40.35 334.11 374.46 || 72.76 442.78 495.54 Member State costs: One-off: Recurring: Total Member State costs: || 0.08 0.99 1.07 || 0.11 1.95 2.06 5.1.4. Option 4: Introduce the
requirement to set up independent fee comparison websites Effectiveness of policy option Comparison sites could prove
effective in achieving the objectives of this initiative. They provide an
effective means for consumers to assess the merits of different offers in a
single space and therefore represent lower search costs than other options
under consideration, where for example, a consumer is required to collect
information from separate credit institutions or perform more detailed
analyses. If properly set up, they also provide the right balance between the
need for information to be concise and clear and the need for it to be complete
and comprehensive, through functionalities that enable internet users to drill
down into deeper levels of information of interest to them. Therefore this
option contributes towards the overall objective to make markets efficient. In the liberalised
markets of other network industries (e.g. telecommunications, electricity,
gas), making price information clear and accessible for customers is considered
crucial for the further developments of the EU markets that bring benefits to
citizens in all Member States. For example, in light of the Commission report
on the functioning of the retail electricity market,[501] in
July 2012 the European Energy Regulators have developed guidelines of good
practice for price comparison tools in the field of energy supply.[502] The recommendations highlight the key requirements of price
comparison tools (such as independence, transparency, exhaustiveness, clarity,
user-friendliness and accessibility), which can ensure neutral and objective
information to consumers. In the 2012 public
consultation on bank accounts, broad support was expressed both by consumers
and the banking industry as to the usefulness of comparison web-sites to help consumers and complement the obligation to provide
clear information. However, comparison
websites must capture a broad range of consumers. Although internet penetration
in European households continues to increase steadily[503], the
proportion of individuals who did not use the internet in 2011 stood at 24%,
(42% in 2006), which is still a significant portion of the European population.
In addition, not all categories of consumers may be able and willing to make
use of online comparison tools. This is particularly true for the more
vulnerable sections of society, as indicated also during the public
consultation. These may also be the groups who would benefit most from making
purchases that reflect best value for money.[504]
Neverthless, given that this tool would capture the vast majority of EU
consumers, this will be the most effective tool for comparison purposes,
especially if complemented by other options that address a broader range of
consumers. Alternative comparison methods for those that do not use the
internet, although more time consuming, would include manual comparison of fee
information provided by credit institutions. A recent EIOPA report[505] carried out in the context of the insurance market gives a positive
view of the development of comparison sites as a means to stimulate
competition. However it points to the fact that comparison sites tend to focus
too strongly on price elements in lieu of understanding the terms and
conditions of competing products. As illustrated by the
2011 study,[506] in many cases comparison tools are used in combination with
glossaries and lists of fees. In the context of this
option, we consider that comparison sites are well-adapted tools that could
also provide other types of information, for example they could collect key
customer service indicators or create a number of quality of service measures
in agreement with credit institutions. Another issue highlighted
by EIOPA is the potential for conflicts of interest where close commercial
links exist between insurers and commercial comparison websites. This is an
essential issue to address if market information is to be free of bias and
reliable. In order to ensure that comparison websites are independent, we
consider two variants under this option. The first is to have a single
comparison site within each Member State, managed by a competent public
authority. As an alternative public authorities would set up accreditation
schemes for private comparison sites as a means to ensure independence. Entrusting the setting up
of a comparison website to a public authority, covering virtually the whole
range of bank acccount offers may be more appropriate in Member States where
comparison tools are not widely used. However in more mature markets, existing
private providers may be well established and may be willing and able to fulfil
accreditation requirements in order to gain further recognition in the market
and strengthen their reputation with consumers and credit institutions. Finally, the scope of
comparison websites may also not be bound by national markets but could evolve
to cover broader geographical areas within the single market, where a business
case exists. In this case, it may be more appropriate to allow Member States
and the EU to establish oversight and monitoring mechanisms at an appropriate
level, while allowing firms to seek business opportunities within the single
market. Impacts
of policy option and efficiency Comparison tools are becoming increasingly
widespread within the EU. The number of available comparison sites has
increased drastically since 2008,[507] cover
more products than payment accounts and are present in all Member States with
the exception of Luxembourg. Generally they are not established through legally
binding instruments, but originate from a wide range of stakeholders including
commercial operators, credit institutions, consumer organisations or
organisations representing industry. As a result of market developments it
appears more appropriate to establish accreditation schemes for operators of
comparison sites.[508] Website operators would be subject to
requirements to acquire accreditation such as minimum numbers of products or
providers websites should provide information about, dislosures of potential
conflicts of interest and independence. In addition they would need to adhere
to quality standards on the information provided together with requirements on
timeliness. These standards would generate costs to website operators. Given
that the onus of collecting and processing information would fall upon website
operators, credit institutions are not expected to incur compliance costs under
this variant. Participation on comparison sites on the part of credit
institutions would be voluntary and credit institutions would be able to weigh
the benefits of promoting their payment accounts against the potential costs
that may arise as a result of vountary arrangements with website operators to
provide information on a regular basis. The main set-up costs would fall upon
competent public authorities who would be charged with developing accreditation
systems as well as monitoring compliance and imposing sanctions where
approprate for sites whose scope falls within national market boundaries. It
may be appropriate for an EU level supervisor to develop accreditation of
standards in collaboration with Member State authorities with the view of
converging national authorities and developing a level playing field within the
Single Market. Operators seeking to cover broader geographical areas than
Member State territories could then fall under the direct supervisory powers of
an EU level authority. The impact on consumers who make use of
comparison tools would be highly positive. As noted above, consumers could
limit their search costs and receive relevant information - not only on prices
- but also on other important information on services and service quality. In
the public consultation, most consumer organisations acknowledged the potential benefits of comparison
websites, accessible to all and run by public bodies. This was the preferred
tool for enhancing transparency and comparability of bank fees. The financial
services industry generally supported the development of comparison websites,
but stated that they should remain voluntary, in particular if existing
initiatives function well. A few respondents, however, pointed out the
importance of a public intervention on websites, with a supervisory or
management role (e.g. Banking Associations in the Czech Republic, Italy and the
Netherlands). Quantification
of costs and benefits ·
Variant A: A single official website managed by
a competent authority Benefits associated with changes in
switching behaviour on the part of consumers are estimated at EUR 731.08
million from 2013 to 2022. One-off costs to credit institutions are
estimated at between EUR 13.75 - EUR 21.81 million. These mainly consist of
costs incurred to set up internal processes to compile and submit fee
information to a website managed by a public operator. Similarly, recurring
costs to credit institutions, estimated at a range between EUR 49.36 – EUR
98.72 million from 2013 to 2022, consist of costs incurred in submitting price
information to a website operator on a regular basis. Initial outlay to Member States is
estimated at a range of EUR 0.76 – EUR 2.8 million, consisting mainly of
website set-up costs. Total recurring costs to Member States are estimated
between EUR 14.04 – EUR 20.95 million. These figures are composed of time-based
costs (EUR 7.93 – EUR 8.74 million) and acquisition costs (EUR 6.11 – EUR 12.21
million). Running websites are the major component of time-based costs, with an
estimated cost of EUR 7.21 – 7.34 million, while acquisition costs are made up
of the estimated cost of promoting the website through information campaigns. Table 3.L: A single official website managed
by a competent authority Total EU benefits (million EUR) || Consumer benefits: Changes in switching behaviour Total consumer benefits: || 731.08 731.08 Total EU costs (million EUR) || Min || Max Credit institutions: One-off: Recurring: Total credit institutions costs: || 13.75 49.36 63.11 || 21.81 98.72 120.53 Member State costs: One-off: Recurring: Total Member State costs: || 0.76 14.04 14.80 || 2.86 20.95 23.81 ·
Variant B: Comparison sites licensed under an
accreditation scheme Benefits associated with changes in
switching behaviour on the part of consumers are estimated at EUR 731.08
million from 2013 to 2022 as in Variant A to this option. Credit institutions would not be
significantly impacted by this option given that participation in comparison
websites would be voluntary and the onus of collecting and processing fee
information would call upon website operators. Two website operators per Member State are
assumed to obtain accreditation for the purposes of this assessment. These
would incur one-off costs, (EUR 0.32 million – EUR 0.65 million), mainly
incurred in setting up operations and internal controls to comply with
accreditation standards. Similarly, recurring costs to website operators,
estimated at a range between EUR 4.77 – EUR 9.53 million from 2013 to 2022,
consist of costs of meeting requirements in view of compliance audits. Initial outlay to Member States is
estimated at a range of EUR 0.36 – EUR 0.66 million, consisting mainly of
setting up an accreditation system. Total recurring costs to Member States are
estimated between EUR 3.48 – EUR 6.74 million. These figures are composed of
time-based costs (EUR 1.10 – EUR 1.98 million) and acquisition costs (EUR 2.38
– EUR 4.76 million). These mainly comprise the cost of monitoring websites and
carrying out awareness campaigns. Table 3.M:
Comparison sites licensed under an accreditation scheme Total EU benefits (million EUR) || Consumer benefits: Changes in switching behaviour Total consumer benefits: || 731.08 731.08 Total EU costs (million EUR) || Min || Max Website operators: One-off: Recurring: Total website operators costs: || 0.32 4.77 5.09 || 0.65 9.53 10.18 Member State costs: One-off: Recurring: Total Member State costs: || 0.36 3.48 3.84 || 0.66 6.74 7.40 5.1.5. Option 5: Introduce the
requirement to provide representative examples when advertising payment
accounts Effectiveness
of policy option Representative examples are an effective
means of providing clear and concise information through advertising material
that demonstrates a snapshot of the main attributes of a payment account and
the main elements of fees. Some account pricing models may be more suitable to
the use of representative examples than others. In particular, pricing models
that have a simple charge structure comprising a limited number of fees (e.g.
package-based or indirect revenue based) can easily be presented, together with
specific conditions and attributes of an account in a concise, tablular form.
This allows consumers to obtain all of the main price features of an account at
a glance, within advertising material. On the contrary where payment accounts charge
fees per transaction or block of transactions, (transactional-based), the cost
of an account will depend heavily on consumption patterns and typically counts
a greater number of fee items, (e.g. variable fees relating to cash handling
and payments). In this case, fee information cannot be easily captured in a
summary table format and needs more processing to be useful. To reflect variable costs in representative
examples, this option foresees the use of usage profiles reflecting differing
kinds of account usage patterns. The first variant within this option foresees
that credit institutions would set up their own representative examples using
usage profiles developed internally for relevant products. Alternatively,
Member States would set up standard representative usage profiles to be used
consistently by credit institutions. Technically the latter variant should
provide a better basis for comparison of different payment account offers than
if credit institutions are free to develop own usage profiles. While both variants would enable
representative examples to be customised to differing levels of usage patterns,
both alternatives would also multiply the number of representative examples
that would have to be presented with advertising material for any one payment
account product. We consider that a minimum of 3 and a maximum of 6 usage
profiles[509] would be necessary to capture different levels of usage in a
representative manner. As a result, where payment accounts charge fees per
transaction (or per block of transactions), representative examples may not be
an appropriate means of providing consise and easy to understand fee
information within advertising material. The reasons are, first that this tool
does not cater well for variable costs and second, because combining and
providing information about underlying usage profiles may render information
less clear and understandable, especially in advertising material. While the
Commission's behavioural study,[510]
indicated that the use of representative examples a positive impact on consumer
switching behaviour, the study restricted the number of profiles to two
extrement scenarios and was presented in a visually attractive manner, which
may have influenced positive responses rates in this case. Another issue to consider is that consumers
may not be able to locate their own usage levels within a set of examples,
without assistance. As discussed in the problems section pricing
models for payment accounts vary considerably within the EU. Table 3.F above
shows eight Member States[511] where the transaction-based model was in use, out of a sample of 16
Member States.[512] The use of representative examples is also of
less value when used for packaged payment accounts, with a regular, single
charge fee and tailored services. In some more mature
markets, such as in France, the trend is to increasingly personalise packaged
bank offers to meet customer needs. In such a tailor-made product environment,
representative examples may also not be effective. Impacts
of policy option and efficiency Detailed information on the current use of
representative examples for the purposes of advertising within the EU is not
available and no regulatory requirements or coordinated self-regulatory
initiatives appear to be in place in Member States. A number of credit
institutions may provide representative examples on a voluntary bases, mainly
in The Netherlands and to some extent in the United Kingdom, fucussing on
overdrafts. Therefore it is likely that credit institutions in all Member
States would need to adapt to such a requirement. Credit institutions would
incur one-off costs associated with setting up representatives examples and
where relevant, account usage profiles. Additional costs would include adapting
promotional material and the recurring costs of ensuring compliance with the
requirements for all advertising launching new payment account products. The option would impact upon public
authorities mainly in the event that standard bank usage profiles were to be
set up at Member State level. Public authorities would incur one-off costs in
setting up usage profiles in this case. Costs would also arise for public
authorities, credit institutions and consumer organisations, from the necessary
coordination efforts during the set-up stage. Recurring costs would mainly be
incurred in monitoring credit institutions and ensuring that representative
examples reflect the attributes of payment account products accurately. In the public consultation on payment
accounts, a number of consumers (including BEUC) noted that entrusting credit
institutions with the task to develop their own usage profiles could be
problematic, introducing bias into profiles and also detrimental to the
objective of providing clear and comparable information. Conversely, many
representatives from the financial services industry indicated that
representative examples should be provided on a voluntary basis and did not
react favourably to standardisation of usage profiles at Member State level. Both variants under this option have
potential disadvantages. If representative examples do not provide clear and
comparable information, they may have an adverse impact on stakeholders –
particularly consumers. They present risks to industry as they do not guarantee
improvements in providing a level playing field to market participants.
Moreover, the benefit of representative examples is fundamentally linked to how
well pricing structures adapt to the presentation of attributes provided for a
payment account. This option is therefore not considered to fulfill the
objectives established in this initiative. Quantification of costs and benefits ·
Variant A: Banks set up own representative
examples A change in consumer switching behaviour is
estimated to accrue a benefit amounting to EUR 146.22 million from 2013 to
2022. Compared to other options, this reflects the difficulties first, of
ensuring that representative examples would be a useful tool when applied to
different pricing structures and second, of those arising due to the complexity
that disclosure on different usage profiles within the same representative
example may create. Total one-off costs to credit institutions
of setting up own representative examples are estimated at between EUR 265.44 –
EUR 463.30 million. The major cost items to credit institutions are adapting
advertising material in compliance with a legislative requirement, (EUR 174.52
– EUR 290.87 million). This amount also includes the cost of developing
representative account usage profiles. Other major cost items include costs of
updating IT systems and internal communication and training costs. Total recurring costs to credit
institutions are estimated at between EUR 323.68 – EUR 347.76 million from 2013
to 2022 and mainly comprise additional staff costs as a result of incremental
compliance requirements (EUR 299.61). One-off costs to Member States mainly
consist of implementing legislation and are not expected to be material.
Recurring costs to Member States from 2013 to 2022, are estimated at a range
between EUR 0.71 - EUR 1.40 million and mainly comprise the cost monitoring and
enforcement of legislation (estimated between EUR 0.33 - EUR 0.66 each). Table 3.N:
Representative examples using non-standard usage profiles set up by credit
institutions Total EU benefits (million EUR) || Consumer benefits: Changes in switching behaviour Total consumer benefits: || 146.22 146.22 Total EU costs (million EUR) || Min || Max Credit institution costs: One-off: Recurring: Total credit institution costs: || 265.44 323.68 589.12 || 463.30 347.76 811.06 Member State costs: One-off: Recurring: Total Member State costs: || 0.02 0.71 0.73 || 0.03 1.40 1.43 ·
Variant B: Member States prescribe
representative examples The estimate of benefits to consumers
relating to a change in switching behaviour is equal to variant A above,
amounting to EUR 146.22 million from 2013 to 2022. Total one-off costs to credit institutions
are estimated at between EUR 299.71 – EUR 522.34 million. The major cost items
to credit institutions are the same as described in variant A. Here they are
expected to be higher, reflecting additional compliance efforts in adapting
marketing and IT to pre-defined usage profiles rather than profiles that are
generated internally. Total recurring costs to credit institutions
are estimated at between EUR 362.97 – EUR 390.94 million from 2013 to 2022 and
mainly comprise additional staff costs as a result of incremental compliance
requirements. One-off costs to Member States mainly
consist of developing standard usage profiles and are estimated to cost between
EUR 0.08 and EUR 0.12. Recurring costs to Member States are expected mainly
through revisions of standard usage profiles, monitoring and enforcement of
legal requirements. Total recurring costs to Member States are estimated at
between EUR 0.94 - EUR 1.85 million from 2013 to 2022 and mainly comprise the
cost monitoring and enforcement of legislation. Table 3.O: Costs
and benefits –representative examples using standard usage profiles Total EU benefits (million EUR) || Consumer benefits: Changes in switching behaviour Total consumer benefits: || 146.22 146.22 Total EU costs (million EUR) || Min || Max Credit institution costs: One-off: Recurring: Total credit institution costs: || 299.71 362.97 662.08 || 522.34 390.94 912.08 Member State costs: One-off: Recurring: Total Member State costs: || 0.08 0.94 1.02 || 0.12 1.85 1.97 5.1.6. Option 6: Provide or make
available a personalised cost simulation to prospective customers Effectiveness
of policy option Cost simulations can be provided through both
the major distribution channels used by credit institutions to sell payment
accounts, i.e. the branch network and online. As a result, they are capable of
capturing virtually all customers. They would cover the needs of consumers with
varying degrees of financial education, as more proactive internet users could
use tools to calculate cost simulations themselves, while others preferring to
bank directly in branches would be assisted by an employee of a credit
institution in compiling the information necessary to set up a simulation. Yet
the ultimate responsibility to provide information that may reasonably reflect
a client’s usage patterns would fall upon the client themself, although factual
information from a consumer’s bank history and bank statements could be used to
provide reliable information. To be effective, personalised cost
simulations need to be based on relevant information information, which
requires efforts from both consumers and businesses. For example, in 2011 the
United Kingdom launched an initiative to enable consumers to access their
personal and transaction data in a safe way, named "Midata ".[513] The purpose of the intiative is for consumers to improve their
purchasing decisions by becoming more aware of their consumption patterns.
While this is precisely the kind of information necessary for cost simulations,
initial research indicates that "There is
unlikely to be very much initial consumer interest in the overarching principle
of companies releasing personal data for use by consumers. If anything, this
news is likely to be received with suspicion until the benefits of this can be
observed in practice."
Some credit institutions provide a simple tool on their website for consumers
to run simulations of overdraft charges. Yet, mandatory cost simulations
approximating the features contained in this option are currently not widely in
use. In order to address different account usage
patterns, this option considers the two scenarios presented in the discussion
on representative examples. Under the first scenario, banks would provide fully
personalised cost simulations attaching the fees charged on an account to
information provided by a prospective customer on usage patterns, (apart from
account management fees and other standard charges). Banks could also set up
their own customer usage profiles and provide prospective customers with cost
simulations corresponding to the most relevant profile, based on information
collected from the customer. In the second scenario Member States would define
a set of standard bank usage profiles for credit institutions to use when
providing cost simulations. This approach suffers from the same weaknesses as
the previous option that discussed the use of representative examples. Impacts
of policy option and efficiency The impact on consumers would depend on how
they perceived this option. When contrasted with comparison websites, this
option has the disadvantage that consumers would need to collect simulations
from different institutions separately in order to compare offers, thus
incurring higher search costs. In addition as mentioned above, the clarity of
information could be hampered by different methodologies used by credit
institutions within simulators and usage patterns. In the public consultation,
several consumer organisations questioned the usefulness of these tools,
raising in particular the risk of them being too generic. The cost of developing and operating
simulators would be borne by credit institutions, who would also incur additional
set-up costs in adapting front office operations and training front office
staff in branch networks. Public authorities would incur significant set up
costs if charged with developing standard usage profiles. Coordination efforts
would raise costs to industry representative organisations, credit institutions
and consumer representatives involved in the process. Public authorities would
incur additional setup costs in designing presentation and information
requirements and recurring costs of monitoring compliance after entry into
force. An EU level supervisor would be charged with coordinating the production
of technical standards for the use of cost simulations, ensuring consistency in
the application of this requirement across the internal market. The appeal of cost simulations has not been
ascertained and they are only used on a voluntary basis by a limited number of
credit institutions. While they are mostly useful to estimate variable cost
items associated with a payment account, they suffer from similar weaknesses to
representative examples. As noted previously, different groups of stakeholders
have indicated either potential for methodological bias when developing
simulators or reluctance for simulators to become a regulatory tool. As a
result their impact on stakeholders presents the risk of not providing clear
and comparable information presented in an understandable way. They present
risks to industry as they do not guarantee improvements in providing a level
playing field to market participants. In the public consultation, several representative associations of banks could not support the
development of standardised cost simulations, raising concerns on the
effectiveness of this approach and the cost implied.
Consequently, this option does not fulfil the objectives established in this
initiative. Quantification
of costs and benefits ·
Variant A: Banks provide personalised
simulations or set up own usage profiles Benefits to consumers from changes in
switching behaviour are estimated at EUR 219.32 million from 2013 to 2022.
Although both options that utilise usage profiles created by credit
institutions (representative examples and cost simulations) do not fulfil the
objectives of providing clear, comparable information on bank fees, the
Commission’s estimate of benefits to consumers takes account of the potential
broader impact personalised cost simulations – provided to consumers at
the pre-contractual stage – could have over representative examples. Total one-off costs to credit institutions
of setting up own representative examples are estimated at a range between EUR
420.77 – EUR 691.71 million. The main items of cost to credit institutions
arise from updating IT systems (EUR 139.91 – EUR 209.87 million) and marketing
and promotional material (EUR 209.87 – EUR 349.78 million) to set up cost
simulations. This also includes the cost of developing representative account
usage profiles. This option is expected to generate high
costs to credit institutions over the long term as it imposes new procedures on
credit institutions when opening accounts, requiring additional time to be
spent by front office staff with payment account clients. Total recurring costs
to credit institutions are estimated at between EUR 2 572.48 – EUR 3 682.59
million from 2013 to 2022. Of this amount, additional interaction by front
office staff with clients' accounts for an estimated, EUR 2 204.17 – EUR 3
306.25 million from 2013 and 2022. One-off costs to Member States mainly
consist of implementing legislation and are not expected to be material.
Recurring costs to Member States for the period from 2013 to 2022 are estimated
between EUR 0.71 - EUR 1.40 million and mainly comprise the cost of monitoring
and enforcement of legislation (estimated between EUR 0.33 - EUR 0.66 each). Table 3.P: Costs
and benefits – cost simulations using non-standard usage
profiles set up by credit institutions Total EU benefits (million EUR) || Consumer benefits: Changes in switching behaviour Total consumer benefits: || 219.32 219.32 Total EU costs (million EUR) || Min || Max Credit institution costs: One-off: Recurring: Total credit institution costs: || 420.77 2 572.48 2 993.25 || 691.71 3 682.59 4 374.30 Member State costs: One-off: Recurring: Total Member State costs: || 0.02 0.71 0.73 || 0.03 1.40 1.43 ·
Variant B: Member State prescribe usage profiles The estimate of benefits to consumers
resulting from a change in switching behaviour is at the same level as for
Variant A above, amounting to EUR 219.32 million from 2013 to 2022. Total one-off costs to credit institutions
are estimated between EUR 461.12 – EUR 757.51 million. The major cost items to
credit institutions are of the same kind as described in Variant A but are
higher, reflecting additional compliance efforts in adapting marketing material
and IT systems to pre-defined usage profiles rather than generating profiles
internally. Similar to variant A, recurring costs to
credit institutions that are estimated at between EUR 2 821.51 – EUR 4 036.32
million from 2013 to 2022, are impacted upon by the expected additional time
front office staff would need to dedicate to clients to provide cost
simulations, (EUR 2 397.51 – EUR 3 596.27),. One-off costs to Member States mainly
consist of developing standard usage profiles and are estimated to cost between
EUR 0.08 - EUR 0.12. Recurring costs to Member States are expected mainly as a
result of revisions of standard usage profiles, monitoring and enforcement of
legal requirements. Total recurring costs to Member States are estimated
between EUR 0.99 - EUR 1.95 million from 2013 to 2022 and mainly comprise the
costs of monitoring and enforcing legislation. Table 3.R: Costs
and benefits – cost simulations using standard usage profiles Total EU benefits (million EUR) || Consumer benefits: Changes in switching behaviour Total consumer benefits: || 219.32 219.32 Total EU costs (million EUR) || Min || Max Credit institution costs: One-off: Recurring: Total credit institution costs: || 461.12 2 821.51 3 282.63 || 757.51 4 036.32 4 793.83 Member State costs: One-off: Recurring: Total Member State costs: || 0.08 0.99 1.07 || 0.12 1.95 2.07 5.1.7. Option 7: Introduce EU
standardised forms for the provision of ex-ante information on fees (standard
price lists) Effectiveness
of policy option EU standardised forms for ex-ante information
on bank fees would essentially comprise two elements: a standard presentation
and fully standardised fee terminology. First it would require the creation of a
standard format for a price list of fees. This would include standard
categories of fees presented in a pre-defined order. It would foresee specific
disclosures regarding information about the frequency with which fees would be
charged and measurement units (e.g. per transaction), together with additional
presentation requirements covering the name and details of the credit
institution, similar to the standard presentation format provided for in SECCI
or ESIS. As with SECCI and ESIS, a standard price list
would need to regularise the terminology used to describe fees to create an EU
standard for pre-contractual information. Unlike the Annual Percentage Rate of
Charge,[514] which effectively establishes the cost of a loan, there is no such
unique, single measure of cost that encompasses fees incurred under a payment
account. Standardising all fee terminology at EU level would be complex; not
all payment services instruments are commonly used throughout the EU, e.g.
cheques are common in France but are not used at all in Belgium. The result
could be that EU standard fees would not only be overly cumbersome to be
effective, but they may also lead to confusion by requiring disclosure of fee
items that may not be relevant to a large number of EU citizens. Member States’ responses to the Commission
consultation on payment accounts acknowledged the need
for coordination across borders and favoured
flexibility to accommodate national circumstances. Consumers also took the view
that full EU level harmonisation of fees terminology could be a medium to
long-term goal. Respondents from industry held the view that harmonisation of
fee terminology should happen at a national level, while they generally did not
disagree with action coordinated by the EU. While it is considered that Option 2 may
identify commonalities between Member States where similar charging structures
are in operation, a full EU level standardisation of fee terminology, without
taking into account national circumstances does not appear to be supported by
stakeholders in Member States. Impacts
of policy option and efficiency The impact on consumers could vary widely
depending on the relevance of a European standard price list to the fees
actually incurred by EU citizens. As underlined by a majority of consumers
responding to the public consultation, Member State standardisation of major
fee items as described under Option 2 is a prerequisite to determining possible
commonalities between Member States (or groups of Member States). This option would generate costs to the EU in
developing a fully standardised EU price list, as opposed to simply those fees
common to all Member States. Member States would also incur set-up costs
through coordination efforts with the EU. Recurring costs to credit
institutions in complying with this requirement would be largely similar
whether action were taken nationally or at EU level. However one-off costs
would be higher in the event of EU-level standardisation: this would require a
greater degree of adaptation on the part of credit institutions to comply with
full standardisation, that would not allow for flexibility to take account of
national banking practices and cultures would be affected. Quantification
of costs and benefits ·
The Commission estimates that changes in
switching behaviour could result in a benefit to consumers of EUR 438.65
million, measured from 2013 to 2022. ·
Total initial outlay for credit institutions is
estimated at between EUR 148.89 – EUR 252.07 million. Costs to credit
institutions in adapting marketing and promotional material (EUR 107.51 – EUR
179.19) and from internal communication and training costs (EUR 33.59 – 58.79
million) are expected to be higher under this option than if EU standard
terminology were to be undertaken only for a limited number of fees as
described in Option 2. Other relevant one-off costs to credit institutions
including changes to IT systems to produce price lists in standard form would
not vary significantly to those estimates for Option 2. ·
Total recurring costs to credit institutions are
estimated at between EUR 224.89 – EUR 297.51 million from 2013 to 2022 and
mainly comprise additional staff costs as a result of incremental compliance
requirements. ·
One-off costs to the European Institutions have
not been quantified. Costs to Member States mainly comprise those of monitoring
and enforcing legislation. Table 3.S: Costs
and benefits – EU standard form for ex-ante fee disclosure Total EU benefits (million EUR) || Consumer benefits: Changes in switching behaviour Total consumer benefits: || 438.65 438.65 Total EU costs (million EUR) || Min || Max Credit institution costs: One-off: Recurring: Total credit institution costs: || 148.89 224.89 373.78 || 252.07 297.51 549.58 Member State costs: One-off: Recurring: Total Member State costs: || 0.01 0.33 0.34 || 0.02 0.64 0.66 5.1.8. Option 8: Introduce an
obligation for banks to provide ex-post information on the fees incurred Effectiveness of policy option In order to provide information that can be
used effectively, ex-post information needs to be provided in a dedicated
summary and to be concise. However it should also provide sufficient detail of
major elements of fees incurred to enable a consumer to understand what fee
expenditure relates to, and to assess the need to either modify consumption
patterns or move to another provider. This option directly addresses the objective
of making consumers aware of costs actually incurred, as obtaining a summary of
information about charges incurred is key for a consumer to understand the cost
holding an account. This option is effective in combination with
Options 2 and 4B and the ex-post fee items would match the ex-ante fee items in
Option 2. This option - in combination with ex-ante fee comparison and
presentation requirements - could help improve customer mobility while
nurturing competition in the payment accounts market. Impacts
of policy option and efficiency The impact of this option on consumers would
be very positive. This benefit would be maximised if ex-ante and ex-post
information requirements were coordinated. This could be achieved by ensuring
that the major fee items selected under option 2 - disclosed in a standard
price list - included ex-post fee information. This could be provided alongside
regular information on total costs incurred. In the public consultation, almost
all consumers stressed the key role of clear and timely
information on actual fees paid and called for action in this area. As described in the problems section, the
approach taken by Member States to the provision of ex-post information on fees
incurred varies widely ranging from a requirement of regular, dedicated and
concise information in some Member States to no requirements in others. At
least 11 Member States have adopted specific requirements for ex-post
information;this option would have an important impact on harmonisation within
the Internal Market and on the provision of equal levels of consumer
protection. Public authorities would mainly incur the
cost of defining the content and presentation of summary fee sheets, in
collaboration with representatives of credit instutions and consumer
organisations. There would also be recurring costs associated with monitoring
compliance of the requirements. An EU-level supervisor could coordinate the
activities of Member State competent authorities during the set-up stage,
overseeing the selection of those fees common to all Member States, and
ensuring the consistent application of rules within the internal market. Credit institutions are expected to incur
costs in updating their information systems to be able to provide a summary of
information at a level of detail determined by Member States. However, as
confirmed by the contributions to the public consultation, most of the financial services industry has already adopted the
practice of providing consumers with statements on a regular basis. Quantification
of costs and benefits ·
The Commission estimates that benefits to
consumers of providing ex-post information in a dedicated summary form,
particularly if information is structured to match ex-ante fee presentation
requirements, would accrue in the form of savings through better account
management and through changes to consumer switching behaviour. These benefits
are estimated to generate savings to consumers amounting to EUR 2 702.57 and
EUR 1 462.16 million respectively from 2013 to 2022. ·
Credit institutions would incur one-off costs
mainly through adapting IT systems to filter charge information, developing
summary form fee statements and due to internal reporting, amounting to EUR
192.42 – EUR 326.31 million. Total recurring costs to credit institutions are estimated
at between EUR 260.37 – EUR 492.45 million from 2013 to 2022 and mainly
comprise additional staff costs as a result of incremental compliance
requirements and the cost of disseminating ex-post fee information in a
standard form. ·
Costs to Member States mainly comprise
monitoring and enforcement of legislation. One-off costs are estimated between
EUR 0.07 – EUR 0.11 million. The recurring costs to Member States are estimated
at EUR 0.81 – EUR 1.59 million from 2013 to 2022. Table 3.T: Costs
and benefits – a requirement to provide ex-post information of fees incurred Total EU benefits (million EUR) || Consumer benefits: Changes in switching behaviour Better account management Total consumer benefits: || 1 462.16 2 702.57 4 164.73 Total EU costs (million EUR) || Min || Max Credit institution costs: One-off: Recurring: Total credit institution costs: || 192.42 260.37 452.79 || 326.31 492.45 818.76 Member State costs: One-off: Recurring: Total Member State costs: || 0.07 0.81 0.88 || 0.11 1.59 1.70 5.1.9. Option 9: Introduce EU
standardised forms for the provision of ex-post information on fees Effectiveness
of policy option EU standardised forms prescribing ex-post
information requirements would establish presentation requirements covering all
personal payment account fees developed at an EU level. Presentation
requirements would include aspects such as the level of detail to be provided,
information on unit costs, the number of charge events, total costs incurred as
well any debit incurred and any credit interest earned. As indicated in option 8, the provision of
ex-post information would be most beneficial if combined with options for
ex-ante information provision, focusing on providing consumers with detailed
information about the most relevant fees incurred, for example those indicated
in a standard ex-ante price list. For reasons discussed in the analysis of
Options 2 and 7 above, standardisation of fee terms would only be effective at
national level, after EU level standardisation of the fees common to all Member
States. Including all personal payment account fees
in any EU action would not be helpful to consumers and may in fact be
cumbersome, making such a tool unusable. As a result this option is not
considered more effective than option 8 above. Impacts
of policy option and efficiency The impact of this option on consumers is not
expected to be as positive as the impact brought about by option 8, since the
price list would cover all fees across the EU and not just those most relevant
to consumers. The benefit derived from standard presentation requirements and
coherence with ex-ante information requirements would be similar in both
options 8 and 9. This option is likely to set up the requirement to present fee
items in a summary sheet that may not represent major items of expenditure
incurred by a large number of EU citizens. As indicated under option 8, most respondents to the public consultation from the financial
services industry recalled current the current practices that have been already
developed and used in terms of providing consumers with statements on a regular
basis. This option would generate costs to the EU to
develop a standard summary form that provides ex-post information on fees
incurred and identify every personal payment account fee in the EU. Costs to
credit institutions in complying with this requirement would not vary to a
large extent if fee lists are set up at the level of Member States or the EU. Quantification
of costs and benefits ·
The Commission estimates that benefits to
consumers would accrue in the form of savings through better account management
and changes to consumer switching behaviour amounting to EUR 954.48 and EUR
292.43 million respectively from 2013 to 2022. ·
Credit institutions would incur one-off costs
mainly through adapting IT systems to filter charge information, develop
summary form fee statements and reporting internally. This would amount to EUR
345.71 – EUR 681.55 million. These costs are expected to be higher than if
summary ex-post fee statements were set up by Member States on the basis of
common EU criteria given the greater potential for a departure from national
banking practices and cultures resulting in greater adaptation efforts by
credit institutions. ·
Total recurring costs to credit institutions are
estimated to cost between EUR 587.74 – EUR 1 100.48 million from 2013 to 2022
and mainly comprise additional staff costs as a result of incremental
compliance requirements and the cost of disseminating information in standard
form. ·
Costs to Member States mainly comprise
monitoring and enforcement of legislation. One-off costs are estimated between
EUR 0.03 – EUR 0.05 million. The recurring costs to Member States are estimated
at EUR 0.71 – EUR 1.40 million from 2013 to 2022. Table 3.U: Costs
and benefits – a requirement to provide ex-post information of fees incurred Total EU benefits (million EUR) || Consumer benefits: Changes in switching behaviour Better account management Total consumer benefits: || 292.43 954.48 1 247.11 Total EU costs (million EUR) || Min || Max Credit institution costs: One-off: Recurring: Total credit institution costs: || 345.71 587.74 933.45 || 681.55 1 100.48 1 792.03 Member State costs: One-off: Recurring: Total Member State costs: || 0.03 0.71 0.74 || 0.05 1.40 1.45 Annex IV
Payment account switching 1. Problems 1.1. General
problem: restricted customer mobility Comparison with other network industries Graph
IV.A: Annual switching rates for different network industries
Source: Monitoring consumer
markets in the European Union, GFK, 2011 Graph IV.B: Overall
switching of products/services within network industries Source: Monitoring consumer markets in the
European Union, GFK, 2011 In mobile telephony, for example, academic
research[515] measured the impacts of introduction of mobile number portability
on switching rates and on benefits resulting from increased efficiency and
price reductions due to strengthening of competition in the mobile telephony
sector.[516] It concluded that in countries where a good quality mobile number
portability service was introduced[517]
average prices[518] fell by 6.6% in the short term and by 12% over the long run.
The quarterly switching rates[519]
increased by 13.6% over the short term and by 34.7% over the long term. These
results were confirmed by another study[520] that
analysed the impact of mobile number portability on prices in the EU15
countries from 1998 to 2002 and tested the impact of both regulatory (e.g.
legislation on mobile number portability) and non-regulatory factors (e.g.
income per capita in purchasing power parities, total population). The findings
suggest that number portability leads to a reduction in prices, since
competition is more intense and prices decreased in countries where mobile
number portability was introduced. Are low switching
rates a problem? Low switching rates are not, per se, a sign
of insufficient competition. Low switching levels in retail banking markets are
problematic only if consumers are not willing and able to switch rapidly when
differences in fees or product features appear. A number of studies demonstrate
that there is a significant discrepancy between the percentage of consumers
unsatisfied with their bank and those that have not thought about switching
their banks.[521] Dissatisfied customers are more likely to switch accounts than
satisfied customers, but only 25% of very dissatisfied customers, and 40% of
extremely dissatisfied customers, are likely to switch. High levels
satisfaction can clearly not alone explain low switching rates.[522] Restricted customer
mobility has an adverse impact on both consumers and the banking industry.
First, it increases providers’ market power resulting in lower incentive for
them to innovate and seek cost-efficiencies. Consequently, 'locked-in'
customers experience higher prices and a reduced level of services. Second, it
affects the supply side of banking services, as it is one of the factors that
limit the possibility for efficient credit institutions to enter new markets or
expand their client base. 1.2. Specific
problems 1.2.1. Inadequate
information EBIC reported that
information on payment account
switching should be available on the national banking associations' websites
and websites of banks and invited those banks that did not yet integrate the
information on their webpage to do so.[523]
Regarding the staff awareness, they stated that "the
situation will in any case improve over time as the branch staff will naturally
get acquainted with this new service."[524]
However, a number of surveys and mystery shopping studies cited in the main
report and below have come to different conclusions. Table 4.A: Share of
switching enquirers answering 'YES' to the following questions: Did they explain how direct debits and standing orders would be transferred? || 43% Did they explain how payments would be cancelled at your old bank? || 32% Did they explain that they would inform your old bank and transfer the balance of your account? || 35% Did they explain that they would provide a dedicated switching team to do everything for you? || 18% Did they make it clear that you would not have to contact your old bank at all during the switching process? || 26% Were you given information on how long each step took? || 21% Was it made clear that switching service was free? || 57% Source: Consumer
Market Study on the consumers’ experiences with bank account switching with
reference to the Common Principles on Bank Account
Switching, GfK, January 2012. In a review of a sample of 136 bank websites
from all EU countries, BEUC concluded that in 10% of the cases, the relevant
information was difficult to find and in 24% of cases, there was no information
at all available on the website. Moreover, the websites of some of the largest
banks in "some countries" were amongst those that failed to
provide information about switching.[525]
National research confirms these findings. In France, a survey[526] in 1 746 branches found that only 14% of branches had
information on switching freely available in form of leaflets and information
was provided spontaneously in only 35% of cases where the consumer expressed a
wish to change the bank. 1.2.2. Complexity
of switching process Switching current accounts is a complex
process. In order for customers not to be discouraged by this process, ideally,
the process should be short, with the least possible time and effort incurred
on the part of the consumer and free of errors. Many consumers, however, find
switching to be too much effort. For example, in 2011 around 1% of EU citizens
tried to switch payment accounts but gave up.[527] This
figure was slightly higher in Estonia, France, Luxembourg and Slovakia (2%).[528] In another survey from 2009, 6% of consumers (equivalent to around
21 million consumers) felt that the cost and effort of switching was too much.[529] In a UK survey,[530] nearly two thirds of respondents indicated 'too much hassle' as the
reason why they have not switched or not considered switching. Difficulties transferring standing orders and
direct debits represent one of the major barriers to account mobility. As part
of an EU mystery shopping exercise[531] in
2011 around 400 mystery shoppers were instructed to perform a switch to a new
bank including the transfer of a standing order from the old payment account.
Out of the 276 shoppers who were said to be helped, two thirds were told that
the bank could not assist them with the transfer of standing orders and only
19% successfully switched their payment account including a standing order.
While the data for Member States differs significantly; it can be noted that
the overall low success rate cannot be explained by a few 'black sheep' but a
problem across the board. Table 4.B:
Overview: Results of attempted switches: || Mystery shoppers || Successful application for switching service || Successful switchers incl. one standing order || Number || Number || % || Number || % Austria || 15 || 15 || 100% || 13 || 87% Belgium || 15 || 12 || 80% || 4 || 27% Bulgaria || 15 || 2 || 13% || 1 || 7% Cyprus || 10 || 0 || 0% || 0 || 0% Czech Republic || 15 || 7 || 47% || 3 || 20% Denmark || 15 || 10 || 67% || 2 || 13% Estonia || 15 || 15 || 100% || 1 || 7% Finland || 15 || 12 || 80% || 3 || 20% France || 20 || 9 || 45% || 5 || 25% Germany || 20 || 15 || 75% || 4 || 20% Greece || 15 || 5 || 33% || 0 || 0% Hungary || 15 || 15 || 100% || 3 || 20% Ireland || 15 || 15 || 100% || 9 || 60% Italy || 15 || 14 || 93% || 3 || 20% Latvia || 15 || 4 || 27% || 2 || 13% Lithuania || 15 || 6 || 40% || 3 || 20% Luxembourg || 9 || 9 || 100% || 1 || 11% Malta || 10 || 1 || 10% || 0 || 0% Netherlands || 15 || 14 || 93% || 3 || 20% Poland || 15 || 15 || 100% || 2 || 13% Portugal || 15 || 12 || 80% || 4 || 27% Romania || 15 || 0 || 0% || 0 || 0% Slovakia || 15 || 14 || 93% || 1 || 7% Slovenia || 15 || 14 || 93% || 0 || 0% Spain || 15 || 11 || 73% || 0 || 0% Sweden || 15 || 14 || 93% || 7 || 47% UK || 19 || 16 || 84% || 4 || 21% EU 27 || 403 || 276 || 67% || 78 || 19% Source: Consumer Market Study on the
consumers’ experiences with bank account switching with reference to the Common
Principles on Bank Account Switching, GfK, January 2012. In an Austrian study[532],
direct debit transfers were singled out as the main concern for switching and
were not transferred by any of the account providers involved in the mystery
shopping study. Account providers could not guarantee that all direct debits
would be transferred during the switch as neither the new nor the old bank has
the relevant information on direct debits of third parties. Erroneous transfers
of direct debits were said to be possibly resulting in additional charges to
the consumer, such as reminder fees or reversing payment fees. Due to the high
number of errors, the Austrian consumer organisation recommended that consumers
should retrieve all information on direct debits from old statements and
directly inform all relevant third party creditors in order to avoid problems.
While this national mystery shopping exercise seems to contradict the results
of Table 4.A above, the national exercise focused on direct debts, while the EU
mystery shopping covered the transfer of standing orders. Overall, the problem of
potential misdirection of payments has been identified as the most prominent
inconvenience of switching by all stakeholders.[533] A UK
consumer organisation stated that "Problems with direct debits and
standing orders were the biggest single source of difficulties experienced
during the switching process" and that "nearly 36% experienced
a problem with direct debits or standing orders." [534] 2. Summary
of problems and consequences Table 4.C: Problems
and consequences Problems || Consequences Complexity of switching process => Time required for the switching => Uncertainty in the duration of the switching process => Errors resulting in delay or non-execution of recurrent payments, in particular direct debit transactions Inadequate Information => Limited awareness of the switching service by consumers => Limited knowledge of the switching service by bank staff Psychological factors (negative perceptions) No cross-border switching service || Restricted cross-border activity => Characteristics of switching process restrict consumer cross-border activity => Increased costs for credit institutions operating in several Member States => Non-level playing field between market actors => Restricted market entry/expansion => Missed business opportunities Restricted product choice => Reduced product choice for financial and non-financial products and services => Product/service received not adapted to customer needs/preferences => Higher prices for financial and non-financial products and services => Higher costs of shopping around Low consumer satisfaction => lower consumer confidence 3. Detailed
assessment of the policy options 3.1. Possible
policy instruments Each of the above options could be given
effect through a variety of different policy instruments. These include an
industry self-regulation (code of conduct), EU level non-binding measures such
as a Recommendation or Communication, or binding EU measures such as
legislation in the form of a Regulation or Directive. Table 4.CA: Policy
options versus instruments || Communication || Self-regulation || Recommendation || Directive || Regulation 1. No action || || || || || 2. Ensure that the switching services follow the Common Principles (CP) || || X || X || X || X 3. Improve the effectiveness of the CP || || || || || 3 (A) Improve the existing CP || || X || X || X || X 3 (B) Broaden the scope of the CP to EU-wide cross-border switching || || X || X || X || X 4. Set up an automatic redirection service for all receipts and payments from an old to a new account || || || || || 4 (A) Introduce a domestic automatic redirection service || || X || X || X || X 4 (B) Introduce an EU-wide redirection service || || X || X || X || X 5. Introduce payment account portability || || || || || 5 (A) Domestic payment account portability || || X || X || X || X 5 (B) EU payment account portability || || X || X || X || X A Commission Communication would be unable
to achieve any of the objectives, as it is a tool to communicate information to
the Member States rather than effect a particular change. The following
sections will assess the impact of the policy options and will describe which
policy instrument is the most appropriate to use, as well as the underlying
reasons for the choice. 3.2. Option
1: No action ·
Effectiveness of policy option When assessing the effectiveness of no EU
action, recent developments at Member State level need to be taken into
account. As demonstrated in Sub-section 3.2.3 of the main report, the Common
Principles are not sufficiently applied by payment account providers in the
majority of Member States. Consequently, the defined objectives are not being
met or are only partially met. The effectiveness of 'no action' is highly
dependent on the application/non-application of the Common Principles. In most
cases – partly due to the non-binding character of the Common Principles – it
is a discretionary choice of account providers. In any event, the Common
Principles do not contain any explicit provisions on raising awareness among
consumers on the existence of switching services or any requirement for
improving staff awareness of the switching process. As a result, it is not
ensured that consumers receive adequate assistance during the switching
process. In addition, no substantial reduction of the risk of
lost/missed/inaccurate transactions resulting from switching of payment accounts
can be expected, as third parties need to be informed of changes in payment
account details 'manually'. Furthermore, as the Principles relate to domestic
switching only, consumers wishing to switch cross-border are not helped. A number of Member States have decided to go
beyond what is expected by the self-regulatory principles in different ways.
Ireland, for example, has decided to render the voluntary switching code
legally binding to improve the application of the Common Principles via
stricter monitoring and enforcement measures by public authorities. This
implies that Ireland has already opted for Option 2 and therefore fulfils the
objectives to the extent of that option. In order to decrease the risk of
lost/missed/delayed/inaccurate transactions resulting from switching of payment
accounts, the Netherlands have introduced a re-routing system for payment
orders sent to the 'old' payment account to be automatically sent on to the
'new' account. A similar, though technically different system, is currently
being developed in the United Kingdom and should become operational in
September 2013. These actions taken by the Member States aim
to facilitate domestic switching systems. However, as the approaches differ,
they might lead to an even less consistent regulatory environment, making the
potential cross-border switching of payment accounts even more difficult and
hindering the potential benefits of a pan-European payment account market in
the future. ·
Impacts of policy option on stakeholders and
efficiency In the absence of any action, the
consequences outlined in Section 3.4 of the main report
will persist. Consumer mobility remains
restricted and consumers are unable to reap the benefits of a well-functioning
competitive internal market. Moreover, due to different frameworks in different
Member States, consumers do not enjoy the same level of service by the payment
providers. The fact that different Member States look for national solutions
going beyond the requirements of the Common Principles further amplifies these
divergences and creates further obstacles to an integrated internal market. The overall impacts of this policy option
would be negative for consumers. Direct and indirect costs to consumers are
likely to remain, meaning that barriers to switching would persist. Generally, consumer and civil society
representatives have voiced clear discontent with the status quo and consider
the voluntary character of the Common Principles to be a major cause of
insufficient switching services.[535] The
Financial Services User Group sees difficulty in the fact that self-regulation
does not provide for sanction; therefore while voluntary commitments might be
respected in some banking communities, they do not result in behavioural change
in others.[536] For payments account providers, 'no action' is generally the
preferred way forward: they believe that switching services complying with the
Common Principles are in place and even though they recognise certain
shortcomings in relation to misdirection of payments during the switching
process, they do not see a need for additional measures.[537] This option would be the least expensive in
terms of short-term costs. Generally, providers of low quality products or
those charging above average prices would benefit from no action, as they would
be able to remain competitive due to restricted customer mobility. Providers
offering better quality and higher value for money products and service to
their (potential) customers would be affected negatively; the value-added to
the customer of switching might not exceed actual or perceived switching costs.
Therefore, more competitive providers would be penalised and limited in their
attempts to expand their customer base domestically and across Europe. The impact of 'no action' upon Member States
would be neutral, unless they decided to take any national measures. If they
acted unilaterally (as has already happened in Ireland), providers would be
affected in a similar way as described in Option 3A or, in the case of the
Netherlands or the United Kingdom, as described by Option 4A. If action were
taken at national level alone, all stakeholders would, long-term, encounter
consequences from an inconsistent regulatory framework negatively affecting the
functioning of retail banking markets. Providers would be hindered in their
attempts to enter new markets, and consumers would be offered fewer products of
inferior quality. 3.3. Option
2: Ensure that the switching services follow the Common Principles ·
Effectiveness of policy option Ensuring the application of Common Principles
should reduce the complexity and increase the certainty of the switching
process. However, as the Common Principles do not contain any explicit
provisions on raising awareness among consumers on the existence of the
switching services or any requirement to improve staff knowledge of the
switching process, it would not ensure that consumers receive adequate
assistance during the switching process. In addition, it would not lead to any
significant reduction of the risk of lost/missed/inaccurate transactions
resulting from switching of payment accounts, as third parties would need to be
informed of changes in payment account details manually. Furthermore, as the
Common Principles do not contain any provisions on cross-border switching,
their application on national level would be inconsistent and may preclude
cross-border switching. The potential introduction of 27 different national
legal regimes could hinder potential benefits from a future pan-European
payment account market. In conclusion, this option taken alone would
produce insufficient effects to meet the defined objectives. Moreover, the
effectiveness of this option would be highly dependent on the policy
instrument, if any, chosen by Member States. ·
Impacts of policy option on stakeholders and
efficiency Consumers should, in principle, become more
aware of switching processes and increasingly gain the confidence to ask their
'new' bank to provide them with the service. This increased confidence could
also encourage shopping around for a better product. Consumers would be offered
an improved service from account providers and be less restricted in their
mobility. However, consumers may still be confronted with a time-consuming,
complex process if they were to encounter insufficiently knowledgeable staff,
and could continue to face difficulties with the transfer of recurrent
payments. Furthermore, consumers wishing to switch provider cross-border would
be unable to do so: cross-border provisions are not foreseen. Payment account providers that have not fully
implemented or correctly applied the Common Principles would incur one-off costs. These would consist of: adaptation of IT
systems and business processes to comply with the
Common Principles and monitor internal compliance; costs of staff training on
the switching process; and updating website/branch information to include
information on the switching service. Furthermore, they would incur recurrent
costs relating to running, monitoring compliance with and reporting upon the switching
service. However, providers wishing to expand their client base and/or enter
new markets would be able to benefit from moderately increased customer
mobility and a more level-playing field. This option could benefit wider society by
creating a more competitive environment due to increased customer and provider
mobility. For Member States, the impact of this option
would be limited. Some costs would be incurred for running an awareness
campaign. Additionally, they would incur monitoring costs and costs of
reporting to the EU. Further costs to Member States would depend on the policy
instrument chosen. This option could be implemented in various
ways. First, scoreboards providing information on the success/failure of
switching between account providers could be developed. The Commission could also engage in more in-depth monitoring (e.g.
annual reports). Second, Member States could designate
a competent authority that would be responsible for monitoring the application
of the Common Principles – this might involve conducting mystery shopping
exercises and reporting on the results. To increase consumer awareness
of the switching service, Member States could undertake information campaigns. The policy instruments could be
self-regulatory or binding. First, the Commission could issue a Recommendation
inviting Member States to endorse the EBIC Common Principles. Member States
would be free to determine how best to ensure the application of the EBIC
Common Principles within their territory – through self-regulation or through
legal measures. Secondly, the Commission could make the Common Principles on
bank account switching binding at EU level. In this case, Member State
authorities would be responsible for monitoring compliance, enforcement of the
principles and reporting of results to the Commission. Member State monitoring could take different forms, such as mystery
shopping, reporting obligations, etc. Generally, consumers have expressed a clear
preference for a legally binding approach, arguing that the Common Principles
have been in place for three years, but were applied poorly. So far the only
Member State that has adopted legal measures is Ireland.[538]A great majority of financial
services industry representatives, on the other hand, would prefer that the Principles
remain voluntary; they feel that binding measures might not adequately address
the specific needs of national banking markets and might not be flexible enough
to adapt to future market developments.[539]
Outside the EU, recent legal measures aiming at
facilitating payment account switching have recently (July 2012) been taken in
Australia. The adopted measures including switching provisions similar to the
Common Principles, though go beyond these by not only assisting the consumer by
informing third parties to his/her direct debits/credits (by providing standard
letters), but by actually performing this task on behalf of the consumer.[540] In the event that the Common Principles were
made legally binding at EU level, in case of a Directive, Member States would
incur one-off legislative costs and recurring enforcement costs. Ireland would
be the exception. If the legal instrument were a regulation, there would be no
one-off costs to the Member States for the adoption of national legal measures,
but costs of legislating would be incurred at EU level. The overall impacts on stakeholders are
likely to be limited and depend on the instrument chosen. As demonstrated in
Section 7.6 of the main report, if binding measures were introduced, the impact
on Member States and payment account providers would be slightly negative due
to higher additional costs incurred. However, the positive effects for
consumers would likely be significantly higher with a possibility of
enforcement. All Members States would be affected by this
option, though only to a small extent. Ireland is likely to be affected only
very marginally (e.g. if reporting to the EU is made obligatory), as it already
has introduced switching legislation. The Netherlands and Denmark would also be
affected only marginally[541], but they would potentially incur legislative costs. ·
Quantification of costs and benefits A summary of quantified costs and benefits is
provided in Table 4.D. Table 4.D: Costs
and benefits – Ensure compliance with the existing Common
Principles at domestic level Total EU benefits (million EUR) || Consumer benefits: || Changes in switching behaviour || 1 462.2 Total consumer benefits: || 1 462.2 Total EU costs (million EUR) || Min || Max Credit institution costs: || || One-off: || 16.8 || 32.9 Recurring: || 228.8 || 395.7 Total credit institution costs: || 245.6 || 428.6 Member State costs: || || One-off: || || 3.2 Recurring: || || 18.8 Total Member State costs: || || 22.0 The total cost
of implementing this option to the industry has been estimated at between
EUR 246–429 million. These include one-off costs of
EUR 17-33 million for adapting
IT systems and business processes to facilitate the switching process; initial
staff training and updating website information on the switching process; and
time spent by banks' legal departments on familiarisation with new legislative
text (where appropriate). The industry would incur recurring costs of staff
spending time in implementing switching (additional customer enquiries) and
compliance monitoring and. If calculated for a 10-year period, these would
total EUR 229–396 million. The cost to Member States
would be limited and only incurred if binding measures were introduced. In
Table 4.D costs are quantified on the basis that the legal instrument used is a
Directive. If the binding instrument were a Regulation, the costs to the Member
States would be lower (as they would not incur the costs for transposing the
Principles in national legislation), but the cost to EU-budget might increase
accordingly. The benefits to consumers, payment account
providers and wider society would arise from facilitation of market access and
an increase in cross-border activity due to economies of scale and scope. These
would lower cross-border operating costs and increase consumer confidence and mobility,
contributing to a more competitive environment, likely to influence price
levels and product offers. For this option, these benefits are lower than they
could be (and in cross-border terms are expected to be
minimal) as only domestic switching is facilitated. Consumers
who switch are estimated to save more than EUR 1 462 million. If
a non-binding approach were chosen, this would probably be significantly lower. Additional potential benefits arising to
consumers, payment account provider and wider society resulting from a more
competitive environment reached through greater customer and provider mobility
have not been quantified. A detailed description of the methodology
used to calculate potential costs and benefits, including related assumptions,
are presented in Annex VI. 3.4. Option
3: Add provisions to improve the effectiveness of the Common Principles Variant A: Improve the existing Common
Principles at domestic level ·
Effectiveness of policy option By introducing obligatory displays on banks
websites and ensuring that staff are properly trained on switching procedures,
this variant would ensure that consumers are made aware of switching services,
provided with all relevant information, and receive adequate assistance. This
would reduce indirect costs to consumers in terms of time and effort. The objective of reducing the risk of
lost/missed/inaccurate transactions resulting from switching of payment
accounts to less than 5% of transferred transactions would not be fully met.
Third parties would need to be informed of changes in payment account details
'manually', meaning that most of the direct costs to
customers, such as postage or penalties from missed/late payments, would not be
significantly reduced. Furthermore, as this option does
not introduce any provisions on cross-border switching, its implementation
would not, enable the consumers to maximise the benefits from the Single
European Payment Area. ·
Impacts of policy option on stakeholders and
efficiency Consumers would be more aware of the switching
service and informed about what it comprised. The process would be easier and
less time-consuming as consumers would be assisted by sufficiently
knowledgeable staff. Although customer mobility would be less restricted,
consumers may still face difficulties transferring recurrent payment and be
discouraged from changing provider. Consumers wishing to switch cross-border
would not be helped: cross-border provisions are not included, narrowing
product choice granted, in principle, by the Single European Payment Area. In their responses to the 2012 Commission
consultation, consumer representatives noted that "the consumer
experience in relation to bank account switching depends on the level of staff
preparedness and training of a particular bank branch, whilst all banks must
comply equally with the same guidelines. Accordingly, better information and
better training of bank staff would benefit banks and reduce the random
variable which impacts on consumer experiences of switching and, more
generally, the relationship between banks and their customers."[542] Providers, Member States and wider society
would incur the same one-off and recurring costs and benefits as found in
Option 2 above. The effectiveness,
impacts, costs and benefits would depend on the policy instrument via which
this option is implemented. If a self-regulatory approach were chosen, all
effects and impacts would likely be significantly lower – the lack of
enforcement mechanisms would create a risk that the measures would not be
implemented or applied properly. Even if a binding instrument were chosen, the
implementation of Option 3A could be flexible enough to take into
account national specificities and thus ensure nationally effective switching.
Staff training provisions could specify that staff are to be adequately trained
on the functioning of the switching service, leaving Member States to decide
how this is to be applied. Geographically, all
Member States would be affected by this option. The cost and broader impact
would depend on the current application of the Common Principles and the way
how the additional provisions relating to staff training and provision on
information were implemented. Consequently, other things being equal, Member
States with a higher number of credit institutions would be affected to a
greater extent than those with fewer. On this basis, the Member States impacted
upon to a medium extent would be: Bulgaria, Cyprus, Germany, Hungary,
Luxemburg, Latvia, Poland, Portugal and the United Kingdom.[543] The remaining Member States would be
affected to a smaller extent. ·
Quantification of costs and benefits A summary of
quantified costs and benefits is provided in Table 4.E below. Table 4.E: Costs
and benefits – Improve the existing Common Principles at domestic level Total EU benefits (million EUR) || Consumer benefits: || Changes in switching behaviour || 1 679.5 Total consumer benefits: || 1 679.5 Total EU costs (million EUR) || Min || Max Credit institution costs: || || One-off: || 37.3 || 73.1 Recurring: || 852.6 || 1 214.1 Total credit institution costs: || 889.9 || 1 287.2 Member State costs: || || One-off: || || 3.2 Recurring: || || 18.8 Total Member State costs: || || 22.0 In practice,
the incremental costs for industry from the implementation of this option
should only be slightly higher than those cited under Option 2. However, given
that the Common Principles do not have an explicit obligation for e.g. staff
training, these additional costs (many of which should have already been
incurred by providers applying the Common Principles) are far more than double
that in the above table. Costs to Member States would remain unchanged
compared to Option 2: up to EUR 22 million for all costs for a period
of 10 years. The benefits in forms of money saved by
consumers who switch will be EUR 1 680 million – higher than
Option 2. Additional benefits arising for consumers,
payment account providers and wider society due to a more competitive
environment have not been quantified, but are likely to be higher than for
Option 2. A detailed description of the methodology
used to calculate potential costs and benefits, including related assumptions,
is presented in Annex VI. Variant B: Broaden the scope of the
improved Common Principles to cross-border switching ·
Effectiveness of policy option This option is based on Option 3A, so meets
the same objectives. By introducing additional provision on
cross-border switching and harmonising certain provisions of the Common
Principles, such as the time-periods set for the 'new'
and the 'old' bank to perform their respective tasks, implementation of this
option would additionally create a consistent regulatory framework across the
EU. This option would to a large extent meet the
defined operational objectives. Moreover, it could be considered as a first
step ahead of possible further measures at a later stage, such as an EU-wide
redirection service. ·
Impacts of policy option on stakeholders and
efficiency Generally, stakeholders would encounter
similar costs and benefits as with Variant A of this option. The difference
would be that a consumer wishing to switch provider cross-border would be
helped, since this option foresees relevant cross-border provisions. As a
result, consumer mobility would be facilitated domestically and at EU level.
Consumers would benefit from greater product choice due to the implementation
of the Single European Payments Area and from lower account fees resulting from
increased competitive pressure. Payment account providers that have adopted
processes incompatible with harmonised cross-border provisions (e.g. adopting
stricter provisions as to the number of days for performing the tasks by the
two banks) would face additional costs for adapting them. However, providers
wishing to expand their client base and/or enter new markets would significantly
benefit from increased EU-wide customer mobility providing for a more
level-playing field. If followed, the more competitive environment
this variant would achieve (in comparison to Variant A) would also bring larger
benefits to wider society, most likely in form of better quality products and
overall lower account prices. Member States might encounter additional
costs, as closer cooperation of supervisory bodies of different Member States
would be necessary for cross-border switching. Further
costs to Member States also exist in the form of one-off costs relating to
potential introduction of legal measures (if a Directive were chosen) and the
organisation of awareness raising campaigns on the enhanced cross-border
switching procedures (EUR 3 million) and recurrent costs related to
monitoring and enforcement measures and potentially reporting to the EU
(EUR 2 million a year). As with Variant A, the overall impacts on
stakeholders are likely to depend largely on the response of Member States
and/or providers depending on the policy instrument chosen. Due to additional
complexity given through the cross-border implications of this option, however,
it is likely that the impacts of self-regulatory measures would be overall
significantly lower than if legally binding measures are chosen. Even if in
principle a consistent EU-wide framework could be implemented within a
self-regulatory initiative, experience has shown that the Common Principles
were insufficient, leaving doubt about whether they could be successful if
implemented with an extended scope. Due to their
generally principle-based wording, even a binding instrument could potentially
leave a quite high flexibility to Member States in course of implementation.
Member States could decide whether they wish to define the extent of staff
training, the layout of information on the switching service, the exact content
of the information that needs to be submitted from the 'old' bank to the 'new'
one, and its format. A more standardised approach across the Member State would
nevertheless be necessary for certain provisions (such as maximum length of the
switching procedure) to ensure the functioning of the cross-border switching
service. As this option is
introducing provisions facilitating cross-border switching service which was
not existent in any of the Member States, diverse stakeholders within all
Member States would be impacted by it. However, the extent of the impact across
the Member States would depend on those same factors as outlined in Variant A
above. On this basis, it has been assessed[544] that
the Member States affected to the largest extent would be: Bulgaria, Germany,
Finland, Luxemburg, Poland, Portugal, and the United Kingdom. Denmark, Estonia, Malta and the Netherlands would be affected to a
smaller extent, while the remaining Member States would be affected to a medium
extent. ·
Quantification of costs and benefits A summary of quantified costs and benefits is
provided in Table 4.F below. Table 4.F:
Costs and benefits – Broadening the scope of the improved Common Principles
to cross-border switching Total EU benefits (million EUR) || Consumer benefits: || Changes in switching behaviour || 3 655.4 Total consumer benefits: || 3 655.4 Total EU costs (million EUR) || Min || Max Credit institution costs: || || One-off: || 67.2 || 129.4 Recurring: || 2 041.3 || 2 649.2 Total credit institution costs: || 2 108.5 || 2 778.6 Member State costs: || || One-off: || || 3.2 Recurring: || || 18.8 Total Member State costs: || || 22.0 The costs incurred from implementing this
option to the industry would be between EUR 2 109-2779 million. These costs
include the same categories of one-off costs and recurring costs as Variant A. The main difference in cost arises from a higher weighting factor
due to higher necessary adaptation level by the payment account providers
arising from additional requirements of this option. Costs to Member States would remain unchanged
to Options 2 and 3A and would, calculated over a 10-year period, amount to
EUR 22 million. The money saved by consumers who switch would
be higher than for Options 2 and 3A due to easier domestic and cross-border
mobility. They would amount to EUR 3655 million. Additional benefits for consumers, payment
account providers and wider society resulting from a more competitive environment
have not been quantified, but are likely to be higher than for Option 3A. The
above costs and benefits are estimated on the basis of implementation within a
Directive. If the choice of the instrument were a self-regulatory approach, the
cost to Member States would probably be lower. However, the benefits to the
consumers are likely to be considerably lower as there would be no enforcement
mechanism and no guarantee of timely implementation. The methodology used is presented in Annex
VI. 3.5. Option
4: Set up an automatic redirection service for all receipts and payments from
an old to a new account Variant A: Introduce automatic domestic
redirection service ·
Effectiveness of policy option Introducing a domestic automatic redirection
service would be an effective measure to address the operational objectives at
domestic level. Switching would become easier and less time-consuming for the
customer. The risk of errors in transactions would be significantly reduced –
even virtually eliminated – as all payments paid to/or debited from the 'old'
payment account would be automatically redirected/rerouted to the 'new' payment
account. A period for the redirection service of 13 months would guarantee this
for infrequent payments too (e.g. annual recurrent payments). Direct costs
(e.g. postage costs) and indirect costs in terms of consumer time would be
significantly reduced: for most types of transactions, third parties would be
automatically informed of the customer's new banking details via the 'payment
infrastructure'. Only in a few exceptional cases, e.g. cash in-payments, would
the consumer need to take action to inform other party – if known – of his/her
new bank details. This option does not propose explicit provisions on raising
consumer awareness of switching services, nor does it introduce requirements
for staff training on the switching process, and so it would not ensure
adequate assistance is provided to consumers. To ensure this, it could be
combined with Option 3A. As this option would introduce a national
redirection service, it would most likely lead to 27 different systems in place
across the EU, and would not contribute to the creation of a consistent EU
framework. Moreover, it might be counterproductive to possible subsequent
efforts to obtain potential cost efficiencies through the establishment of an
EU-wide redirection service. Significant resources deployed by Member States
and the financial industry to implement the domestic redirection system would
create an infrastructure that would not necessarily be compatible with a later
EU-wide redirection system. It would therefore increase the domestic mobility
of customers but potentially create further obstacles to cross-border
switching. The cross-border mobility of financial providers would be improved
by increased domestic customer mobility, but the positive impact would be lower
than in the case of introduction of an EU-wide redirection service, since many
of the economies of scale would not be obtainable. Payment account providers
operating cross-border would face significant investment in order to integrate
themselves into two or more domestic redirection services. For this reason,
this option does not create a level playing field between market actors. ·
Impacts of policy option on stakeholders and
efficiency If a domestic redirection service were
introduced, consumers would benefit from a significantly improved domestic
switching process. As the process would be automated, consumer involvement
would be reduced to a minimum. Consumers would not need to take action to
inform third parties of changes to their payment account details (with a few
exceptions) as they would be automatically informed via the system. Knowing
that payments will not get lost or be delayed would improve consumer confidence
in the switching process. Increased confidence would make consumers more likely
to switch where a better offer exists. Generally, the direct cost in terms of
postage and penalties for late/missed payments would be minimised by this
option. Yet as the introduction of the redirection service would be costly to
the industry, it is likely that these costs would be passed on to the
consumers. As redirection is to be offered free of charge, the costs would be
passed on to the consumers in other ways, meaning that all consumers, including
those uninterested in switching, would need to pay. However, all consumers
would benefit from a more competitive environment, but as this option only
proposes a domestic redirection service, it would not help consumers wishing to
switch cross-border. For the industry, the introduction of a
redirection service would impose significant initial costs. First, they would
need to acquire familiarity with any new requirements, possibly requiring
external legal and/or technical expertise. They would also face significant
one-off costs for the internal development of a system to be aligned to an
industry-wide switching service, which would include costs for adapting their
IT-systems, business processes, monitoring systems and product pricings. Further
one-off costs would relate to training of staff dealing with customer enquiries
and adaptation of material for consumers on the switching service. Despite
these high costs, some industry stakeholders have indicated that such automatic
rerouting of payments represents best practice.[545] In addition to the costs of adaptation of
providers' internal payment systems, a redirection service would necessitate
the development of a central infrastructure via which payments could be
redirected. The costs for central development would consist of: designing and
implementing a new messaging system to inform third parties that their payments
have been redirected and communicate the new bank details to them; implementing
changes to payment schemes to support redirection and forwarding of payments
from the old account; and undertaking industry testing. Implementation and
management of the new service would also be costly; these costs would most
probably need to be in first instance borne by Member States (central authority)
and could, upon functioning, be recovered from the banking industry as a 'per
switch charge' over the initial period of the service's operation. There would also be smaller recurrent costs
for the industry and Member States. The industry would need to bear the costs
for running the redirection service, for compensating customers in case of
system errors, and for handling a potentially increased number of customer
enquiries (as customer mobility would increase). Member States would incur
recurrent costs for compliance monitoring and costs related to enforcement and
to reporting to the EU. One-off costs to Member States would arise in case
legislative measures should be adopted. Introduction of redirection service would
also incur costs for direct debit originators and merchants accepting recurring
card transactions. These would need to adapt their IT systems and business
processes. So far, the Netherlands is the only Member
State that has introduced a redirection service. The so-called 'Interbank
Switch-Support Service' ('Overstapservice') has been available since February
2004 and includes the following features[546]: ·
for 13 months all direct debits destined for the
old account are, without delay, automatically re-routed to the new account
through the Interpay clearing house. The corporate customer that has initiated
the direct debit is automatically informed of the new account number and is
requested to update his database; ·
for 13 months all credit transfers destined for
the old account are, without delay, re-routed to the new account (also through
the Interpay clearing house). The account holder must inform his debtors of the
new account number, for which the ISSS brochure provides him with standard
cards; ·
the old bank cancels standing orders on the old
account and provides the customer with a detailed specification. The customer
must give this list to the new bank, requesting that it activates some or all
of the standing orders on the new account. Accordingly, if this option were retained,
Dutch stakeholders would not incur any costs/benefits. The United Kingdom is also in the process of
developing a redirection service, which should be operational by September
2013. According to the final report of the Independent Commission on Banking[547], preliminary discussions with the Payments Council suggest that the
costs of introducing an effective redirection service could be in the order of
GBP 650 million to GBP 850 million. These are predominantly
one-off costs – the ongoing maintenance costs would be very low, and may be
offset by savings from fewer manual processes. These estimates
include costs to all those potentially affected by the change, including
central payments schemes, banks that are members of these schemes, banks that
access these schemes through agency arrangements, and service users of payments
systems, such as direct debit originators and merchants that take automated
debit card payments. The ICB states that "there is significant
uncertainty around these costs, which are still subject to testing with banks
and service users. In some cases, the direct costs of introducing the
redirection service may be one element of wider investments in infrastructure,
in which case it will be difficult to attribute costs specifically to the new
service. The costs to small business direct debit originators are expected to
be unchanged from the current system. The costs to small banks and banks that
access payments systems through agency arrangements are still highly uncertain."
[548] "The Commission’s conclusion is that
there are significant net benefits of such a service. This service may also
have a financial stability benefit, as it will facilitate orderly resolution of
failed current account providers by enabling the accounts to be switched to
another bank easily and reliably." [549] Based on the information on the set-up and
functioning of the Dutch and UK systems, they do not appear to be compatible
should they be merged into a single system. This suggests that if this option
were adopted, it might be counterproductive if an EU-wide redirection service
might become desirable at a later stage, since this would probably require
significant resources and effort. Moreover, the technical implementation of a
redirection service, may require a single clearing house domestically (such as
the Bankers' Automated Clearing Services – now known as Bacs Payment Schemes
Limited – in the UK) or
the interlinking of clearing houses where there are several of them. In some
Member States with multiple clearing houses, adaptation of payment systems
would be more technically difficult and therefore more costly. Additionally,
third parties to credit mandated direct debits (which are the standard for SEPA
direct debits) might not be known to banks. As a consequence, their direct
debits could not be automatically transferred to the new payment account.
Nevertheless, it should be possible to redirect these payments once they are
sent to the old account, and then inform the third party of the customer's
changed account details. Domestic redirection services could be
implemented via self-regulation or legally binding measures. As implementation
of this option requires substantial technical input from the industry,
implementation by banking communities has advantages. However, due to the high
initial one-off costs to the industry, the extent that to which the industry
would wish to implement the redirection service on a voluntary basis is
questionable. A legal obligation might therefore represent a more effective
(and comparably efficient) way forward. This option would have a large impact on all
Member States except for the Netherlands and the UK. ·
Quantification of costs and benefits A summary of quantified costs and benefits is
provided in Table 4.G below. Table 4.G:
Costs and benefits – Introduce domestic automatic redirection service Total EU benefits (million EUR) || Consumer benefits: || Changes in switching behaviour || 5 848.7 Reduction direct/indirect costs || 1 284.2 Total consumer benefits: || 7 132.9 Total EU costs (million EUR) || Min || Max Credit institution costs: || || One-off: || 500.0 || 22 734 Recurring: || not quantified || not quantified Total credit institution costs: || 500.0 || 22 734 Member State costs: || || One-off: || || 3.2 Recurring: || || 18.8 Total Member State costs: || || 22.0 Based on the costs of the re-routing system
introduced in 2004 in the Netherlands (EUR 18 million) and the cost
estimate for the UK redirection system (between GBP 650-850 million),
it is estimated that the overall cost to the industry of introducing similar redirection
systems in all 27 Member States would be between EUR 500 – 22 000 million. As with some other options, the cumulative
10-year costs to the Member States are estimated at around EUR 22 million.
However, as this option would likely be introduced in combination with either
Option 2 or Option 3A, this cost would arise only once. The benefits to consumers are estimated at
EUR 7 133 million. Additional benefits for consumers, payment
account providers and wider society resulting from a more competitive
environment have not been quantified, but are likely to be higher than for
Options 2 and 3A. The costs of this option would not differ
much according to the policy instrument chosen, and with a self-regulatory
initiative there would be only marginal costs for Member States. The benefits
of a self-regulatory approach would depend on its effectiveness, but are
expected to be lower than for a legally binding approach. Overall, however, the benefits would
potentially be lower that the costs, making this option inefficient, and therefore
disproportionate to the defined objectives. The methodology used is presented in Annex
VI. Variant B: Introduce an automatic EU-wide
automatic redirection service ·
Effectiveness of policy option An EU-wide automatic redirection service
would fulfil all the objectives that Variant A above does. It would also create
a consistent framework across the EU, reducing barriers to customer
cross-border mobility. More mobile customers would represent more opportunities
for competitive providers of retail financial services. Providers would be able
to use similar systems in different Member States, facilitating and reducing
the costs of cross-border expansion. ·
Impacts of policy option on stakeholders and
efficiency Impacts on stakeholders would be similar to
those described in Variant A. This option would also help consumers wishing to
switch cross-border, therefore potentially bringing wider benefits to customers
and industry. However, due to divergent national
payment systems and use of different currencies, this
option would be technically more challenging than
Variant A. All Member States, even those that already
have a redirection system (the Netherlands, as of 2013 the United Kingdom),
would be affected significantly by this option. The Netherlands and the United
Kingdom would need to amend their systems to make it compatible with the EU
system. As with Variant A, the policy instrument
chosen would not change the cost of implanting the policy much. A
self-regulatory initiative would only impose marginal costs upon Member States.
The benefits of a self-regulatory approach, which would be more challenging for
this variant, as cross-border provisions would need to be agreed upon and
applied, would depend on its effectiveness. Benefits are likely to be higher under
a legally binding approach. ·
Quantification of costs and benefits A summary of quantified costs and benefits is
provided in table 4.H below. Table 4.H:
Costs and benefits – Introduce EU-wide automatic redirection service Total EU benefits (million EUR) || Consumer benefits: || Changes in switching behaviour || 6 579.7 Reduction direct/indirect costs || 1 426.9 Total consumer benefits: || 8 006.6 Total EU costs (million EUR) || Min || Max Credit institution costs: || || One-off: || 500.0 || 22 734 Recurring: || not quantified || not quantified Total credit institution costs: || 500.0 || 22 734 Member State costs: || || One-off: || || 3.2 Recurring: || || 18.8 Total Member State costs: || || 22.0 Due to divergent national payment systems and
use of different currencies, this option would be technically challenging and
therefore costly to the industry. However, additional economies of scale would
arise, benefiting providers operating in more than one Member State. As it is
difficult to estimate these costs, we use the same broad estimate as with
Option 4A. As with some other options, the cumulative
10-year costs to Member States are estimated at EUR 22 million (or less with a
Regulation). Since this option would likely be introduced in combination with
Option 3B, this cost would arise only once. Benefits are likely to be high. Consumers
will save an estimated EUR 1 427 million[550] from
the simpler switching process and EUR 8 000 million in reduced
bank fees following a provider switch.[551] Additional potential benefits to
stakeholders arising from a more competitive environment are likely to be
higher than for Option 4A. Overall, however, benefits would potentially
be lower than costs, making this option inefficient and possibly
disproportionate to the defined objectives. The methodology used is presented in Annex
VI. 3.6. Option
5: Introduce payment account portability Variant A: Domestic payment account
portability ·
Effectiveness of policy option Introduction of national account number
portability would be an effective measure to address the operational objectives
defined at domestic level. As the account number would stay with the customer
who moves from one provider to another within the Member State, the whole
process of switching would become a lot less complex and time-consuming for the
consumer. There would be no need to inform third parties about new bank
details: nothing would change for the customer apart from the provider's name
and address. Consequently, the direct costs of switching for consumers would be
significantly lowered; some costs, such as postage, would be eliminated. No
transactions directed to or from the payment account would get lost during the
process, since the account number would be the unique identifier and the
payments would be executed automatically to the provider with whom the account
is active at the very moment of the financial transaction; therefore, no
payments would be missed or charged twice/double. Customers would need to be
informed about 'account number portability', but as the switching process would
be significantly simplified, there would be significantly less (or no) need for
particular assistance by bank staff during the process. This option would introduce payment account
portability at domestic level and would lead to a multiplicity of systems in place
within the EU; therefore, it would not help achieve a consistent framework
across the EU. Moreover, it might undermine subsequent efforts to introduce
EU-wide portability. Significant resources deployed by Members States and the
finance industry to implement domestic payment account number portability would
create infrastructure possibly incompatible with a subsequent EU-wide
portability system. As this option is domestically-focused, it
does not facilitate customer cross-border mobility. While financial providers
may find it easier to move cross-border as a consequence of this option, but
less so than with EU-wide account number portability, and so does not create a
fully-level playing field between market actors. ·
Impacts of policy option on stakeholders and
efficiency Payment account number portability could be
achieved in two ways. The first is that all numbering systems for all payment
accounts would need to be unified, meaning that all accounts would need to be
re-numbered in a standard way. This would be the most effective, though also
the most costly way forward, as for historical reasons the numbering standards
in different Members States – and sometimes even within Member States – diverge
significantly. In recent years, significant efforts were made to standardise
the payment information necessary for banks to execute payments. IBAN[552]
and BIC[553]
codes were introduced for this purpose and following SEPA[554] migration these codes will be
the standards required for SEPA credit transfers and direct debits both at
cross-border and national level. However, the IBAN contains a referral to the
Member State and provider (and even the branch of a bank in some cases)
allowing identification of the payment account. For these reasons, according to
banking industry experts, the introduction of portable payment account numbers
would mean that the current IBAN and BIC standards would have to be replaced.[555] As already stated in the Impact Assessment of the Payment Services
Directive, "… studies carried out in some Member States
(Netherlands, UK) regarding this question of portability have shown that the
recently introduced EU-wide IBAN-BIC numbering system is not compatible with
the portability of account numbers without incurring in disproportionate costs
and provoking problems for efficient straight through processing." Furthermore, it needs to be noted that the IBAN code, even though
originally adopted by the European Committee for Banking Standards, was later
adopted as an international standard and is currently used in numerous
countries outside the EU. Portability could also be introduced by
creating a central 'database' that automatically 'translated' each existing
account number in a new virtual account number. The customer would need to
communicate this 'virtual' number once to all third parties who could change
their records. If the consumer wishes to switch between providers (or between
accounts with a single provider), the new account number would replace the old
account number in the database, and so the new account number would be assigned
to the 'virtual' number. The consumer would not need to communicate the new
payment account details. This way of achieving account number
portability could potentially be compatible with IBAN coding. Nevertheless, for
this method, potential operational risks would need to be taken into account
when designing/developing the system. As customers and public authorities make
heavy demands on payment systems, technical problems could not only entail
direct economic damage, but also pose a challenge to financial stability and
increase the risk of fraud or the accidental disclosure of personal data.
Additionally, it would be necessary to enable tracking of the active provider
for each account number for tax purposes. If domestic account portability could be
successfully and cost-efficiently implemented, it would be most beneficial to
consumers wishing to switch domestically. It would eliminate the risk of
missed/delayed payments, financially benefiting consumers (reduction of costs related
to missed payments such as late payment fees, unexpected overdrafts costs or
longer-term effects such as possible black marks on their credit history).
Consumers would find the process understandable and straightforward, decreasing
the time and effort involved in switching. As they would not need to inform
third parties of changes in their payment account details, consumers would
benefit from a real reduction of direct costs of switching in terms of postage
costs. An easy and error-free switching process would substantially improve
consumer satisfaction and confidence. Consumers would also benefit from increased
domestic customer mobility, which would stimulate competition between
providers, leading to more product innovation by the providers and therefore
more product choice and better value for consumers. These effects would be
smaller than with cross-border portability. Furthermore, as this option would
result in substantial costs to the financial industry, it is likely that a
(significant) part of these costs will be passed on to consumers. As set out
above, as the switching service is meant to be free of charge, costs would be
passed on to all consumers, irrespective of their desire to switch.
Furthermore, depending on method of implementation, consumers would bear
one-off costs of informing third parties of their new portable account number
or the 'virtual' account number and updating the account information in their
everyday business transactions (including i.e. reprinting of stationery). To
direct debit originators and those who make automatic payments into customers'
accounts the introduction of payment account portability would impose initial
costs for adapting account information in their database. Subsequent costs
would be significantly reduced, as there would be no/substantially less need
for them to change their entries relating to payment account information in the
database at a later stage. For the financial industry, this option would
impose considerable initial costs - primarily one-off compliance costs related
to the implementation of account number portability and significantly smaller
recurrent costs related to its functioning. The compliance costs would comprise
familiarisation costs with new legal and technical requirements of portability
(potentially requiring external expertise); costs of adapting IT systems to
make accounts portable across EU; costs of adapting business processes to meet
the requirements of account portability; costs of initial customer
communications and of initial staff training on portability; and dealing with
customer enquiries. One-off administrative costs would arise for adapting IT
systems and business processes to monitor internal compliance. Recurrent costs
would be linked to the increased operational costs of handling additional
customer enquiries and the costs of reporting on compliance activities to a
supervisory body. Once account number portability was
operational, the financial services industry would benefit from a simpler
switching process. Even higher domestic customer mobility would facilitate the
market entry and client acquisition of competitive market players. Due to its technical nature, this option
could be implemented through either a self-regulatory initiative or a legally
binding approach with a number of regulatory technical standards. At present,
no existing domestic laws could prevail over any self-regulatory agreement,
leaving the door open for a self-regulatory approach. However, due to the high
one-off costs of this option and the fact that the significantly less costly
and burdensome Common Principles were not sufficiently applied on a voluntary
basis, a legal obligation might be necessary to achieve effective results. For Member States, costs would depend on the
implementing instrument. If a legally binding instrument were chosen, this
option would potentially result in one-off costs for the transposition of the
EU legislation into national law (in case of a Directive) and for conceptual
development of the portability system and related necessary changes to national
payment infrastructure. Potentially information campaigns to raise awareness of
the portability service among consumers could be envisaged. Recurrent costs
would arise for compliance monitoring and enforcement costs, and costs for
reporting to the EU. Alternatively, if the legal instrument chosen were a
Regulation, most of these costs would not accrue to Member States, but would
need to be financed directly from the EU budget. Due to the historical differences in account
numbering, any new system is likely to retain some idiosyncrasies.. All Member
States would be significantly affected by this option, as no Member State has a
portability system in place, though Sweden may be affected less due to its
existing "Bankgiro" system for corporate customers. Consequently,
providers operating in several Member States would be confronted with
significant initial outlays with limited possibility to profit from economies
of scale. Furthermore, if different account number portability system were
introduced across the EU, these would not necessarily be compatible with a
potential EU-wide portability that could be envisaged at a later stage without
deploying significant additional resources to adapt the systems. ·
Quantification of costs and benefits A summary of
quantified costs and benefits is provided in Table 4.I below. Table 4.I: Costs
and benefits – Account number portability at national level Total EU benefits (million EUR) || Consumer benefits: || Changes in switching behaviour || 8 773.0 Reduction direct/indirect costs || 1 284.2 Total consumer benefits: || 10 057.2 Total EU costs (million EUR) || Credit institution costs: || One-off: || 14 700 Recurring: || not quantified Total credit institution costs: || 14 700 Member State costs: || || One-off: || || 3.2 Recurring: || || 18.8 Total Member State costs: || || 22.0 The
quantification of the overall costs of introducing domestic payment account
portability is difficult. The costs would arguably be similar to introducing
EU-wide portability (i.e. EUR 14 700 million for the European
banking industry). On the one hand, some of the cumulative costs might be
higher due to fewer economies of scale, especially for small Member States.
Similarly, overall costs to Member States might be higher, as they might conceptually
develop and design their own systems. However, some technical aspects might be
less costly if portability were introduced only domestically. As these effects
are difficult to quantify, for simplicity the costs of domestic portability are
assumed to be equal to the costs of EU-wide portability. The overall benefits of this option are
potentially lower than from an EU-wide portability: the effect on consumer and
provider mobility would be smaller and would not fully level the payment
account market playing field. The benefits that were
quantified for this option stem from two sources. First, there are benefits for
consumers resulting from better product choice (savings in bank fees following
a provider switch) estimated at EUR 8 773 million. Second, there are
reduced consumer costs estimated at EUR 1 284 million. All
stakeholders could benefit from a more competitive environment; these benefits
are difficult to quantify. In conclusion, the long-term benefits of
EU-wide portability would need to be weighed up more carefully against the
technical issues behind modifications to payment infrastructures. For now, this
option seems disproportionate. The methodology used is presented in Annex
VI. Variant B: EU-wide payment account
portability ·
Effectiveness of policy option As domestic payment account portability is an
implicit prerequisite to EU-wide account number portability, this variant would
be an effective measure to address all operational objectives as described in
the analysis of Option 5A. Moreover, as this variant would introduce
pan-European payment account portability, it would automatically create a
consistent framework across the EU. At the same time, it would significantly
reduce the barriers to customer cross-border mobility. More mobile customers
would represent greater opportunity for competitive providers of retail
financial services. Together with the fact that the financial services
providers would not need to use differing infrastructure related to payment
account numbering in different Member States, this would facilitate and
increase their cross-border mobility. Overall, introduction of EU-wide payment
account portability would be the most effective measure in view of the
operational objectives. Increased customer mobility and financial services
mobility would lead to more competitiveness in the retail financial sector,
improve the level-playing field between market actors and result in larger
consumer choice and lower prices, which would lead to greater consumer
satisfaction and confidence. ·
Impacts of policy option on stakeholders and
efficiency EU level account number portability could be
achieved in the two ways described above, with similar difficulties. An additional difficulty that would need to
be solved is that, if payment account numbers were to be easily transferable
between Member States, for tax purposes, a system would need to be developed
that would allow tracking of the payment account provider and Member State
where the payment account is active. If EU-wide portability could be successfully
and cost-efficiently implemented, it would be the option benefiting consumers
wishing to switch the most. Consumers and providers would be affected in a
similar manner to that in Variant A above; however, the benefits would likely
be magnified because of increased cross-border mobility. Consumers would
benefit from easier improved product choice and direct costs savings. Payment
account providers operating in more than one Member State would benefit from
potentially higher economies of scale and lower compliance costs. Generally,
payment account providers would benefit from easier market entry/expansion due
to higher consumer and provider mobility. As introduction of EU-wide portability would
necessitate conceptual development it might be possible to delegate the task to
a European body such as the European Banking Authority (EBA). Within the feedback to Commission public
consultation[556], a majority of consumer representatives and several Member States
identified the introduction of EU-wide payment account portability as the best
long-term solution, eliminating obstacles to switching payment accounts. The
European consumer organisation BEUC encouraged Commission to launch an in-depth
feasibility study on EU-wide account number portability, in order to better
assess its cost and benefits and its implications, such as compatibility with
the IBAN system. [557] Overall, implementation of EU-wide portability would have
significant impacts on all Member States. ·
Quantification of costs and benefits A summary of
quantified costs and benefits is provided in Table 4.J below. Table 4.J: Costs
and benefits – EU-wide account number portability Total EU benefits (million EUR) || Consumer benefits: || Changes in switching behaviour || 9 504.1 Reduction direct/indirect costs || 1 426.9 Total consumer benefits: || 10 931.0 Total EU costs (million EUR) || Credit institution costs: || One-off: || 14 700 Recurring: || not quantified Total credit institution costs: || 14 700 Member State costs: || || One-off: || || 3.2 Recurring: || || 18.8 Total Member State costs: || || 22.0 The cost of
introducing payment account portability would be high. The cost across the EU
for the technical reorganisation of account numbering systems alone would total
around EUR 14 700 million for the European banking industry.[558] The EUR 14 700 million
figure excludes further reorganisation costs,
particularly in relation to customers (adaptation of customer systems,
information for business partners and other organisational measures). For example, when switching accounts, banks will still expect to
reissue physical cards and cheque books, as these include bank logos and
account number details. Assuming that the demand for switching
significantly increased once account number portability were operational – and
considering that the yearly demand for national
switching in the EU is currently 7.7%[559] – a prudent estimate of its
increase would be around 10%. In a conservative scenario, the cost per switch
would be calculated by dividing the total costs among 10% of the current
account users (i.e. about 35.8 million customers). This would mean that
cost of introducing account number portability would amount to approximately
EUR 413 per payment account switcher in a given year in the EU. However,
as the recurrent costs of porting account numbers are very low in comparison to
one-off initial outlay, it may be argued, that the significant investment
required for the one-off adaptation of the account number portability should be
viewed as a mid- to long-term investment and one should consider the costs to
be amortised over several years. Considering a 5-year horizon and assuming 10%
switching rate per annum, the costs per switch would amount to EUR 82. As this option also foresees the facilitation
of cross-border switching, consumers would make direct cost savings of
EUR 1 427 million[560] from
a more efficient process and EUR 9 504 million
from lower bank fees following a switch.[561] Additional potential benefits arising to consumers, payment account
providers and wider society, including a more competitive environment, have not
been quantified, but would likely be significantly higher than if portability
were introduced domestically. In conclusion, the long-term benefits of
EU-wide portability will need to be weighed up more carefully against the
technical issues behind modifying payment infrastructures. For the time being,
however, implementation of this option is disproportionate to the identified
problems. The methodology used is presented in Annex
VI. Annex V
Glossary Term || Definition Basic payment account || A basic payment account includes the ability to deposit and withdraw cash into and from the account. It also enables the consumer to make essential payment transactions such as receiving income or benefits, paying bills or taxes and purchasing goods and services, including via direct debit, credit transfer and the use of a payment card. Consumer || Any natural person who requests and makes use of a basic payment account for purposes other than his trade, business, craft or profession. Churn || The share of customers who change providers in a given year. Credit transfer || A payment service for crediting a payee’s payment account, where a payment transaction or a series of payment transactions is initiated by the payer on the basis of the consent given to his payment service provider. Debit card || A payment card not allowing payment transactions which exceed the balance of the account. Direct Debit || Direct debit is a payment service that allows a payee (e.g. an electricity company or a mobile phone operator) to instruct its bank to collect (to debit) varying amounts directly from a customer's account. The transaction is initiated by the payee (the company in the example provided) on the basis of the payer's (consumer's) consent given to the payee or to the payer's own service provider. Gateway product || A product that a consumer purchases which leads to subsequent product/service purchases with the same provider. Payment account || An account held in the name or one or more payment service users, which is used for the execution of payment transactions; held by a payment services provider. Payment card || any personalised card used for payment orders/transactions, including a debit card or pre-paid card; which can be used at points of sale where the card is accepted, including for online purchases. Payment service provider || Any of the categories referred to in Article 1(1) of Directive 2007/64/EC and the legal and natural persons referred to in Article 26 of that Directive, but excludes those institutions listed in Article 2 of Directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions benefiting from a Member State waiver exercised under Article 2(3) of Directive 2007/64/EC, to which belong: – credit institutions/banks; – payment institutions, e.g. GSM companies, bill payers, money remittance institutions, etc.; – electronic money institutions; – post office giro institutions; – other payment services providers, e.g. public authorities or national central banks (in some cases). Payment service user || A natural or legal person making use of a payment service in the capacity of either payer or payee, or both. Payment transaction || An act, initiated by the payer or by the payee of transferring funds, irrespective of any underlying obligations between the payer and the payee. Pre-paid card || A payment card pre-loaded with funds. SEPA || Single Euro Payments Area Standing order || An instruction initiated by the payer (i.e. a consumer) through an instruction to their payment institution to pay a set amount at regular intervals to the payee's account. Annex
VI Assumptions and calculation bases used in
determining costs and benefits Detailed tables: benefits and costs of
access to basic payment accounts Option 1: No action Option 2: Ensure application of the
provisions of the Recommendation Since three Member States (Belgium, France
and Italy) have already implemented the Recommendation, the calculation of
costs and benefits of this option for different stakeholders covers 24 Member
States. Table
6.A: Ensure application of the provisions of the Recommendation Benefit / cost per stakeholder and type || Benefit / cost description || Euro (Millions) || Calculation basis Number of consumers that could potentially open an account as a result of this option || || || Number of consumers impacted would be 2 million (pessimistic scenario), 6.4 million (realistic scenarios) or 10 million (optimistic scenario). Source: SEC(2011)906, p. 41 and annexes, p. 51, "While the number of European consumers who desire access to a bank account but are deprived of it have been estimated to amount to about 6.4 million, an additional optimistic scenario considers the possibility of a 10 million uptake. The additional demand of 3.6 million basic accounts could come from previously disinterested unbanked consumers who notice the new product and become interested (especially if it is low-priced). It could also come (albeit to a small extent) from some consumers who although not unbanked, will close their existing ordinary account in case they can get a basic account for a lower price." Under this policy option, it is assumed that all these consumers would be impacted. No discount is therefore applied to the 3 scenarios. Benefits to consumers || Total benefits resulting from improved access to a basic payment account || 542 - 2711 || || 320-1600 || Benefits from discounts from reduced use of out-of-bank money transmission services (e.g. reduced use of postal orders): EUR 60[562] saved annually per consumer on money transmission services multiplied by the number of unbanked consumers who would open an account (2 million, 6.4 million or 10 million depending on the scenario). Benefits from discounts from reduced use of cheques: EUR 120[563] saved annually per consumer by withdrawal from cheques multiplied by the number of unbanked consumers who would open an account (2 million, 6.4 million or 10 million depending on the scenario). The benefits are discounted to take into account the fact that 3 Member States (Belgium, France and Italy) have already applied this policy option. || 222-1111 || Benefits from discounts from electronic payments (e.g. discounts available by paying utility bills by direct debit rather than cash): EUR 125[564] saved per consumer / per year by using the more efficient means of payment multiplied by the number of unbanked consumers who would open an account (2 million, 6.4 million or 10 million depending on the scenario). The estimated benefit of EUR 125 per consumer per year is considered a prudent estimate.[565] Data from the UK suggests that vulnerable consumers in the UK could be paying EUR 880-1 100 a year in higher costs because they are excluded from mainstream financial services. [566] The benefits are discounted to take into account the fact that 3 Member States (Belgium, France and Italy) have already applied this policy option. || || 0 || Benefits from online purchases: EUR 0. Based on the evidence collected for this impact assessment, it is assumed that being able to access a bank account would not necessarily provide access to the appropriate means of payment to enable online purchases. Costs to consumers || Total costs for consumers || 108-542 || Account operation costs || 91 – 453 || · Annual recurring charge for maintenance of the account: the figure is calculated by multiplying the annual maintenance charge of EUR 51[567] by the number of consumers who would open an account (2 million, 6.4 million or 10 million depending on the scenario). · The costs are discounted to take into account the fact that 3 Member States (Belgium, France and Italy) have already applied this policy option. Cost of inappropriate use of the account || 18 – 89 || · For the purposes of this calculation, an average failed transaction cost of EUR 20 is assumed (in France and the UK, these charges are estimated at somewhere between EUR 17 and EUR 22 for each failed transaction[568]). · It is assumed that 25% of unbanked consumers who would open a bank account (i.e. 25% under the pessimistic, realistic and optimistic scenarios) would make on average 2 failed transactions per year.[569] This number is multiplied by the average failed transaction cost of EUR 20[570]. · The costs are discounted to take into account the fact that 3 Member States (Belgium, France and Italy) have already applied this policy option. Benefit / cost per stakeholder and type || Benefit / cost description || Euro (Millions) || Calculation basis Benefits to payment services providers || Recurring annual benefits from providing access to a basic payment account || 18 - 89 || · Average price of a payment account which consumer has to pay has been calculated at EUR 51[571], where the estimated costs incurred by account provider are equal to EUR 40[572]. This results in revenue of approximately EUR 10[573] for providers per each account which is multiplied by the number of unbanked consumers who would open an account (2 million, 6.4 million or 10 million depending on the scenario). · The benefits are discounted to take into account the fact that 3 Member States (Belgium, France and Italy) have already applied this policy option. Costs to payment services providers || One-off costs of introducing basic bank accounts (if not already exist) || N/A || · These costs of will generally be incorporated into the annual fees charged to consumers. Over time, the more basic bank accounts that there are, the lower the incremental costs[574], thus these are assumed to be marginal. || Recurring annual costs resulting from operating a basic payment account || 71 – 356 || · The costs are calculated by multiplying the annual cost of operation of an account (EUR 40[575]) by the number of consumers who would open an account (3 scenarios are 2 million, 6.4 million and 10 million). The CSES study also concluded that these costs were highly dependent on the design of the product being offered and the more electronic features provided, the cheaper the account. [576] · The costs are discounted to take into account the fact that 3 Member States (Belgium, France and Italy) have already applied this policy option. Benefit / cost per stakeholder and type || Benefit / cost description || Euro (Millions) || Calculation basis Benefits to Member States (governments) || Benefits resulting from savings on payments of social security || 18 – 89 || Savings resulting from payments of social benefits via bank transfers (instead of more costly means e.g. benefit cheques) are estimated at EUR 7-12 per recipient per annum[577], thus an average of EUR 10 per recipient per annum[578] has been applied which is multiplied by the number of unbanked consumers who would open an account (2 million, 6.4 million or 10 million depending on the scenario). The benefits are discounted to take into account the fact that 3 Member States (Belgium, France and Italy) have already applied this policy option. Costs to Member States (governments) || Total costs for Member States || 3.02 || One-off costs of legislating || 1.13 || · The cost of legislating is assumed to require about 1 500 man hours[579] where the EU average employee cost per hour is estimated to be around EUR 31.5[580] which is multiplied by 24 Member States which have not yet implemented the Recommendation. · This methodology may overestimate the actual costs of legislating. Calculations based on an alternative methodology in another impact assessment on the basis of data provided by Member States give a far lower figure. However, in order to prevent an underestimation of the costs and in order to be consistent with a previous impact assessment on access to basic account services[581], it was decided to use the methodology used in SEC(2011)906. Recurring costs of monitoring application of legislation || 1.89 || · The annual cost of monitoring and enforcing is assumed to require about 2 500[582] man hours where the EU average employee cost per hour is estimated to be around EUR 31.5[583] which is multiplied by 24 Member States which have not yet implemented the Recommendation yet. · This methodology may overestimate the actual costs of legislating. Calculations based on an alternative methodology in another impact assessment on the basis of data provided by Member States give a far lower figure. However, in order to prevent an underestimation of the costs and in order to be consistent with a previous impact assessment on access to basic account services[584], it was decided to use the methodology used in SEC(2011)906. Benefit / cost per stakeholder and type || Benefit / cost description || Euro (Millions) || Calculation basis Benefits to utility firms || Recurring annual benefits from reductions in transaction costs: many banked consumers would switch to direct debit payments. || 32 - 160 || The transaction cost savings for water and energy payments can oscillate between EUR 1.2-2 55 (EUR 0.6-EUR 1 for water payments and EUR 0.6-EUR 1 for energy payments respectively) per transaction.[585] In order to make the necessary overall estimation of benefits to be obtained by utility firms in the 24 Member States which have not yet implemented the Recommendation, an average saving of EUR 1.5[586] per transaction has been assumed. It is assumed that 12 transactions take place a year. This is multiplied by the number of unbanked consumers who would open an account (2 million, 6.4 million or 10 million depending on the scenario). The benefits are discounted to take into account the fact that 3 Member States (Belgium, France and Italy) have already applied this policy option. Option 3:
Modify the provisions of the Recommendation relative to the beneficiaries Variant
A: Introduce a universal right to a basic payment account The calculation of
costs and benefits of this option for different stakeholders covers 27 Member
States. No discount is therefore applied. Table 6.B: Modify
the provisions of the Recommendation relative to the beneficiaries- Variant A:
Introduce a universal right to a basic payment account Benefit / cost per stakeholder and type || Benefit / cost description || Euro (Millions) || Calculation basis Number of consumers that could potentially open an account as a result of this option || || || Number of consumers impacted would be 2 million (pessimistic scenario), 6.4 million (realistic scenarios) or 10 million (optimistic scenario). Source: SEC(2011)906, p. 41 and annexes, p. 51, "While the number of European consumers who desire access to a bank account but are deprived of it have been estimated to amount to about 6.4 million, an additional optimistic scenario considers the possibility of a 10 million uptake. The additional demand of 3.6 million basic accounts could come from previously disinterested unbanked consumers who notice the new product and become interested (especially if it is low-priced). It could also come (albeit to a small extent) from some consumers who although not unbanked, will close their existing ordinary account in case they can get a basic account for a lower price." Under this policy option, it is assumed that all these consumers would be impacted. No discount is therefore applied to the 3 scenarios. Benefits to consumers || Total benefits resulting from improved access to a basic payment account || 610 - 3050 || || 360-1800 || · Benefits from discounts from reduced use of out-of-bank money transmission services (e.g. reduced use of postal orders): EUR 60[587] saved annually per consumer on money transmission services multiplied by the number of unbanked consumers who would open an account (2 million, 6.4 million or 10 million depending on the scenario). · Benefits from discounts from reduced use of cheques: EUR 120[588] saved annually per consumer by withdrawal from cheques multiplied by the number of unbanked consumers who would open an account (2 million, 6.4 million or 10 million depending on the scenario). · All 27 Member States would be impacted by this option, therefore no discount is applied. || 250-1250 || · Benefits from discounts from electronic payments (e.g. discounts available by paying utility bills by direct debit rather than cash): EUR 125[589] saved per consumer / per year by using the more efficient means of payment multiplied by the number of unbanked consumers who would open an account (2 million, 6.4 million or 10 million depending on the scenario). · The estimated benefit of EUR 125 per consumer per year is considered a prudent estimate.[590] Data from the UK suggests that vulnerable consumers in the UK could be paying EUR 880-1 100 a year in higher costs because they are excluded from mainstream financial services. [591] · All 27 Member States would be impacted by this option, therefore no discount is applied. || || 0 || · Benefits from online purchases: EUR 0. Based on the evidence collected for this impact assessment, it is assumed that being able to access a bank account would not necessarily provide access to the appropriate means of payment to enable online purchases. Costs to consumers || Total costs for consumers || 122-610 || Account operation costs || 102 – 510 || · Annual recurring charge for maintenance of the account: the figure is calculated by multiplying the annual maintenance charge of EUR 51[592] by the number of consumers who would open an account (2 million, 6.4 million or 10 million depending on the scenario). · All 27 Member States would be impacted by this option, therefore no discount is applied. Cost of inappropriate use of the account || 20 – 100 || · For the purposes of this calculation, an average failed transaction cost of EUR 20 is assumed (in France and the UK, these charges are estimated at somewhere between EUR 17 and EUR 22 for each failed transaction[593]). · It is assumed that 25% of unbanked consumers who would open a bank account (i.e. 25% under the pessimistic, realistic and optimistic scenarios) would make on average 2 failed transactions per year.[594] This number is multiplied by the average failed transaction cost of EUR 20[595]. · All 27 Member States would be impacted by this option, therefore no discount is applied. Benefit / cost per stakeholder and type || Benefit / cost description || Euro (Millions) || Calculation basis Benefits to payment services providers || Recurring annual benefits from providing access to a basic payment account. || 20 - 100 || · Average price of a payment account which consumer has to pay has been calculated at EUR 51[596], where the estimated costs incurred by account provider are equal to EUR 40[597]. This results in revenue of approximately EUR 10[598] for providers per each account which is multiplied by the number of unbanked consumers who would open an account (2 million, 6.4 million or 10 million depending on the scenario). · All 27 Member States would be impacted by this option, therefore no discount is applied. Costs to payment services providers || Recurring annual costs resulting from operating a basic payment account. || 80 – 400 || · The costs are calculated by multiplying the annual cost of operation of an account (EUR 40[599]) by the number of consumers who would open an account (3 scenarios are 2 million, 6.4 million and 10 million). The CSES study also concluded that these costs were highly dependent on the design of the product being offered and the more electronic features provided, the cheaper the account. [600] · All 27 Member States would be impacted by this option, therefore no discount is applied. || One-off costs of introducing basic bank accounts (if not already exist) || N/A || · These costs of will generally be incorporated into the annual fees charged to consumers. Over time, the more basic bank accounts that there are, the lower the incremental costs[601], thus these are assumed to be marginal. Benefit / cost per stakeholder and type || Benefit / cost description || Euro (Millions) || Calculation basis Benefits to Member States (governments) || Benefits resulting from savings on payments of social security || 20 – 100 || · Savings resulting from payments of social benefits via bank transfers (instead of more costly means e.g. benefit cheques) are estimated at EUR 7-12 per recipient per annum[602], thus an average of EUR 10 per recipient per annum[603] has been applied which is multiplied by the number of unbanked consumers who would open an account (2 million, 6.4 million or 10 million depending on the scenario). · All 27 Member States would be impacted by this option, therefore no discount is applied. Costs to Member States (governments) || Total costs for Member States || 3.4 || One-off costs of legislating || 1.27 || · The cost of legislating is assumed to require about 1 500 man hours[604] where the EU average employee cost per hour is estimated to be around EUR 31.5[605] which is multiplied by 27 Member States. · This methodology may overestimate the actual costs of legislating. Calculations based on an alternative methodology in another impact assessment on the basis of data provided by Member States give a far lower figure. However, in order to prevent an underestimation of the costs and in order to be consistent with a previous impact assessment on access to basic account services[606], it was decided to use the methodology used in SEC(2011)906. Recurring costs of monitoring application of legislation || 2.12 || · The annual cost of monitoring and enforcing is assumed to require about 2 500[607] man hours where the EU average employee cost per hour is estimated to be around EUR 31.5[608] which is multiplied by 27 Member States. · This methodology may overestimate the actual costs of legislating. Calculations based on an alternative methodology in another impact assessment on the basis of data provided by Member States give a far lower figure. However, in order to prevent an underestimation of the costs and in order to be consistent with a previous impact assessment on access to basic account services[609], it was decided to use the methodology used in SEC(2011)906. Benefit / cost per stakeholder and type || Benefit / cost description || Euro (Millions) || Calculation basis Benefits to utility firms || Recurring annual benefits from reductions in transaction costs: many banked consumers would switch to direct debit payments. || 36 – 180 || · The transaction cost savings for water and energy payments can oscillate between EUR 1.2-2 55 (EUR 0.6-EUR 1 for water payments and EUR 0.6-EUR 1 for energy payments respectively) per transaction.[610] In order to make the necessary overall estimation of benefits to be obtained by utility firms in the 24 Member States which have not yet implemented the Recommendation, an average saving of EUR 1.5[611] per transaction has been assumed. It is assumed that 12 transactions take place a year. This is multiplied by the number of unbanked consumers who would open an account (2 million, 6.4 million or 10 million depending on the scenario). · All 27 Member States would be impacted by this option, therefore no discount is applied. Variant B: Introduce a right to a basic payment account at least for
national residents Since three Member States (Belgium, France
and Italy) have already implemented the Recommendation, thus they provide for a
right to a basic payment account at least for national residents, the
calculation of costs and benefits of this option for different stakeholders
covers 24 Member States. In addition, for this option the number of unbanked
national residents has been calculated as 82% of the total unbanked consumers. Table 6.C: Modify the
provisions of the Recommendation relative to the beneficiaries- Variant B:
Introduce a right to a basic payment account at least for national residents Benefit / cost per stakeholder and type || Benefit / cost description || Euro (Millions) || Calculation basis Number of consumers that could potentially open an account as a result of this option || || || Number of consumers impacted would be 2 million (pessimistic scenario), 6.4 million (realistic scenarios) or 10 million (optimistic scenario). Source: SEC(2011)906, p. 41 and annexes, p. 51, "While the number of European consumers who desire access to a bank account but are deprived of it have been estimated to amount to about 6.4 million, an additional optimistic scenario considers the possibility of a 10 million uptake. The additional demand of 3.6 million basic accounts could come from previously disinterested unbanked consumers who notice the new product and become interested (especially if it is low-priced). It could also come (albeit to a small extent) from some consumers who although not unbanked, will close their existing ordinary account in case they can get a basic account for a lower price." Under this policy option, it is assumed that all these consumers would be impacted. No discount is therefore applied to the 3 scenarios. In 2010, citizens living in another Member State represented 12.3 million people (18% of the EU population above 15 years of age).[612] Benefits to consumers || Total benefits resulting from improved access to a basic payment account || 444 - 2223 || || 262-1312 || · Benefits from discounts from reduced use of out-of-bank money transmission services (e.g. reduced use of postal orders): EUR 60[613] saved annually per consumer on money transmission services multiplied by the number of unbanked consumers who would open an account (depending on the scenario). · Benefits from discounts from reduced use of cheques: EUR 120[614] saved annually per consumer by withdrawal from cheques multiplied by the number of unbanked consumers who would open an account (depending on the scenario). · The benefits are discounted to take into account the fact that 3 Member States (Belgium, France and Italy) have already applied this policy option. || 182-911 || · Benefits from discounts from electronic payments (e.g. discounts available by paying utility bills by direct debit rather than cash): EUR 125[615] saved per consumer / per year by using the more efficient means of payment multiplied by the number of unbanked consumers who would open an account (depending on the scenario). · The estimated benefit of EUR 125 per consumer per year is considered a prudent estimate.[616] Data from the UK suggests that vulnerable consumers in the UK could be paying EUR 880-1 100 a year in higher costs because they are excluded from mainstream financial services. [617] · The benefits are discounted to take into account the fact that 3 Member States (Belgium, France and Italy) have already applied this policy option. || || 0 || · Benefits from online purchases: EUR 0. Based on the evidence collected for this impact assessment, it is assumed that being able to access a bank account would not necessarily provide access to the appropriate means of payment to enable online purchases. Costs to consumers || Total costs for consumers || 89-445 || Account operation costs || 74 – 371 || · Annual recurring charge for maintenance of the account: the figure is calculated by multiplying the annual maintenance charge of EUR 51[618] by the number of consumers who would open an account (depending on the scenario). · The costs are discounted to take into account the fact that 3 Member States (Belgium, France and Italy) have already applied this policy option. Cost of inappropriate use of the account || 15 – 72 || · For the purposes of this calculation, an average failed transaction cost of EUR 20 is assumed (in France and the UK, these charges are estimated at somewhere between EUR 17 and EUR 22 for each failed transaction[619]). · It is assumed that 25% of unbanked consumers who would open a bank account (i.e. 25% under the pessimistic, realistic and optimistic scenarios) would make on average 2 failed transactions per year.[620] This number is multiplied by the average failed transaction cost of EUR 20[621]. · The costs are discounted to take into account the fact that 3 Member States (Belgium, France and Italy) have already applied this policy option. Benefit / cost per stakeholder and type || Benefit / cost description || Euro (Millions) || Calculation basis Benefits to payment services providers || Recurring annual benefits from providing access to a basic payment account || 15 - 73 || · Average price of a payment account which consumer has to pay has been calculated at EUR 51[622], where the estimated costs incurred by account provider are equal to EUR 40[623]. This results in revenue of approximately EUR 10[624] for providers per each account which is multiplied by the number of unbanked consumers who would open an account (depending on the scenario). · The benefits are discounted to take into account the fact that 3 Member States (Belgium, France and Italy) have already applied this policy option. Costs to payment services providers || Recurring annual costs resulting from operating a basic payment account || 58 – 292 || · The costs are calculated by multiplying the annual cost of operation of an account (EUR 40[625]) by the number of consumers who would open an account (depending on the scenario). The CSES study also concluded that these costs were highly dependent on the design of the product being offered and the more electronic features provided, the cheaper the account. [626] · The costs are discounted to take into account the fact that 3 Member States (Belgium, France and Italy) have already applied this policy option. || One-off costs of introducing basic bank accounts (if not already exist) || N/A || · These costs of will generally be incorporated into the annual fees charged to consumers. Over time, the more basic bank accounts that there are, the lower the incremental costs[627], thus these are assumed to be marginal. Benefit / cost per stakeholder and type || Benefit / cost description || Euro (Millions) || Calculation basis Benefits to Member States (governments) || Benefits resulting from savings on payments of social security || 15 – 73 || · Savings resulting from payments of social benefits via bank transfers (instead of more costly means e.g. benefit cheques) are estimated at EUR 7-12 per recipient per annum[628], thus an average of EUR 10 per recipient per annum[629] has been applied which is multiplied by the number of unbanked consumers who would open an account (2 million, 6.4 million or 10 million depending on the scenario). · The benefits are discounted to take into account the fact that 3 Member States (Belgium, France and Italy) have already applied this policy option. Costs to Member States (governments) || Total costs for Member States || 3.02 || One-off costs of legislating || 1.13 || · The cost of legislating is assumed to require about 1 500 man hours[630] where the EU average employee cost per hour is estimated to be around EUR 31.5[631] which is multiplied by 24 Member States which have not yet implemented the Recommendation. · This methodology may overestimate the actual costs of legislating. Calculations based on an alternative methodology in another impact assessment on the basis of data provided by Member States give a far lower figure. However, in order to prevent an underestimation of the costs and in order to be consistent with a previous impact assessment on access to basic account services[632], it was decided to use the methodology used in SEC(2011)906. Recurring costs of monitoring application of legislation || 1.89 || · The annual cost of monitoring and enforcing is assumed to require about 2 500[633] man hours where the EU average employee cost per hour is estimated to be around EUR 31.5[634] which is multiplied by 24 Member States which have not yet implemented the Recommendation yet. · This methodology may overestimate the actual costs of legislating. Calculations based on an alternative methodology in another impact assessment on the basis of data provided by Member States give a far lower figure. However, in order to prevent an underestimation of the costs and in order to be consistent with a previous impact assessment on access to basic account services[635], it was decided to use the methodology used in SEC(2011)906 Benefit / cost per stakeholder and type || Benefit / cost description || Euro (Millions) || Calculation basis Benefits to utility firms || Recurring annual benefits from reductions in transaction costs: many banked consumers would switch to direct debit payments. || 26 - 131 || · The transaction cost savings for water and energy payments can oscillate between EUR 1.2-2 55 (EUR 0.6-EUR 1 for water payments and EUR 0.6-EUR 1 for energy payments respectively) per transaction.[636] In order to make the necessary overall estimation of benefits to be obtained by utility firms in the 24 Member States which have not yet implemented the Recommendation, an average saving of EUR 1.5[637] per transaction has been assumed. It is assumed that 12 transactions take place a year. This is multiplied by the number of unbanked consumers who would open an account (depending on the scenario). · The benefits are discounted to take into account the fact that 3 Member States (Belgium, France and Italy) have already applied this policy option. Variant C: Introduce a right to a basic payment account at least to
those non-residents with a link to the country where they wish to open an
account Since three Member States (Belgium, France
and Italy) have already implemented the Recommendation, thus they provide for a
right to a basic payment account at least to those non-residents with a link to
the country where they wish to open an account, the calculation of costs and benefits
of this option for different stakeholders covers 24 Member States. In addition, for this option the number of
unbanked non-residents with a link to the country where they wish to open an
account has been calculated as 50% of the total unbanked non-residents applying
for an account. This figure has been summed up to the total of unbanked
national residents who would also have a right to a basic payment account under
this option. Table 6.D: Modify
the provisions of the Recommendation relative to the beneficiaries- Variant C:
Introduce a right to a basic payment account at least to those non-residents
with a link to the country where they wish to open an account Benefit / cost per stakeholder and type || Benefit / cost description || Euro (Millions) || Calculation basis Number of consumers that could potentially open an account as a result of this option || || || Number of consumers impacted would be 2 million (pessimistic scenario), 6.4 million (realistic scenarios) or 10 million (optimistic scenario). Source: SEC(2011)906, p. 41 and annexes, p. 51, "While the number of European consumers who desire access to a bank account but are deprived of it have been estimated to amount to about 6.4 million, an additional optimistic scenario considers the possibility of a 10 million uptake. The additional demand of 3.6 million basic accounts could come from previously disinterested unbanked consumers who notice the new product and become interested (especially if it is low-priced). It could also come (albeit to a small extent) from some consumers who although not unbanked, will close their existing ordinary account in case they can get a basic account for a lower price." Under this policy option, it is assumed that all these consumers would be impacted. No discount is therefore applied to the 3 scenarios. In 2010, citizens living in another Member State represented 12.3 million people (18% of the EU population above 15 years of age).[638] Benefits to consumers || Total benefits resulting from improved access to a basic payment account || 493 - 2467 || || 291-1456 || · Benefits from discounts from reduced use of out-of-bank money transmission services (e.g. reduced use of postal orders): EUR 60[639] saved annually per consumer on money transmission services multiplied by the number of unbanked consumers who would open an account (depending on the scenario). · Benefits from discounts from reduced use of cheques: EUR 120[640] saved annually per consumer by withdrawal from cheques multiplied by the number of unbanked consumers who would open an account (depending on the scenario). · The benefits are discounted to take into account the fact that 3 Member States (Belgium, France and Italy) have already applied this policy option. || 202-1011 || · Benefits from discounts from electronic payments (e.g. discounts available by paying utility bills by direct debit rather than cash): EUR 125[641] saved per consumer / per year by using the more efficient means of payment multiplied by the number of unbanked consumers who would open an account (depending on the scenario). · The estimated benefit of EUR 125 per consumer per year is considered a prudent estimate.[642] Data from the UK suggests that vulnerable consumers in the UK could be paying EUR 880-1 100 a year in higher costs because they are excluded from mainstream financial services. [643] · The benefits are discounted to take into account the fact that 3 Member States (Belgium, France and Italy) have already applied this policy option. || || 0 || · Benefits from online purchases: EUR 0. Based on the evidence collected for this impact assessment, it is assumed that being able to access a bank account would not necessarily provide access to the appropriate means of payment to enable online purchases. Costs to consumers || Total costs for consumers || 99-493 || Account operation costs || 83 – 413 || · Annual recurring charge for maintenance of the account: the figure is calculated by multiplying the annual maintenance charge of EUR 51[644] by the number of consumers who would open an account (depending on the scenario). · The costs are discounted to take into account the fact that 3 Member States (Belgium, France and Italy) have already applied this policy option. Cost of inappropriate use of the account || 16 – 81 || · For the purposes of this calculation, an average failed transaction cost of EUR 20 is assumed (in France and the UK, these charges are estimated at somewhere between EUR 17 and EUR 22 for each failed transaction[645]). · It is assumed that 25% of unbanked consumers who would open a bank account (i.e. 25% under the pessimistic, realistic and optimistic scenarios) would make on average 2 failed transactions per year.[646] This number is multiplied by the average failed transaction cost of EUR 20[647]. · The costs are discounted to take into account the fact that 3 Member States (Belgium, France and Italy) have already applied this policy option. Benefit / cost per stakeholder and type || Benefit / cost description || Euro (Millions) || Calculation basis Benefits to payment services providers || Recurring annual benefits from providing access to a basic payment account || 16 - 81 || · Average price of a payment account which consumer has to pay has been calculated at EUR 51[648], where the estimated costs incurred by account provider are equal to EUR 40[649]. This results in revenue of approximately EUR 10[650] for providers per each account which is multiplied by the number of unbanked consumers who would open an account (depending on the scenario for the number of impacted consumers). · The benefits are discounted to take into account the fact that 3 Member States (Belgium, France and Italy) have already applied this policy option. Costs to payment services providers || Recurring annual costs resulting from operating a basic payment account || 65 – 324 || · The costs are calculated by multiplying the annual cost of operation of an account (EUR 40[651]) by the number of consumers who would open an account (3 scenarios are 2 million, 6.4 million and 10 million). The CSES study also concluded that these costs were highly dependent on the design of the product being offered and the more electronic features provided, the cheaper the account. [652] · The costs are discounted to take into account the fact that 3 Member States (Belgium, France and Italy) have already applied this policy option. || One-off costs of introducing basic bank accounts (if not already exist) || N/A || · These costs of will generally be incorporated into the annual fees charged to consumers. Over time, the more basic bank accounts that there are, the lower the incremental costs[653], thus these are assumed to be marginal. Benefit / cost per stakeholder and type || Benefit / cost description || Euro (Millions) || Calculation basis Benefits to Member States (governments) || Benefits resulting from savings on payments of social security || 16 – 81 || · Savings resulting from payments of social benefits via bank transfers (instead of more costly means e.g. benefit cheques) are estimated at EUR 7-12 per recipient per annum[654], thus an average of EUR 10 per recipient per annum[655] has been applied which is multiplied by the number of unbanked consumers who would open an account (2 million, 6.4 million or 10 million depending on the scenario). · The benefits are discounted to take into account the fact that 3 Member States (Belgium, France and Italy) have already applied this policy option. Costs to Member States (governments) || Total costs for Member States || 3.02 || One-off costs of legislating || 1.13 || · The cost of legislating is assumed to require about 1 500 man hours[656] where the EU average employee cost per hour is estimated to be around EUR 31.5[657] which is multiplied by 24 Member States which have not yet implemented the Recommendation. · This methodology may overestimate the actual costs of legislating. Calculations based on an alternative methodology in another impact assessment on the basis of data provided by Member States give a far lower figure. However, in order to prevent an underestimation of the costs and in order to be consistent with a previous impact assessment on access to basic account services[658], it was decided to use the methodology used in SEC(2011)906. Recurring costs of monitoring application of legislation || 1.89 || · The annual cost of monitoring and enforcing is assumed to require about 2 500[659] man hours where the EU average employee cost per hour is estimated to be around EUR 31.5[660] which is multiplied by 24 Member States which have not yet implemented the Recommendation yet. · This methodology may overestimate the actual costs of legislating. Calculations based on an alternative methodology in another impact assessment on the basis of data provided by Member States give a far lower figure. However, in order to prevent an underestimation of the costs and in order to be consistent with a previous impact assessment on access to basic account services[661], it was decided to use the methodology used in SEC(2011)906. Benefit / cost per stakeholder and type || Benefit / cost description || Euro (Millions) || Calculation basis Benefits to utility firms || Recurring annual benefits from reductions in transaction costs: many banked consumers would switch to direct debit payments. || 29 - 146 || · The transaction cost savings for water and energy payments can oscillate between EUR 1.2-2 55 (EUR 0.6-EUR 1 for water payments and EUR 0.6-EUR 1 for energy payments respectively) per transaction.[662] In order to make the necessary overall estimation of benefits to be obtained by utility firms in the 24 Member States which have not yet implemented the Recommendation, an average saving of EUR 1.5[663] per transaction has been assumed. It is assumed that 12 transactions take place a year. This is multiplied by the number of unbanked consumers who would open an account (depending on the scenario). · The benefits are discounted to take into account the fact that 3 Member States (Belgium, France and Italy) have already applied this policy option. Option 4:
Improve the features of the basic payment account Variant
A: Enlarge the list of basic services to include internet banking and online
purchasing The calculation of
costs and benefits of this option for different stakeholders covers 27 Member
States. No discount is therefore applied. Table 6.E: Improve
the features of the basic payment account- Variant A: Enlarge the list of basic
services to include internet banking and online purchasing Benefit/ cost per stakeholder and type || Benefit / cost description || Euro (Millions) || Calculation basis Number of consumers that could potentially open an account as a result of this option || || || Number of consumers impacted would be 2 million (pessimistic scenario), 6.4 million (realistic scenarios) or 10 million (optimistic scenario). Source: SEC(2011)906, p. 41 and annexes, p. 51, "While the number of European consumers who desire access to a bank account but are deprived of it have been estimated to amount to about 6.4 million, an additional optimistic scenario considers the possibility of a 10 million uptake. The additional demand of 3.6 million basic accounts could come from previously disinterested unbanked consumers who notice the new product and become interested (especially if it is low-priced). It could also come (albeit to a small extent) from some consumers who although not unbanked, will close their existing ordinary account in case they can get a basic account for a lower price." Under this policy option, it is assumed that all these consumers would be impacted. No discount is therefore applied to the 3 scenarios Benefits to consumers || Total benefits resulting from improved access to a basic payment account || 236 - 1179 || || 88-440 || · Benefits from discounts from reduced use of out-of-bank money transmission services (e.g. reduced use of postal orders): EUR 84[664] saved annually per consumer on money transmission services multiplied by the number of unbanked consumers who would open an account (depending on the scenario). A higher figure for savings on money transmission has been estimated for calculation of this option (EUR 7 per transaction per month[665]) because with an access to internet banking consumer will be able to make even more electronic transactions and thus save on other more costly ways of transferring money. · Benefits from discounts from reduced use of cheques: EUR 120[666] saved annually per consumer by withdrawal from cheques multiplied by the number of unbanked consumers who would open an account (2 million, 6.4 million or 10 million depending on the scenario). · In order to be able to benefit from access to an account, consumers first need access. As such, this includes the benefits of Option 2. In order to establish the incremental benefit of this option alone, the benefits of Option 2 are deducted from the total. · All 27 Member States would be impacted by this option, therefore no discount is applied. || 28-139 || · Benefits from discounts from electronic payments (e.g. discounts available by paying utility bills by direct debit rather than cash): EUR 125[667] saved per consumer / per year by using the more efficient means of payment multiplied by the number of unbanked consumers who would open an account (2 million, 6.4 million or 10 million depending on the scenario). · The estimated benefit of EUR 125 per consumer per year is considered a prudent estimate.[668] Data from the UK suggests that vulnerable consumers in the UK could be paying EUR 880-1 100 a year in higher costs because they are excluded from mainstream financial services. [669] · In order to be able to benefit from access to an account, consumers first need access. As such, this includes the benefits of Option 2. In order to establish the incremental benefit of this option alone, the benefits of Option 2 are deducted from the total. · All 27 Member States would be impacted by this option, therefore no discount is applied. || 120-600 || · Benefits from discounts from online purchases: EUR 60 saved per consumer / per year on online purchases multiplied by a number of unbanked consumers. Costs to consumers || Total costs for consumers || 22-108 || Account operation costs || 19 – 97 || · Annual recurring charge for maintenance of the account: the figure is calculated by multiplying the annual maintenance charge of EUR 55 by the number of consumers who would open an account. A higher figure for the charge of annual account maintenance has been used for the calculation of this option (EUR 55) in order to cover additional features of the basic payment account: internet banking and online purchase facility. Cost of inappropriate use of the account || 2 – 11 || · For the purposes of this calculation, an average failed transaction cost of EUR 20 is assumed (in France and the UK, these charges are estimated at somewhere between EUR 17 and 22 for each failed transaction). · It is assumed that 25% of unbanked consumers who would open a bank account would make on average 2 failed transactions per year. This number is multiplied by an average failed transaction cost of EUR 20. Benefit / cost per stakeholder and type || Benefit / cost description || Euro (Millions) || Calculation basis Benefits to payment services providers || Recurring annual benefits from providing access to a basic payment account. || 2 - 11 || · Average price of a payment account which consumer has to pay has been calculated under this option at EUR 55, where the costs incurred by account provider are equal to ca. EUR 43-45. This results in revenue of ca. EUR 10 for providers per each account which is multiplied by a number of consumers who would open a bank account. Costs to payment services providers || Recurring annual costs resulting from operating a basic payment account. || 15 – 74 || · The costs are calculated by multiplying the annual cost of operation of an account under this option (EUR 43) by the number of consumers who would open an account. A higher figure of annual cost of account operation has been used for the calculation of this option (EUR 43) in order to cover the cost of additional features of the basic payment account: internet banking and online purchase facility. Benefit / cost per stakeholder and type || Benefit / cost description || Euro (Millions) || Calculation basis Benefits to Member States (governments) || Benefits resulting from savings on payments of social security || 2 – 11 || · Savings resulting from payments of social benefits via bank transfers (instead of more costly means e.g. cheques) are estimated at EUR 7-12 per recipient per annum, thus the average of EUR 10 per recipient per annum has been applied which is multiplied by a number of consumers who would open a bank account. Costs to Member States (governments) || Total costs for Member States || 0 || One-off costs of legislating || 0 || · The cost of legislating is assumed to require about 1500 man hours where the EU average employee cost per hour is estimated to be around EUR 31.5 which is multiplied by 27 Member States. Recurring costs of monitoring application of legislation || 0 || · The cost of monitoring is assumed to require about 2500 man hours where the EU average employee cost per hour is estimated to be around EUR 31.5 which is multiplied by 27 Member States. Benefit / cost per stakeholder and type || Benefit / cost description || Euro (Millions) || Calculation basis Benefits to utility firms || Recurring annual benefits from reductions in transaction costs: many banked consumers would switch to direct debit payments. || 16 – 80 || · The transaction cost savings for water and energy payments can oscillate between EUR 1.2-2 per transaction. A higher figure for benefits on payments collection by utility firms has been used for calculation of this option (EUR 2 per transaction) because with an access to internet banking consumer will be able to make even more electronic payments which will allow for greater savings of utility firms. Variant B: Enlarge the list of basic services to include a small
overdraft or a 'buffer' facility Since one Member State (France) has already
implemented the Recommendation, and in addition banks in France can offer a
basic payment account with a small overdraft or a 'buffer' facility, therefore
the calculation of costs and benefits of this option for different stakeholders
covers 26 Member States. In addition, for
this option the total number of unbanked consumers who would open a basic
payment account has been reduced by 10%. Given a small overdraft or a buffer
facility available under this option, providers would need to conduct
creditworthiness assessment of applicants and it is estimated that based on
this, 10% of them would be rejected (based on data from the UK). Table 6.F: Improve
the features of the basic payment account- Variant B: Enlarge the list of basic
services to include a small overdraft or a 'buffer' facility Benefit / cost per stakeholder and type || Benefit / cost description || Euro (Millions) || Calculation basis Benefits to consumers || Total benefits resulting from improved access to a basic payment account || -14 to -68 || || -8 to -40 || · Benefits from discounts from reduced use of out-of-bank money transmission: EUR 60 saved per consumer / per year on money transmission services multiplied by a number of unbanked consumers. · Benefits from discounts from reduced use of cheques: EUR 120 saved per consumer / per year by withdrawal from cheques multiplied by a number of unbanked consumers. || -6 to -28 || · Benefits from discounts from electronic payments: EUR 125 saved per consumer / per year multiplied by a number of unbanked consumers. Costs to consumers || Total costs for consumers || -11 to -57 || Account operation costs || -2 to -11 || · Annual recurring charge for maintenance of the account: the figure is calculated by multiplying the annual maintenance charge of EUR 51 by the number of consumers who would open an account. Cost of inappropriate use of the account || -9 to -46 || · For the purposes of this calculation, an average failed transaction cost of EUR 20 is assumed (in France and the UK, these charges are estimated at somewhere between EUR 17 and 22 for each failed transaction). · It is assumed that under this option 25% of unbanked consumers who would open a bank account would make on average 1 failed transaction per year. This number is multiplied by an average failed transaction cost of EUR 20. It is assumed that consumers with positive credit histories are less likely to make failed transactions and therefore the number of failed transactions per year has been decreased (from 2 to 1) compared to other policy options. Benefit / cost per stakeholder and type || Benefit / cost description || Euro (Millions) || Calculation basis Benefits to payment services providers || Recurring annual benefits from providing access to a basic payment account. || -0.4 to -2 || · Average price of a payment account which consumer has to pay has been calculated at EUR 51, where the costs incurred by account provider are equal to ca. EUR 40. This results in revenue of ca. EUR 10 for providers per each account which is multiplied by a number of consumers who would open a bank account. Costs to payment services providers || Recurring annual costs resulting from operating a basic payment account. || -2 to -9 || · The costs are calculated by multiplying the annual cost of operation of an account (EUR 40) by the number of consumers who would open an account. Benefit / cost per stakeholder and type || Benefit / cost description || Euro (Millions) || Calculation basis Benefits to Member States (governments) || Benefits resulting from savings on payments of social security || -0.04 to -2 || Savings resulting from payments of social benefits via bank transfers (instead of more costly means e.g. cheques) are estimated at EUR 7-12 per recipient per annum, thus the average of EUR 10 per recipient per annum has been applied which is multiplied by a number of consumers who would open a bank account. Costs to Member States (governments) || Total costs for Member States || 2.52 || One-off costs of legislating || 0.94 || · The cost of legislating is assumed to require about 1500 man hours where the EU average employee cost per hour is estimated to be around EUR 31.5 which is multiplied by 26 Member States. Recurring costs of monitoring application of legislation || 1.57 || · The cost of monitoring is assumed to require about 2500 man hours where the EU average employee cost per hour is estimated to be around EUR 31.5 which is multiplied by 26 Member States. Benefit / cost per stakeholder and type || Benefit / cost description || Euro (Millions) || Calculation basis Benefits to utility firms || Recurring annual benefits from reductions in transaction costs: many banked consumers would switch to direct debit payments. || -0.8 to -4 || The transaction cost savings for water and energy payments can oscillate between EUR 1.2-2 per transaction. In order to make the necessary overall estimation of benefits to be obtained by utility firms in the 26 Member States, an average of EUR 1.5 has been assumed and multiplied by a number of consumers who would open a bank account. Variant C: Indicate a minimum account balance that cannot be seized Since one Member
State (France) has already implemented the Recommendation, and in addition
banks in France can offer a basic payment account with a minimum account
balance that cannot be seized, therefore the calculation of costs and benefits
of this option for different stakeholders covers 26 Member States. Table 6.G: Improve
the features of the basic payment account- Variant C: Indicate a minimum account
balance that cannot be seized Benefit / cost per stakeholder and type || Benefit / cost description || Euro (Millions) || Calculation basis Benefits to consumers || Total benefits resulting from improved access to a basic payment account || 45 – 226 || || 27 – 133 || Benefits from discounts from reduced use of out-of-bank money transmission: EUR 60 saved per consumer / per year on money transmission services multiplied by a number of unbanked consumers. Benefits from discounts from reduced use of cheques: EUR 120 saved per consumer / per year by withdrawal from cheques multiplied by a number of unbanked consumers. || 19 – 93 || Benefits from discounts from electronic payments: EUR 125 saved per consumer / per year multiplied by a number of unbanked consumers. Costs to consumers || Total costs for consumers || 9 – 45 || Account operation costs || 8 – 38 || · Annual recurring charge for maintenance of the account: the figure is calculated by multiplying the annual maintenance charge of EUR 51 by the number of consumers who would open an account. Cost of inappropriate use of the account || 1 - 7 || · For the purposes of this calculation, an average failed transaction cost of EUR 20 is assumed (in France and the UK, these charges are estimated at somewhere between EUR 17 and 22 for each failed transaction). · It is assumed that under this option 25% of unbanked consumers who would open a bank account would make on average 2 failed transactions per year. This number is multiplied by an average failed transaction cost of EUR 20. Benefit / cost per stakeholder and type || Benefit / cost description || Euro (Millions) || Calculation basis Benefits to payment services providers || Recurring annual benefits from providing access to a basic payment account. || 1 – 7 || Average price of a payment account which consumer has to pay has been calculated at EUR 51, where the costs incurred by account provider are equal to ca. EUR 40. This results in revenue of ca. EUR 10 for providers per each account which is multiplied by a number of consumers who would open a bank account. Costs to payment services providers || Recurring annual costs resulting from operating a basic payment account. || 6 – 30 || · The costs are calculated by multiplying the annual cost of operation of an account (EUR 40) by the number of consumers who would open an account. Benefit / cost per stakeholder and type || Benefit / cost description || Euro (Millions) || Calculation basis Benefits to Member States (governments) || Benefits resulting from savings on payments of social security || 1.5 – 7 || Savings resulting from payments of social benefits via bank transfers (instead of more costly means e.g. cheques) are estimated at EUR 7-12 per recipient per annum, thus the average of EUR 10 per recipient per annum has been applied which is multiplied by a number of consumers who would open a bank account. Costs to Member States (governments) || Total costs for Member States || 2.52 || One-off costs of legislating || 0.94 || · The cost of legislating is assumed to require about 1500 man hours where the EU average employee cost per hour is estimated to be around EUR 31.5 which is multiplied by 26 Member States. Recurring costs of monitoring application of legislation || 1.57 || · The cost of monitoring is assumed to require about 2500 man hours where the EU average employee cost per hour is estimated to be around EUR 31.5 which is multiplied by 26 Member States. Benefit / cost per stakeholder and type || Benefit / cost description || Euro (Millions) || Calculation basis Benefits to utility firms || Recurring annual benefits from reductions in transaction costs: many banked consumers would switch to direct debit payments. || 3 - 13 || The transaction cost savings for water and energy payments can oscillate between EUR 1.2-2 per transaction. In order to make the necessary overall estimation of benefits to be obtained by utility firms in the 26 Member States, an average of EUR 1.5 has been assumed and multiplied by a number of consumers who would open a bank account. Variant D: Ensure that the features of the bank account are not of a
discriminatory nature The calculation of
costs and benefits of this option for different stakeholders covers 27 Member
States. Table 6.H: Improve
the features of the basic payment account- Ensure that the features of the bank
account are not of a discriminatory nature Benefit / cost per stakeholder and type || Benefit / cost description || Euro (Millions) || Calculation basis Benefits to consumers || Total benefits resulting from improved access to a basic payment account || 68 339 || || 40 – 200 || Benefits from discounts from reduced use of out-of-bank money transmission: EUR 60 saved per consumer / per year on money transmission services multiplied by a number of unbanked consumers. Benefits from discounts from reduced use of cheques: EUR 120 saved per consumer / per year by withdrawal from cheques multiplied by a number of unbanked consumers. || 28 – 139 || Benefits from discounts from electronic payments: EUR 125 saved per consumer / per year multiplied by a number of unbanked consumers. Costs to consumers || Total costs for consumers || 22 – 108 || Account operation costs || 19 – 97 || · Annual recurring charge for maintenance of the account: the figure is calculated by multiplying the annual maintenance charge of EUR 55 by the number of consumers who would open an account. A higher figure for the charge of annual account maintenance has been used for the calculation of this option (EUR 55) in order to cover the possibility to use the account (e.g. debit card) also abroad. Cost of inappropriate use of the account || 2 – 11 || · For the purposes of this calculation, an average failed transaction cost of EUR 20 is assumed (in France and the UK, these charges are estimated at somewhere between EUR 17 and 22 for each failed transaction). · It is assumed that 25% of unbanked consumers who would open a bank account would make on average 2 failed transactions per year. This number is multiplied by an average failed transaction cost of EUR 20. Benefit / cost per stakeholder and type || Benefit / cost description || Euro (Millions) || Calculation basis Benefits to payment services providers || Recurring annual benefits from providing access to a basic payment account. || 0 || Average price of a payment account which consumer has to pay has been calculated under this option at EUR 55, where the costs incurred by account provider are equal to ca. EUR 45-47. The costs are higher for banks under this option because they would need to incur higher system costs for the account services provided in the same way at national and cross-border level. This gives the revenue of ca. EUR 8 for providers per each account which is multiplied by a number of consumers who would open a bank account. Costs to payment services providers || Recurring annual costs resulting from operating a basic payment account. || 19 - 94 || · The costs are calculated by multiplying the annual cost of operation of an account under this option (EUR 45) by the number of consumers who would open an account. A higher figure of annual cost of account operation has been used for the calculation of this option (EUR 45) in order to cover the possibility to use the account (e.g. debit card) also abroad. Benefit / cost per stakeholder and type || Benefit / cost description || Euro (Millions) || Calculation basis Benefits to Member States (governments) || Benefits resulting from savings on payments of social security || 2 – 11 || Savings resulting from payments of social benefits via bank transfers (instead of more costly means e.g. cheques) are estimated at EUR 7-12 per recipient per annum, thus the average of EUR 10 per recipient per annum has been applied which is multiplied by a number of consumers who would open a bank account. Costs to Member States (governments) || Total costs for Member States || 3.8 || One-off costs of legislating || 1.41 || · The cost of legislating is assumed to require about 1500 man hours where the EU average employee cost per hour is estimated to be around EUR 31.5 which is multiplied by 27 Member States. Recurring costs of monitoring application of legislation || 2.36 || · The cost of monitoring is assumed to require about 2500 man hours where the EU average employee cost per hour is estimated to be around EUR 31.5 which is multiplied by 27 Member States. Benefit / cost per stakeholder and type || Benefit / cost description || Euro (Millions) || Calculation basis Benefits to utility firms || Recurring annual benefits from reductions in transaction costs: many banked consumers would switch to direct debit payments. || 4 - 20 || · The transaction cost savings for water and energy payments can oscillate between EUR 1.2-2 per transaction. In order to make the necessary overall estimation of benefits to be obtained by utility firms in the 27 Member States, an average of EUR 1.5 has been assumed and multiplied by a number of consumers who would open a bank account. Ease of
comparison of bank fees, requirements covering presentation and payment account
switching The assumptions used as well as the basis for
calculation of economic impacts in this section are taken from the study 'Quantification of the economic impacts of EU action to improve fee
transparency, comparability and mobility in the internal market for bank
personal current accounts' Assumptions used in the analysis of costs
and benefits ·
For the purposes of this assessment costs and benefits
are assumed to accrue as from 2013. The basis for adjustments made to express
quantities, whether in terms of volumes or prices, relative to the base year
2013 is described within each assumption below. ·
All benefits and recurring costs are calculated
over a period covering 2013 to 2022 and are expressed at their present values,
discounted at a rate of 4%. ·
EU average prices are derived from 2009 average
prices[670] adjusted for inflation[671] to
express prices in 2012 terms. In order to adjust prices to 2012 levels, the
rate of inflation in 2011 was used by way of assumption.[672] ·
Labour costs to credit institutions: Unless otherwise specified the daily labour rate for credit
institutions is EUR 232. This is computed on the basis of: –
EU average hourly labour rate for 2007[673] (EUR 27.11) –
Starting from the EU average hourly labour rate
for 2007, a forecast is computed for 2012 (EUR 32.44), based on an annual
increase in the EU average hourly labour rate of 3.7%. –
The annual 3.7% increase is calculated on the
basis of the average year-on-year increase in the EU average hourly labour rate
recorded between 2000 and 2007.673 –
For the purposes of this assessment costs are
assumed to be incurred as from 2013. The 2012 forecast hourly labour rate is
adjusted for inflation at a rate of 2% to reflect 2013 prices. –
The daily labour rate is computed on the basis
of a 7 hour working day. ·
Labour costs for management in credit
institutions: The cost of labour for
management in credit institutions is calculated at a 20% premium of the labour
costs to credit institutions described above. ·
Labour costs to Member States: Unless otherwise specified the daily labour rate for Member States
is EUR 115. This is computed on the basis of: –
EU average hourly labour rate for 2007[674] (Euro 12.02) –
The EU average hourly labour rate is forecast
for 2012 (Euro 16.14), on the basis of an annual increase in the EU average
hourly labour rate of 6.1% between 2008 and 2012. –
The annual 6.1% increase is calculated on the
basis of the average year-on-year increase in the EU average hourly labour rate
recorded between 2000 and 2007 –
For the purposes of this assessment costs are
assumed to be incurred as from 2013. The 2012 forecast hourly labour rate is
adjusted for inflation at a rate of 2% to reflect 2013 prices. –
The daily labour rate is computed on the basis
of a 7 hour working day. ·
Unless otherwise stated the total number of
credit institutions in the EU in 2013 is estimated at 7.855. This is
estimated as follows: –
The number of credit institutions in the EU in
May 2012[675]
(8.003) ·
An assumed annual reduction in the number of
credit institutions due to gradual consolidation of 1.85% ·
The reduction rate is calculated based on the
average decrease in the number of credit institutions recorded between 2009
(8.360) and 2011 (8.060) ·
Unless otherwise stated the total number of
employees in credit institutions in the EU in 2013 is estimated at 2 538
320. This is estimated as follows: –
The forecast 2013 average number of employees
per credit institution (324), multiplied by the forecast number of credit
institutions (7.855) described above. –
The 2012 average number of employees is forecast
on the basis of change in the average number of employees in credit
institutions between 2009, (327) and 2010, (326). –
Average number of employees in credit
institutions for years 2009 and 2010 are derived from the total number of
employees in 2009 (2 751 008) and 2010 (2 700 806)[676] divided by the average number of credit institutions between
January and December in the same years (2009: 8 421; 2010: 8 290)675 ·
Unless otherwise stated the total number of
bank account holders in the EU in 2013 is calculated as 365 972 765.
This is estimates as follows: –
EU population figures and for 2011[677] - EU population over 15 years of age for 2011, (422 133 188)
and EU projected population figures for 2015677 (428 993 918) –
The average annual increase between the EU
population over 15 years of age between the 2011 and 2015 figures above is
computed as +0,4% –
Applying an average annual increase of +0,4%,
the 2013 forecast EU population over 15 years of age is 425 549 727. –
The bank account penetration rate in the EU was
84% in 2011.[678] –
For the purposes of estimating bank account
penetration levels in the EU in 2013, a 1% annual increase is assumed. The
penetration rate in the EU is therefore calculated as 86% –
The number of current account holders in 2013 is
derived by applying the 86% penetration rate to the EU population over 15 years
of age of 425 549 727 –
A discount factor is applied in computing costs
where relevant to reflect the distance from the policy frontier in each option
assessed. –
Table 6.I below provides a summary of discount
factors applied to the calculation of costs where relevant.[679] Table 6.I: Discount
factors applied to the calculation of costs Measure || Variant || Discount Factor Ex- ante Fee Disclosure || || 1. Standard price list || A:20 most common fees || 0.35 2.Glossaries || A:non- harmonised terminology || 0.29 B: harmonise terminology || 0.65 3.Comparison website || A: single website at Member State level || 0.51 B: Accreditation system in Member State || 1.00 4.Representative examples || A: self- tailored usage profiles || 0.74 B:standard usage profiles || 0.83 5.Cost simulations || A: self-tailored usage profiles || 0.89 B: standard usage profiles || 0.97 6.EU standardised form for provision of information on fees || || 0.46 Comparable fee disclosure ex- post || || 1.Ex- post fee information || 0.35 2.EU standardised forms || 0.80 Facilitating the process of payment account switching || || 2. Ensure that the switching services follow the Common Principles || 0.15 3. Improve the effectiveness of the Common Principles || A: enhanced Common Principle || 0.34 B: incl. cross-border provisions || 0.58 4. Automatic redirection service || A: at Member State level || 0.81 B: at EU level || 0.84 5.Bank account portability || A: at Member State level || 1.00 B: at EU level || 1.00 ·
Discount factors are computed based on a
regulatory baseline assessment for a sample of 16 Member States to determine
the distance from the policy frontier posed by each of the options under
assessment. ·
Distance from policy frontier assessments were
quantified into rating scales from 0 to 5. A '0' rating means that equivalent
measures to those proposed by any single policy option are present in a Member
State. A rating of 5 means that the Member State has no measures in place that
relate or approximate to the measures proposed within a policy option. ·
Ratings for the individual Member States
assessed were aggregated into groups per rating given. A simple extrapolation
method was used to apply the ratings to the 27 Member States. The extrapolation
method used was to apply ratings in the same proportions for the 27 Member States
as those identified through the assessment of the regulatory framework within
the 16 Member States analysed. ·
The rating scales measuring the distance from
the policy frontier were then applied to costs by setting up the set of
assumptions indicated below: Table 6.J Costs One-off costs are the initial outlay incurred
by credit institutions or member states as a result of implementing a policy
option. One-off costs are assumed to be incurred within 1 year from the
adoption of a policy option and are therefore expressed in their nominal
values. Recurring costs are costs incurred on an
ongoing basis or at a certain level of frequency. All recurring costs are
computed over the period from 2013 to 2022 for the purposes of this impact
assessment. Both one-off costs and recurring costs may
take the form of time-based costs or acquisition costs. Time-based costs are
costs resulting from the allocation of human resources to an activity, required
to implement a policy option. Acquisition costs represent the cost of acquiring
a good or a service. Time-based costs Time based costs are computed by multiplying
the following elements: ·
Daily labour rate (for credit institutions or
Member States as described above); ·
Number of full time equivalent involved and time
spent by each on an activity generating costs; ·
A relevant cost multiplier (expressed in terms
of number of credit institutions, number of employees of credit institutions,
number of bank account holders, number of Member States, or number of employees
of public administrations) ·
Where relevant the discount factor is applied to
reflect the extent to which currently a policy option is at least partially
applied within Member States. Acquisition costs Acquisition costs are computed by multiplying
the following elements: ·
Unit cost of acquiring a good or service ·
A relevant cost multiplier (expressed in terms
of number of credit institutions, number of employees of credit institutions,
number of bank account holders, number of Member States, or number of employees
of public administrations) ·
Where relevant the discount factor is applied to
reflect the extent to which currently a policy option is at least partially
applied within Member States The basis for calculation of each of the
activities resulting in costs and the benefits quantified for individual
options as part of this impact assessment are provided below. Benefits Consumers: Changes in switching behaviour Options that contribute towards promoting
ease of comparison and set out common presentation criteria, coupled with
measures to ensure smooth switching are expected to impact the number of
consumers who switch to a better bank account offer. While benefits in the form
of more or better services, higher service quality or customer care are
important triggers for consumers who decide to switch suppliers, these benefits
could not be quantified. The benefit to an incremental number of consumers who
would switch bank accounts as a result of EU action is quantified in terms of
possible cost savings from moving to a cheaper account. For the purposes of this assessment it is
assumed that consumers could derive up to 20% savings on the computed EU
average price for a current account. The increase in switching levels is
estimated per option for a range between a cumulative +0.05% and +3.25% per
annum as a result of EU action. Details of the impact allocated per option of
increased switching levels are provided below. Consumers: Changes in account management
behaviour The analysis constructs a benefit to
consumers linked specifically to the options ex-post information requirements.
The benefit derives from potential cost savings consumers would accrue through
by being better informed about the cost to them of holding their current
account. For the purposes of this assessment it is
assumed that consumers could derive up to 10% in savings on the computed EU
average price for a current account by adapting consumption patterns on the
basis of information available to them about costs incurred. The benefit is
calculated upon the assumption that the percentage of consumers who would
benefit from changes in consumption patterns are: 0%: 2013; 1.28%: 2014, 2015;
3.84%: 2016-2022. Details of the impact allocated per option of increased
switching levels is provided in table 6.K to table 6.CC below. The basis for calculation of each of the
activities resulting in costs and the benefits quantified for individual
options as part of this impact assessment are provided in table 6.K to table
6.CC below. Detailed
tables of benefits and costs Table
6.K: Ease of comparison and presentation requirements for bank fees – Option 2 Option 2: A standard price list to be provided as part of account opening procedures Benefit per stakeholder and cost type || Benefit description || Euro (Millions) || Calculation basis Benefits to consumers || Benefit accrued from changes in switching behaviour || 584.87 || · Present value ('PV') of estimated incremental cost savings accrued to switchers from 2013 to 2022, discounted at 4%. · The impact on consumer switching behaviour is assumed as follows: 2013: +0% of total number of bank account holders; 2014-2022: a constant +0.2%. Amounts are expressed on a cumulative basis. · Savings are calculated based on the assumption that switchers would accrue cost savings equal to a constant 20% of an EU yearly average cost of a bank account between 2013 and 2022 Cost per stakeholder and cost type || Cost description || Range in Euro (Millions) || Calculation basis One-off costs to credit institutions Time-based costs || Internal communication and training || 5.93–11.86 || · 1 to 2 hours per person · All front office/ marketing employees will have to spend some time on familiarising themselves with new requirements – this is assumed to be 20% of industry workforce · Discount factor – distance from policy frontier = 0.35 Input into the process of determining a list of most relevant fees || 0.77 – 1.28 || · 2 staff members per bank would be involved in this exercise · They will devote 3 to 5 days each · Not all credit institutions across the EU would contribute to this exercise – it is assumed that 20% ( of the total of 7.855) credit institutions, would contribute to this process · Discount factor – distance from policy frontier = 0.35 Time spent by the legal department to familiarise with legislation || 0.64 – 1.28 || · 1 staff member per bank would be involved in this exercise · Time spent 1 to 2 days · Discount factor – distance from policy frontier = 0.35 Management time spent reviewing product and pricing strategy || 1.16 || · 3 members of management team per credit institution · 0.5 days per person – one half day meeting to determine new pricing strategy · It is assumed that management wages are higher than average industry wages by 20% · Discount factor – distance from policy frontier = 0.35 Time spent by legal department to adapt contractual documentation || 0.91 – 1.82 || · 1 member of the legal team per bank · 0.5 to 1 day per person · Discount factor not applied as all banks would have to update contracts to include references to the standard price list which would now have a specific name under national law || || 9.41 – 17.41 || One-off costs to Credit institutions Acquisition costs || Cost of adapting marketing/ advertising promotional material || 83.21 – 138.69 || · Unit cost per credit institution = range of Euro 30 000 – 50 000 · Discount factor – distance from policy frontier = 0.35 · Cost of updating/adapting IT applications to provide standard price lists || 2.77 – 5.55 || · Unit cost per credit institution = range of Euro 1 000 – 2 000 · Discount factor – distance from policy frontier = 0.35 Updating websites to provide newly required information || 0.55 – 1.39 || · Individual cost per credit institution ranging between Euro 200 - 500 · Discount factor: Distance from the policy frontier = 0.35 || || 86.54 – 145.62 || Recurring costs to Credit institutions Time-based costs || Additional staff costs generated by new compliance requirements || 142.85 || · 10% of 1 Full Time Equivalent per credit institution per annum · Discount factor: Distance from the policy frontier = 0.35 Recurring reporting requirements || 8.02 - 16.05 || · 1 person per bank · 0.5 to 1 day per year · No discount factor applied || || 150.84 – 158.90 || Recurring costs to Credit institutions Acquisition costs || Costs of printing price lists || 32.30- 96.89 || · Unit cost = Euro 0.10 to 0.30 per print out · Lists are made available in hard copy format to 10% of customers [consider bank account holders] · Discounting factor not applied as new price lists would need to be printed in accordance with standard format and a given name || || 32.30- 96.89 || One-off costs to public authorities Time-based costs || Identifying and agreeing 20 most common fees || 0.04 – 0.07 || · 2 officials are involved · Each official spends 20 to 30 days per year on this activity · Discount factor: Distance from the policy frontier = 0.35 Transposing EU legislation into national law || 0.01 – 0.02 || · 1 official involved · Time spent estimated at 10 to 15 days on this activity · Discount factor: Distance from the policy frontier = 0.35 || || 0.05-0.09 || Recurring costs to public authorities Time-based costs || Revising list of common fees || 0.10- 0.19 || · 2 officials are involved · Time spent estimated at 5 to 10 days per year on this activity · Discount factor: Distance from the policy frontier = 0.35 Monitoring compliance || 0.12- 0.23 || · 1 official involved · 12 to 24 days per year to monitor compliance (e.g. scanning websites of banks) · Discount factor: Distance from the policy frontier = 0.35 Reporting to EU || 0.05 - 0.08 || · 1 official involved · 2 to 3 days per official per year · Discounting factor not applied – as not a requirement under current situation Enforcement costs e.g. sweeps, investigations || 0.33- 0.66 || · 1 official involved · 12 to 24 days per year · Discount factor: Distance from the policy frontier = 0.35 || || 0.60-1.17 || Table
6.L: Ease of comparison and presentation requirements for bank fees – Option 3
Variant A Option 3: Introduce the requirement to develop glossaries for bank fee terms Variant A: A glossary containing non-harmonised terminology Cost per stakeholder and cost type || Cost description || Range in EUR (Millions) || Calculation basis One-off costs to credit institutions Time-based costs || Internal communication and training || 4.83 – 9.66 || · 1 to 2 hours per person · All front office/ marketing employees will have to spend some time on familiarising themselves with new requirements – this is assumed to be 20% of industry workforce · Discount factor – distance from policy frontier = 0.29 Time spent on developing glossary of fee terms used by a bank || 1.57 – 2.61 || · 1 staff members per bank would be involved in this exercise · They will devote 3 to 5 days each · Discount factor – distance from policy frontier = 0.29 Time spent by the legal department to familiarise with legislation || 0.52 – 1.05 || · 1 staff member per bank would be involved in this exercise · Time spent 1 to 2 days per year · Discount factor – distance from policy frontier = 0.29 Time spent by legal department to adapt contractual documentation || 0.91 – 1.82 || · 1 member of the legal team per bank · 0.5 to 1 day per person · Discount factor not applied as all banks would have to update contracts to include references to the glossary || || 7.83-15.14 || One-off costs to Credit institutions Acquisition costs || Cost of updating/adapting IT applications with a glossary || 2.26 – 4.52 || · Unit cost per credit institution = range of EUR 1.000 - 2.000 · Discount factor – distance from policy frontier = 0.29 Adding glossary to website || 1.57 – 3.93 || · Individual cost per credit institution ranging between Euro 200 - 500 · Discounting factor not applied as all banks would have to add new, glossary to websites. || || 3.83-8.44 || Recurring costs to Credit institutions Time-based costs || Additional staff costs generated by new compliance requirements || 116.30 || · 10% of 1 Full Time Equivalent per credit institution per annum · Discount factor – distance from policy frontier = 0.29 Updating glossary with new fees/services || 16.05-32.11 || · 1 person per bank · 1 to 2 days per year · Discounting factor not applied as all credit institutions would have to update glossary when new terms are introduced Recurring reporting requirements || 8.03-16.05 || · 1 person per bank · 0.5 to 1 day per year · No discount factor applied. || 140.38 – 164.46 || Recurring costs to Credit institutions Acquisition costs || Costs of printing glossaries || 9.29-27.86 || · Unit cost = Euro 0.10 to 0.30 per print out · Glossary assumed to be made available in hard copy format to 10% of customers · Discount factor – distance from policy frontier = 0.29 || || 9.29-27.86 || One-off costs to public authorities Time-based costs || Initial compilation of glossary || 0.01 – 0.02 || · 2 officials are involved · Each official spends 5 to 10 days per year on this activity · Discount factor: Distance from the policy frontier = 0.29 Transposing EU legislation into national law || 0.02– 0.03 || · 1 official involved · Time spent estimated at 5 to 10 days on this activity · Discount factor not applied as there is no current legislative basis in Member States || 0.02-0.05 || || Updating glossary || 0.11-0.16 || · 2 officials are involved · Time spent estimated at 2 to 3 days per year on this activity · Discount factor not applied as there is no current legislative basis in Member States Recurring costs to public authorities Time-based costs || Monitoring compliance || 0.33-0.66 || · 1 official involved · 12 to 24 days per year to monitor compliance (e.g. scanning websites of banks) · Discounting factor not applied – no legislative base for glossaries in Member States currently Reporting to EU || 0.05-0.08 || · 1 official involved · 2 to 3 days per official per year · Discounting factor not applied – as not a requirement under current situation Enforcement costs || 0.33-0.66 || · 1 official involved · 12 to 24 days per year · Discounting factor not applied – as not a requirement under current situation || 0.82-1.56 || Table 6.M: Ease of comparison and
presentation requirements for bank fees – Option 3 Variant B Option 3: Introduce the requirement to develop glossaries for bank fee terms Variant B: A glossary based on fully harmonised terminology Cost per stakeholder and cost type || Cost description || Range in Euro (Millions) || Calculation basis One-off costs to credit institutions Time-based costs || Internal communication and training || 21.73 – 38.03 || · 0.3 to 0.5 days per person · All front office/ marketing employees will have to spend some time on familiarising themselves with new requirements – this is assumed to be 20% of industry workforce · Discount factor – distance from policy frontier = 0.65 Industry input /support to the development of a standardised glossary || 1.41 – 2.35 || · 2 staff members per bank would be involved in this exercise · They will devote 3 to 5 days each · Discount factor – distance from policy frontier = 0.65 Time spent by the legal department to familiarise with legislation || 1.18 – 2.35 || · 1 staff member per bank would be involved in this exercise · Time spent 1 to 2 days per year · Discount factor – distance from policy frontier = 0.65 Management time spent on reviewing product/ pricing strategy || 8.47 – 14.12 || · 2 members of management team per credit institution · 3 to 5 days per person · It is assumed that management wages are higher than average industry wages by 20% · Discount factor – distance from policy frontier = 0.65 Time spent by legal department to adapt contractual documentation || 0.91 – 1.82 || · 1 member of the legal team per bank · 0.5 to 1 day per person · Discount factor not applied as all banks would have to update contracts to include references to the glossary || || 33.70-58.67 || One-off costs to Credit institutions Acquisition costs || Cost of updating/adapting IT applications with a glossary || 5.08 – 10.16 || · Unit cost per credit institution = range of Euro 1 000 – 2 000 . · Discount factor – distance from policy frontier = 0.65 Adding glossary to website || 1.57 – 3.93 || · Individual cost per credit institution ranging between Euro 200 - 500 · Discounting factor not applied as all banks would have to add new, glossary to websites. || || 6.65-14.09 || Recurring costs to Credit institutions Time-based costs || Additional staff costs generated by new compliance requirements || 261.68 || · 10% of 1 Full Time Equivalent per credit institution per annum · Discount factor – distance from policy frontier = 0.65 Updating glossary with new fees/services || 32.11 – 48.16 || · 1 person per bank · 2 to 3 days per year · Discounting factor not applied as all credit institutions would have to update glossary when new terms are introduced Recurring reporting requirements || 8.03 – 16.05 || · 1 person per bank · 0.5 to 1 day per year · No discount factor applied. || 301.81 – 325.89 || Recurring costs to Credit institutions Acquisition costs || Costs of printing glossaries || 32.30 – 96.89 || · Unit cost = Euro 0.10 to 0.30 per print out · Glossary assumed to be made available in hard copy format to 10% of customers · Discounting factor not applied as all banks would have to print glossaries. || || 32.30 – 96.89 || One-off costs to public authorities Time-based costs || Initial compilation of glossary || 0.06 – 0.08 || · 2 officials are involved · Each official spends 15 to 20 days per year on this activity · Discount factor: Distance from the policy frontier = 0.65 Transposing EU legislation into national law || 0.02– 0.03 || · 1 official involved · Time spent estimated at 5 to 10 days on this activity · Discount factor not applied as there is no current legislative basis in Member States || || 0.8-0.11 || Recurring costs to public authorities Time-based costs || Updating glossary || 0.27 – 0.55 || · 2 officials are involved · Time spent estimated at 5 to 10 days per year on this activity · Discounting factor not applied – no legislative base for glossaries in Member States currently Monitoring compliance || 0.33 – 0.66 || · 1 official involved · 12 to 24 days per year to monitor compliance (e.g. scanning websites of banks) · Discounting factor not applied – no legislative base for glossaries in Member States currently Reporting to EU || 0.05 – 0.08 || · 1 official involved · 2 to 3 days per official per year · Discounting factor not applied – as not a requirement under current situation Enforcement costs || 0.33 – 0.66 || · 1 official involved · 12 to 24 days per official per year · Discounting factor not applied – as not a requirement under current situation || 0.99 - 1.95 || Table 6.N: Ease of comparison and
presentation requirements for bank fees – Option 4 Variant A Option 4: Introduce the requirement to set up independent fee comparison websites Variant A: A single official website within each Member State managed by a competent authority Benefit per stakeholder and cost type || Benefit description || EUR (Millions) || Calculation basis Benefits to consumers || Benefit accrued from changes in switching behaviour || 731.08 || · Present value ('PV') of estimated incremental cost savings accrued to switchers from 2013 to 2022, discounted at 4%. · The impact on consumer switching behaviour is assumed as follows: 2013: +0% of total number of bank account holders; 2014-2022: a constant +0.25%. Amounts are expressed on a cumulative basis. · Savings are calculated based on the assumption that switchers would accrue cost savings equal to a constant 20% of an EU yearly average cost of a bank account between 2013 and 2022 Cost per stakeholder and cost type || Cost description || Range in Euro (Millions) || Calculation basis || One-off costs to credit institutions Time-based costs || Management time spent on reviewing product/ pricing strategy || 1.68 || · 3 members of management team per credit institution · 0.5 days per person – one half day meeting to determine new pricing strategy · It is assumed that management wages are higher than average industry wages by 20% · Discount factor – distance from policy frontier = 0.51 || || || 1.68 || || One-off costs to Credit institutions Acquisition costs || Setting up internal process || 12.07 – 20.13 || · Unit cost = EUR 3 000 to EUR 5 000 per credit institution · Discount factor – distance from policy frontier = 0.51 || || || 12.07 – 20.13 || || Recurring costs to Credit institutions Time-based costs || Submitting price data to website operator || 49.36 – 98.72 || · 1 person per bank · 6 to 12 days per year · Discount factor – distance from policy frontier = 0.51 || || || 49.36 – 98.72 || || One-off costs to public authorities Time-based costs || Website development (includes both time-based and acquisition costs) || 0.74 – 2.83 || · 2 officials are involved · Each official spends 15 to 20 days on this activity · Discount factor: Distance from the policy frontier = 0.51 · Unit cost of creating a website: EUR 50 000 – EUR 200 000 || Transposing EU legislation into national law || 0.02– 0.03 || · 1 official involved · Time spent estimated at 5 to 10 days on this activity · Discount factor not applied as there is no current legislative basis in Member States || || || 0.76 – 2.86 || || Recurring costs to public authorities Time-based costs || Website running (includes both time-based and acquisition costs) || 7.21-7.34 || · 2 FTE officials are involved · Discount factor: Distance from the policy frontier = 0.51 · EUR 1 000 – EUR 2 000 for server hosting, software upgrades and IT consumables || Website feedback and evaluation || 0.17-0.34 || · 1 official per Member State to analyse feedback provided by users, conduct user surveys, review feedback and develop recommendations for improvement · 12 to 24 days per year · Discount factor: Distance from the policy frontier = 0.51 || Monitoring compliance || 0.16-0.33 || · 1 official involved · 6 to 12 days per official per year · Discounting factor not applied – no legislative base for price comparison site in Member States currently || Reporting to EU || 0.05-0.08 || · 1 official involved · 2 to 3 days per official per year · Discounting factor not applied – as not a requirement under current situation || Enforcement costs || 0.33-0.66 || · 1 official involved · 12 to 24 days per official per year · Discounting factor not applied – as not a requirement under current situation || || || 7.93 – 8.74 || || Recurring costs to public authorities Acquisition costs || Promoting websites through information campaigns || 6.11-12.21 || · Each MS spends EUR 50 000 – EUR 100 000 on promotional activities/ information campaigns per year · Discount factor: Distance from the policy frontier = 0.51 || || || 6.11-12.21 || || Table 6.O: Ease of comparison and
presentation requirements for bank fees – Option 4 Variant B Option 4: Comparison sites licensed under an accreditation scheme Variant B: Comparison websites licensed under an accreditation scheme Benefit per stakeholder and cost type || Benefit description || Euro (Millions) || Calculation basis Benefits to consumers || Benefit accrued from changes in switching behaviour || 731.08 || · Present value ('PV') of estimated incremental cost savings accrued to switchers from 2013 to 2022, discounted at 4%. · The impact on consumer switching behaviour is assumed as follows: 2013: +0% of total number of bank account holders; 2014-2022: a constant +0.25%. Amounts are expressed on a cumulative basis. · Savings are calculated based on the assumption that switchers would accrue cost savings equal to a constant 20% of an EU yearly average cost of a bank account between 2013 and 2022 Cost per stakeholder and cost type || Cost description || Range in Euro (Millions) || Calculation basis || One-Off costs to Website operators Acquisition costs || Cost of obtaining accreditation || 0.05- 0.11 || · Assumed 2 websites per MS on average · Each website operator will incur EUR 1 000 – EUR 2 000 on obtaining accreditation per year · No Discount factor applied. || Initial investments to meet requirements of accreditation system e.g. setting up a complaints handling mechanism ting up internal process || 0.27- 0.54 || · Each website operator will spend EUR 5 000 – EUR 10 000 · No Discount factor applied. || || || 0.32 – 0.65 || || Recurring costs to Website operators Acquisition costs || Meeting requirements - annual audit || 4.77-9.53 || · Each website operator will incur EUR 10 000 – EUR 20 000 · No Discount factor applied. || || || 4.77-9.53 || || One-Off costs to public authorities Time-based costs || Setting up an accreditation system (includes both time-based and acquisition costs) || 0.36 - 0.66 || · 2 officials involved · Each official will spend 15 to 20 days on this activity · No Discount factor applied. · Each MS incurs acquisition costs of EUR 10 000 – EUR 20 000 || || || 0.36 - 0.66 || || Recurring costs to public authorities Time-based costs || Quarterly audits || 0.44- 0.66 || · 1 official involved · Each official will spend 16 to 24 days on this activity · No Discount factor applied. || Regular monitoring of sites || 0.66 – 1.32 || · 1 official involved · Each official will spend 24 to 48 days on this activity · No Discount factor applied. || || || 1.10 – 1.98 || || Recurring costs to public authorities Acquisition costs || Awareness raising campaigns || 2.38 - 4.76 || · Each MS spends EUR 10 000 – EUR 20 000 on promotional activities/ information campaigns per year · No Discount factor applied. || || || 2.38 – 4.76 || || Table 6.P: Ease of comparison and
presentation requirements for bank fees – Option 5 Variant A Option 5: Introduce the requirement to provide representative examples Variant A: Banks set up own representative examples Benefit per stakeholder and cost type || Benefit description || Euro (Millions) || Calculation basis Benefits to consumers || Benefit accrued from changes in switching behaviour || 146.22 || · Present value ('PV') of estimated incremental cost savings accrued to switchers from 2013 to 2022, discounted at 4%. · The impact on consumer switching behaviour is assumed as follows: 2013: +0% of total number of bank account holders; 2014-2022: a constant +0,05%. Amounts are expressed on a cumulative basis. · Savings are calculated based on the assumption that switchers would accrue cost savings equal to a constant 20% of an EU yearly average cost of a bank account between 2013 and 2022. Cost per stakeholder and cost type || Cost description || Range in Euro (Millions) || Calculation basis One-off costs to credit institutions Time-based costs || Internal communication and training || 24.88 –43.54 || · 0.3 to 0.5 days per person · All front office/ marketing employees will have to spend some time on familiarising themselves with new requirements – this is assumed to be 20% of industry workforce · Discount factor – distance from policy frontier = 0.74 Developing compliant representative examples || 2.69 – 4.04 || · 1 staff member per bank would be involved in this exercise · They will devote 2 to 3 days each · Discount factor – distance from policy frontier = 0.74 Time spent by the legal department to familiarise with legislation || 0.67 – 1.35 || · 1 staff member per bank would be involved in this exercise · S/he will devote 0.5 to 1 day each · Discount factor – distance from policy frontier = 0.74 Management time spent reviewing product and pricing strategy || 2.43 || · 3 members of management team per credit institution · 0.5 days per person – one half day meeting to determine new pricing strategy · It is assumed that management wages are higher than average industry wages by 20% · Discount factor – distance from policy frontier = 0.74 Time spent by legal department to adapt contractual documentation || 0.91 – 1.82 || · 1 member of the legal team per bank · 0.5 to 1 day per person · Discount factor not applied as all banks would have to update contracts || || 31.58 – 53.17 || One-off costs to Credit institutions Acquisition costs || Cost of adapting marketing/ advertising promotional material || 174.52 – 290.87 || · Unit cost per credit institution = range of EUR 30 000 – 50 000 · Discount factor – distance from policy frontier = 0.74 Cost of updating/adapting IT applications to generate representative examples || 58.17 – 116.35 || · Unit cost per credit institution = range of EUR 10 000 – 20 000 · Discount factor – distance from policy frontier = 0.74 Updating websites with representative examples || 1.16 – 2.91 || · Individual cost per credit institution ranging between EUR 200 - 500 · Discount factor: Distance from the policy frontier = 0.74 || || 233.86 – 410.13 || Recurring costs to Credit institutions Time-based costs || Additional staff costs generated by new compliance requirements || 299.61 || · 10% of 1 Full Time Equivalent per credit institution per annum · Discount factor: Distance from the policy frontier = 0.74 Updating representative examples || 16.05 - 32.11 || · 1 member of the legal team per bank · 1 to 2 days per person · Discounting factor not applied as representative examples not typically provided by banks Recurring reporting requirements || 8.03 - 16.05 || · 1 official per bank · 0.5 to 1 days per year · Discounting factor not applied as representative examples not typically provided by banks || || 323.68 – 347.76 || One-off costs to public authorities Time-based costs || Transposing EU legislation into national law || 0.02 – 0.03 || · 1 official involved · Time spent estimated at 5 to 10 days on this activity · Discount factor not applied || || 0.02 – 0.03 || Recurring costs to public authorities Time-based costs || Monitoring compliance || 0.33 - 0.66 || · 1 official involved · 12 to 24 days per year to monitor compliance (e.g. scanning websites of banks) · Discount factor not applied Reporting to EU || 0.05 - 0.08 || · 1 official involved · 2 to 3 days per official per year · Discounting factor not applied Enforcement costs e.g. sweeps, investigations || 0.33 - 0.66 || · 1 official involved · 12 to 24 days per year · Discounting factor not applied || || 0.71 – 1.40 || Table 6.Q: Ease of comparison and
presentation requirements for bank fees – Option 5 Variant B Option 5: Introduce the requirement to provide representative examples Variant B: Member States prescribe representative examples Benefit per stakeholder and cost type || Benefit description || Euro (Millions) || Calculation basis Benefits to consumers || Benefit accrued from changes in switching behaviour || 146.22 || · Present value ('PV') of estimated incremental cost savings accrued to switchers from 2013 to 2022, discounted at 4%. · The impact on consumer switching behaviour is assumed as follows: 2013: +0% of total number of bank account holders; 2014-2022: a constant +0.05%. Amounts are expressed on a cumulative basis. · Savings are calculated based on the assumption that switchers would accrue cost savings equal to a constant 20% of an EU yearly average cost of a bank account between 2013 and 2022 Cost per stakeholder and cost type || Cost description || Range in Euro (Millions) || Calculation basis One-off costs to credit institutions Time-based costs || Internal communication and training || 27.82–48.68 || · 0.3 to 0.5 days per person · All front office/ marketing employees will have to spend some time on familiarising themselves with new requirements – this is assumed to be 20% of industry workforce · Discount factor applied – distance from policy frontier = 0.83 Industry inputs to develop a standard usage profile || 3.01 – 4.52 || · 1 staff member per bank would be involved in this exercise · S/he will devote 2 to 3 days to this exercise · Discount factor applied – distance from policy frontier = 0.83 Developing compliant representative examples || 3.01 – 4.52 || · 1 staff members per bank would be involved in this exercise · They will devote 2 to 3 days each · Discount factor applied – distance from policy frontier = 0.83 Time spent by the legal department to familiarise with legislation || 0.75 – 1.51 || · 1 staff member per bank would be involved in this exercise · S/he will devote 0.5 to 1 day each · Discount factor applied – distance from policy frontier = 0.83 Management time spent reviewing product and pricing strategy || 2.71 || · 3 members of management team per credit institution · 0.5 days per person – one half day meeting to determine new pricing strategy · It is assumed that management wages are higher than average industry wages by 20% · Discount factor applied – distance from policy frontier = 0.83 Time spent by legal department to adapt contractual documentation || 0.91 – 1.82 || · 1 member of the legal team per bank · 0.5 to 1 day per person · Discount factor not applied as all banks would have to update contracts || || 38.22- 63.76 || One-off costs to Credit institutions Acquisition costs || Cost of adapting marketing/ advertising promotional material || 195.14 – 325.24 || · Unit cost per credit institution = range of EUR 30 000 – 50 000 · Discount factor applied– distance from policy frontier = 0.83 Cost of updating/adapting IT applications to generate representative examples || 65.05 – 130.09 || · Unit cost per credit institution = range of EUR 10 000 – 20 000 · Discount factor applied – distance from policy frontier = 0.83 Updating websites with representative examples || 1.30 – 3.25 || · Individual cost per credit institution ranging between EUR 200 - 500 · Discount factor applied: Distance from the policy frontier = 0.83 || || 261.49 – 458.58 || Recurring costs to Credit institutions Time-based costs || Additional staff costs generated by new compliance requirements || 335 || · 10% of 1 Full Time Equivalent per credit institution per annum · Discount factor applied: Distance from the policy frontier = 0.83 Industry inputs to (assumed) annual revision of standard usage profile || 6.65-13.29 || · 1 staff member per bank would be involved in this exercise · S/he will devote 0.5 to 1 day per year to this exercise · Discount factor applied: Distance from the policy frontier = 0.83 Updating representative examples || 13.29 - 26.60 || · 1 member of the legal team per bank · 1 to 2 days per person · Discount factor applied: Distance from the policy frontier = 0.83 Recurring reporting requirements || 8.03 – 16.05 || · 1 official · 0.5 to day per year · Discount factor not applied. || || 362.97 – 390.94 || One-off costs to public authorities Time-based costs || Developing standard usage profiles || 0.06 – 0.09 || · 2 officials are involved · Each official spends 10 to 15 days of his/her time on this activity · Discounting factor not applied Transposing EU legislation into national law || 0.02 – 0.03 || · 1 official involved · Time spent estimated at 5 to 10 days on this activity · Discount factor not applied || || 0.08 – 0.12 || Recurring costs to public authorities Time-based costs || Revising standard usage profiles || 0.23-0.45 || · 2 officials per MS are involved · Each official spends 5 to 10 days of his/her time on this activity · Discount factor applied: Distance from policy frontier = 0.83 Monitoring compliance || 0.33 – 0.66 || · 1 official involved · 12 to 24 days per year to monitor compliance (e.g. scanning websites of banks) · Discount factor not applied Reporting to EU || 0.05 -0.08 || · 1 official involved · 2 to 3 days per official per year · Discounting factor not applied Enforcement costs e.g. sweeps, investigations || 0.33-0.66 || · 1 official involved · 12 to 24 days per year · Discounting factor not applied || || 0.94 – 1.85 || Table 6.R: Ease of comparison and
presentation requirements for bank fees – Option 6 Variant A Option 6: Set up the requirement to provide cost simulations to prospective clients Variant A: Banks set up own customer profiles Benefit per stakeholder and cost type || Benefit description || Euro (Millions) || Calculation basis Benefits to consumers || Benefit accrued from changes in switching behaviour || 219.32 || · Present value ('PV') of estimated incremental cost savings accrued to switchers from 2013 to 2022, discounted at 4%. · The impact on consumer switching behaviour is assumed as follows: 2013: +0% of total number of bank account holders; 2014-2022: a constant +0.075%. Amounts are expressed on a cumulative basis. · Savings are calculated based on the assumption that switchers would accrue cost savings equal to a constant 20% of an EU yearly average cost of a bank account between 2013 and 2022 Cost per stakeholder and cost type || Cost description || Range in Euro (Millions) || Calculation basis One-off costs to credit institutions Time-based costs || Internal communication and training || 52.36 –104.71 || · 0.5 to 1 days per person · All front office/ marketing employees will have to spend some time on familiarising themselves with new requirements – this is assumed to be 20% of industry workforce · Discount factor applied – distance from policy frontier = 0.89 Time spent by the legal department to familiarise with legislation || 0.81 – 1.62 || · 1 staff member per bank would be involved in this exercise · 0.5 to 1 day per person · Discount factor applied – distance from policy frontier = 0.89 Management time spent reviewing product and pricing strategy || 2.92 || · 3 members of management team per credit institution · 0.5 day per person · It is assumed that management wages are higher than average industry wages by 20% · Discount factor – distance from policy frontier = 0.89 Time spent by legal department to adapt contractual documentation || 0.91 – 1.82 || · 1 member of the legal team per bank · 0.5 to 1 day per person · Discount factor not applied as all banks would have to update contracts || || 56.99 – 111.07 || One-off costs to Credit institutions Acquisition costs || Cost of adapting marketing/ advertising promotional material || 209.87 – 349.78 || · Unit cost per credit institution = range of EUR 30 000 – 50 000 · Discount factor – distance from policy frontier = 0.89 Cost of updating/adapting IT applications to generate cost simulations || 139.91 – 209.87 || · Unit cost per credit institution = range of EUR 20 000 – 30 000 · Discount factor – distance from policy frontier = 0.89 Updating websites with cost simulations || 13.99 – 20.99 || · Individual cost per credit institution ranging between EUR 2 000 – 3 000 · Discount factor: Distance from the policy frontier = 0.89 || || 363.78 – 580.64 || Recurring costs to Credit institutions Time-based costs || Additional staff costs generated by new compliance requirements || 360.29 || · 10% of 1 Full Time Equivalent per credit institution per annum · Discount factor applied – distance from policy frontier = 0.89 Cost of longer customer interactions || 2 204.17 – 3 306.25 || · 2 to 4 days extra per customer service staff (estimated as 20% of total industry workforce) · Discount factor applied – distance from policy frontier = 0.89 Recurring reporting requirements || 8.03 -16.05 || · 1 staff member per bank · 0.5 to 1 day per year · Discount factor not applied. || || 2 572.48 – 3 682.59 || One-off costs to public authorities Time-based costs || Transposing EU legislation into national law || 0.02–0.03 || · 1 official involved · Time spent estimated at 5 to 10 days on this activity · Discount factor not applied Recurring costs to public authorities Time-based costs || Monitoring compliance || 0.33 – 0.66 || · 1 official involved · 12 to 24 days per year to monitor compliance (e.g. scanning websites of banks) · Discount factor not applied Reporting to EU || 0.05-0.08 || · 1 official involved · 2 to 3 days per official per year · Discounting factor not applied Enforcement costs e.g. sweeps, investigations || 0.33-0.66 || · 1 official involved · 12 to 24 days per year · Discounting factor not applied || || 0.71 – 1.40 || Table 6.S: Ease of comparison and
presentation requirements for bank fees – Option 6 Variant B Option 6: Set up the requirement to provide cost simulations to prospective clients Variant B: Member States prescribe representative examples Benefit per stakeholder and cost type || Benefit description || Euro (Millions) || Calculation basis Benefits to consumers || Benefit accrued from changes in switching behaviour || 219.32 || Present value ('PV') of estimated incremental cost savings accrued to switchers from 2013 to 2022, discounted at 4%. The impact on consumer switching behaviour is assumed as follows: 2013: +0% of total number of bank account holders; 2014-2022: a constant +0.075%. Amounts are expressed on a cumulative basis. Savings are calculated based on the assumption that switchers would accrue cost savings equal to a constant 20% of an EU yearly average cost of a bank account between 2013 and 2022 Cost per stakeholder and cost type || Cost description || Range in Euro (Millions) || Calculation basis One-off costs to credit institutions Time-based costs || Internal communication and training || 56.95 –113.90 || · 0.5 to 1 day per person · All front office/ marketing employees will have to spend some time on familiarising themselves with new requirements – this is assumed to be 20% of industry workforce · Discount factor – distance from policy frontier = 0.97 Industry inputs to develop a standard usage profile || 3.52 – 5.29 || · 1 staff member per bank would be involved in this exercise · S/he will devote 2 to 3 days to this exercise · Discount factor – distance from policy frontier = 0.97 Time spent by the legal department to familiarise with legislation || 0.88 – 1.76 || · 1 staff member per bank would be involved in this exercise · S/he will devote 0.5 to 1 day · Discount factor – distance from policy frontier = 0.97 Management time spent reviewing product and pricing strategy || 3.17 || · 3 members of management team per credit institution · 0.5 days per person · It is assumed that management wages are higher than average industry wages by 20% · Discount factor – distance from policy frontier = 0.97 Time spent by legal department to adapt contractual documentation || 0.91 – 1.82 || · 1 member of the legal team per bank · 0.5 to 1 day per person · Discount factor not applied as all banks would have to update contracts || || 65.44 – 125.94 || One-off costs to Credit institutions Acquisition costs || Cost of adapting marketing/ advertising promotional material || 228.28 – 380.47 || Unit cost per credit institution = range of EUR 30 000 – 50 000 Discount factor – distance from policy frontier = 0.97 Cost of updating/adapting IT applications to generate cost simulations || 152.19 – 228.28 || Unit cost per credit institution = range of EUR 20 000 – 30 000 Discount factor – distance from policy frontier = 0.97 Updating websites with cost simulations || 15.22 – 22.83 || Individual cost per credit institution ranging between EUR 2 000 – 3 000 Discount factor: Distance from the policy frontier = 0.97 || || 395.68 – 631.57 || Recurring costs to Credit institutions Time-based costs || Additional staff costs generated by new compliance requirements || 391.89 || 10% of 1 Full Time Equivalent per credit institution per annum Discount factor: Distance from the policy frontier = 0.97 Cost of longer customer interactions || 2 397.51 – 3 596.27 || · 2 to 4 days extra per customer service staff (estimated as 20% of total industry workforce) · Discount factor: Distance from the policy frontier = 0.97 Recurring reporting requirements || 32.11-48.16 || 1 staff member per bank 2-3 days per year Discount factor not applied. || || 2 821.51 – 4 036.32 || One-off costs to public authorities Time-based costs || Developing standard usage profiles || 0.06 – 0.09 || 2 officials are involved Each official spends 10 to 15 days of his/her time on this activity Discounting factor not applied Transposing EU legislation into national law || 0.02 – 0.03 || 1 official involved Time spent estimated at 5 to 10 days on this activity Discount factor not applied || || 0.08 – 0.12 || Recurring costs to public authorities Time-based costs || Revising standard usage profiles || 0.27-0.55 || 2 officials per MS are involved Each official spends 5 to 10 days of his/her time on this activity Discounting factor not applied Monitoring compliance || 0.33 – 0.66 || 1 official involved 12 to 24 days year to monitor compliance (e.g. scanning websites of banks) · Discount factor not applied Reporting to EU || 0.05 – 0.08 || 1 official involved 2 to 3 days per official per year Discounting factor not applied Enforcement costs e.g. sweeps, investigations || 0.33 – 0.66 || 1 official involved 12 to 24 days per year Discounting factor not applied || || 0.99 – 1.95 || Table 6.T:
Introduce EU standardised forms for the provision of ex-ante information on
fees (price lists) – Option 7 Benefit per stakeholder and cost type || Benefit description || Euro (Millions) || Calculation basis Benefits to consumers || Benefit accrued from changes in switching behaviour || 438.65 || · Present value ('PV') of estimated incremental cost savings accrued to switchers from 2013 to 2022, discounted at 4%. · The impact on consumer switching behaviour is assumed as follows: 2013: +0% of total number of bank account holders; 2014-2022: a constant +0,15%. Amounts are expressed on a cumulative basis. Savings are calculated based on the assumption that switchers would accrue cost savings equal to a constant 20% of an EU yearly average cost of a bank account between 2013 and 2022 Cost per stakeholder and cost type || Cost description || Range in Euro (Millions) || Calculation basis One-off costs to credit institutions Time-based costs || Internal communication and training || 33.60 –58.79 || · 0.3 to 0.5 per person · All front office/ marketing employees will have to spend some time on familiarising themselves with new requirements – this is assumed to be 20% of industry workforce Industry inputs to develop an EU standard form || 0.66 – 1.0 || · 2 staff member per credit institution would be involved in this exercise · S/he will devote 2 to 3 days to this exercise · Discount factor – distance from policy frontier = 0.46 Time spent by the legal department to familiarise with legislation || 0.41 – 0.83 || · 1 staff member per credit institution would be involved in this exercise · S/he will devote 0.5 to 1 day each · Discount factor – distance from policy frontier = 0.46 Management time spent reviewing product and pricing strategy || 1.49 || · 3 members of management team per credit institution · 0.5 days per person · It is assumed that management wages are higher than average industry wages by 20% · Discount factor – distance from policy frontier = 0.46 Time spent by legal department to adapt contractual documentation || 0.91 – 1.82 || · 1 member of the legal team per bank · 1.5 to 1 day per person · Discount factor not applied as all banks would have to update contracts to include references to the standard price list which would now have a specific name under national law || || 37.07 – 63.92 || One-off costs to Credit institutions Acquisition costs || Cost of adapting marketing/ advertising promotional material || 107.53 – 179.19 || Unit cost per credit institution = range of EUR 30 000 – 50 000 Discount factor – distance from policy frontier = 0.46 Cost of updating/adapting IT applications to generate cost simulations || 3.58 – 7.17 || Unit cost per credit institution = range of EUR 1 000 – 2 000 Discount factor – distance from policy frontier = 0.46 Updating websites with new pricing information || 0.72 – 1.79 || Individual cost per credit institution ranging between UR 200 - 500 Discount factor: Distance from the policy frontier = 0.35 || || 111.82 – 188.15 || Recurring costs to Credit institutions Time-based costs || Additional staff costs generated by new compliance requirements || 184.57 || 10% of 1 Full Time Equivalent per credit institution per annum Discount factor: Distance from the policy frontier = 0.35 Recurring reporting requirements || 8.03-16.05 || 1 staff member per bank 0.5 to 1 day per year Discount factor not applied. || || 192.59 – 200.62 || Recurring costs to Credit institutions Acquisition costs || Printing costs – price lists || 32.30 - 96.89 || Unit cost = EUR 0.10 to 0.30 per print out Lists are made available in hard copy format to 10% of customers Discounting factor not applied as new price lists would need to be printed in accordance with standard format and a given name || || 32.30 - 96.89 || One-off costs to public authorities Time-based costs || Transposing EU legislation into national law || 0.01 – 0.02 || 1 official involved Time spent estimated at 10 to 15 days on this activity Discount factor: Distance from the policy frontier = 0.46 || || 0.01 – 0.02 || Recurring costs to public authorities Time-based costs || Monitoring compliance || 0.15 - 0.3 || 1 official involved 12 to 24 days per year to monitor compliance (e.g. scanning websites of banks) Discount factor: Distance from the policy frontier = 0.46 Recurring costs to public authorities Time-based costs || Reporting to EU || 0.03 - 0.04 || 1 official involved 2 to 3 days per official per year Discount factor: Distance from the policy frontier = 0.46 Enforcement costs e.g. sweeps, investigations || 0.15 - 0.3 || 1 official involved 12 to 24 days per year Discount factor: Distance from the policy frontier = 0.46 || 0.33 – 0.64 || Table 6.U:
Introduce an obligation for banks to provide ex-post information on the fees
incurred - Option 8 Benefit per stakeholder and cost type || Benefit description || Euro (Millions) || Calculation basis Benefits to consumers || Benefit accrued from changes in switching behaviour || 1 462.16 || Present value ('PV') of estimated incremental cost savings accrued to switchers from 2013 to 2022, discounted at 4%. The impact on consumer switching behaviour is assumed as follows: 2013: +0% of total number of bank account holders; 2014-2022: a constant +0.5%. Amounts are expressed on a cumulative basis. Savings are calculated based on the assumption that switchers would accrue cost savings equal to a constant 20% of an EU yearly average cost of a bank account between 2013 and 2022 No discount factor used as changes to potential switching rates are incremental in nature and therefore already take account of the current situation in Member States Benefits accrued from better account management || 2 702.57 || Net present value ('NPV') of estimated incremental cost savings accrued to consumers through better account management from 2013 to 2022, discounted at 4%. The impact on consumer switching behaviour is assumed as follows: 2013-2015: +10% of total number of bank account holders; and 30% from 2016-2022. Percentage savings figures represent an estimate of cumulative savings. Savings are calculated based on the assumption that consumers would accrue cost savings equal to a constant 15% of an EU yearly average cost of a bank account between 2013 and 2022 Discount factor used: 80% || || 4 164.73 || Cost per stakeholder and cost type || Cost description || Range in Euro (Millions) || Calculation basis One-off costs to credit institutions Time-based costs || Internal communication and training || 11.65- 20.39 || 0.3 to 0.5 per person All front office/ marketing employees will have to spend some time on familiarising themselves with new requirements – this is assumed to be 20% of industry workforce Input into the process of determining a list of most relevant fees || 0.76 - 1.26 || 2 staff members per bank would be involved in this exercise 3 to 5 days each Discount factor – distance from policy frontier = 0.35 Time spent by the legal department to familiarise with legislation || 0.32 – 0.63 || 1 staff member per bank would be involved in this exercise S/he will devote 1.5 to 1 day to this task Discount factor – distance from policy frontier = 0.35 Management time spent reviewing product and pricing strategy || 1.14 || 3 members of management team per credit institution 0.5 days per person It is assumed that management wages are higher than average industry wages by 20% Discount factor – distance from policy frontier = 0.35 Time spent by legal department to adapt contractual documentation || 0.91 – 1.82 || 1 member of the legal team per bank 0.5 to 1 day per person Discount factor not applied as all banks would have to update contracts to include references to the standard price list which would now have a specific name under national law || || 14.77 – 25.24 || One-off costs to Credit institutions Acquisition costs || Cost of updating/adapting IT applications to provide standard price lists || 81.74 – 136.23 || Unit cost per credit institution = range of EUR 30 000 – 50 000 Discount factor – distance from policy frontier = 0.35 || Cost of adapting marketing/advertising promotional material || 81.74-136.23 || Unit cost per credit institution = range of EUR 30 000 – 50 000 Discount factor – distance from policy frontier = 0.35 || Adapting format of account statements to include summary box or annex || 13.62 – 27.25 || Unit cost per credit institution = range of EUR 5 000 - 10 000 Discount factor – distance from policy frontier = 0.35 || Updating website with common fee terms || 0.54 – 1.36 || Unit cost per credit institution = range of EUR 200 – 500 Discount factor – distance from policy frontier = 0.35 || || 177.65 – 301.07 || Recurring costs to Credit institutions Time-based costs || Additional staff costs generated by new compliance requirements || 140.32 || 10% of 1 Full Time Equivalent per credit institution per annum Discount factor: Distance from the policy frontier = 0.35 || Recurring reporting requirements || 8.03-16.05 || 1 official involved Time spent estimated at 1 days on this activity Discount factor not applied Recurring costs to Credit institutions Acquisition costs || Disseminating fee information to consumers in standard form || 112.02-336.07 || Unit cost = Euro 0.10 to 0.30 per print out Lists are made available in hard copy format to 10% of customers [consider bank account holders] Discount factor: Distance from the policy frontier = 0.35 || || 260.37–492.45 || One-off costs to public authorities Time-based costs || Transposing EU legislation into national law || 0.03 – 0.05 || 1 official involved Time spent estimated at 10 to 15 days on this activity Discount factor not applied || Identifying and agreeing most common fees || 0.04 – 0.06 || 2 officials involved Time spent estimated at 20 to 30 days on this activity Discount factor: Distance from the policy frontier = 0.35 || || 0.07 – 0. 11 || Recurring costs to public authorities Time-based costs || Revising list of common fees || 0.10-0.19 || 2 officials are involved Time spent estimated at 5 to 10 days per year on this activity Discount factor: Distance from the policy frontier = 0.35 Monitoring compliance || 0.33-0.66 || 1 official involved 12 to 24 days per year to monitor compliance (e.g. scanning websites of banks) Discount factor not applied – as not a requirement under current situation Reporting to EU || 0.05-0.08 || 1 official involved 2 to 3 days per official per year Discounting factor not applied – as not a requirement under current situation Enforcement costs e.g. sweeps, investigations || 0.33-0.66 || 1 official involved 12 to 24 days per year to monitor compliance (e.g. scanning websites of banks) Discount factor not applied – as not a requirement under current situation || || 0.81–1.59 || Table 6.V: Introduce EU standardised forms
for the provision of ex-post information on fees - Option 9 Benefit per stakeholder and cost type || Benefit description || Euro (Millions) || Calculation basis Benefits to consumers || Benefit accrued from changes in switching behaviour || 292.43 || · Present value ('PV') of estimated incremental cost savings accrued to switchers from 2013 to 2022, discounted at 4%. · The impact on consumer switching behaviour is assumed as follows: 2013: +0% of total number of bank account holders; 2014-2022: a constant +0,1%. Amounts are expressed on a cumulative basis. · Savings are calculated based on the assumption that switchers would accrue cost savings equal to a constant 20% of an EU yearly average cost of a bank account between 2013 and 2022 · No discount factor used as changes to potential switching rates are incremental in nature and therefore already take account of the current situation in Member States. Benefits accrued from better account management || 954.68 || · Net present value ('NPV') of estimated incremental cost savings accrued to consumers through better account management from 2013 to 2022, discounted at 4%. · The impact on consumer switching behaviour is assumed as follows: 2013-2015: +2% of total number of bank account holders; 2016-2022: +5% of total number of bank account holders. Percentage savings figures represent an estimate of cumulative savings. · Savings are calculated based on the assumption that consumers would accrue cost savings equal to a constant 15% of an EU yearly average cost of a bank account between 2013 and 2022 · Discount factor used: 80% || || 1 247.11 || Cost per stakeholder and cost type || Cost description || Range from – to in Euro (Millions) || Calculation basis One-off costs to credit institutions Time-based costs || Internal communication and training || 26.77 – 46.84 || · 0.3 to 0.5 per person · All front office/ marketing employees will have to spend some time on familiarising themselves with new requirements – this is assumed to be 20% of industry workforce · Discount factor – distance from policy frontier = 0,80 Industry inputs to develop an EU standard form || 1.74 – 2.90 || · 2 staff member per credit institution would be involved in this exercise · S/he will devote 3 to 5 days to this exercise · 20% of credit institutions involved · Discount factor – distance from policy frontier = 0,80 Time spent by the legal department to familiarise with legislation || 0.72 – 1.45 || · 1 staff member per bank would be involved in this exercise · S/he will devote 0.5 to 1 day · Discount factor – distance from policy frontier = 0,80 Management time spent reviewing product and pricing strategy || 2.61 || · 3 members of management team per credit institution · 0.5 days per person · It is assumed that management wages are higher than average industry wages by 20% · Discount factor – distance from policy frontier = 0,80 Time spent by legal department to adapt contractual documentation || 0.91 – 1.82 || · 1 member of the legal team per bank · 0.5 to 1 day per person · Discount factor not applied as all banks would have to update contracts to include references to the standard price list which would now have a specific name under national law || || 32.75-55.62 || One-off costs to Credit institutions Acquisition costs || Cost of updating/adapting IT applications enable filtering of transactions, generate summary charges etc. || 312.96 - 625.93 || · Unit cost per credit institution = range of EUR 50 000 – 100 000 · Discount factor – distance from policy frontier = 0.80 || || 312.96 – 625.93 || Recurring costs to Credit institutions Time-based costs || Additional staff costs generated by new compliance requirements || 322.36 || · 10% of 1 Full Time Equivalent per credit institution per annum · Discount factor: Distance from the policy frontier = 0.80 Recurring reporting requirements || 8.03-16.05 || · 1 official involved · Time spent estimated at 0.5 to 1 days on this activity · Discount factor not applied || || 330.39-338.41 || Recurring costs to Credit institutions Acquisition costs || Disseminating fee information to consumers in standard EU form - assumed annually || 257.35-772.06 || · Unit cost = Euro 0.10 to 0.30 per print out · Lists are made available in hard copy format to 10% of customers [consider bank account holders] · Discount factor: Distance from the policy frontier = 0.80 || || 257.35-772.06 || One-off costs to public authorities Time-based costs || Transposing EU legislation into national law || 0.03 – 0.05 || · 1 official involved · Time spent estimated at 10 to 15 days on this activity · Discount factor not applied || || 0.03 – 0.05 || Recurring costs to public authorities Time-based costs || Monitoring compliance || 0.33-0.66 || · 2 officials are involved · Time spent estimated at 12 to 24 days per year on this activity · Discount factor not applied Reporting to EU || 0.05-0.08 || · 1 official involved · 2 to 3 days per official per month to monitor compliance (e.g. scanning websites of banks) · Discount factor not applied Enforcement costs e.g. sweeps, investigations || 0.33-0.66 || · 1 official involved · 12 to 24 days per year · Discounting factor not applied – as not a requirement under current situation || || 0.71-1.40 || Payment account switching Table 6.W Option 2: Ensure that the switching services follow the Common Principles on bank account switching Benefit per stakeholder and cost type || Benefit description || Euro (Millions) || Calculation basis Benefit accrued from changes in switching behaviour || A: existing Common Principles || 1 462.16 || · Present value ('PV') of estimated incremental cost savings accrued to switchers from 2013 to 2022, discounted at 4%. · The impact on consumer switching behaviour is assumed as follows: 2013: +0% of total number of bank account holders; 2014-2022: a constant +0.50%. Amounts are expressed on a cumulative basis. · Savings are calculated based on the assumption that switchers would accrue cost savings equal to a constant 20% of an EU yearly average cost of a bank account between 2013 and 2022 Cost per stakeholder and cost type || || Range in Euro (Millions) || Calculation basis One-Off costs to credit institutions Time-based costs || Time spent by legal department to familiarise with new legislative requirements || 0.14 – 0.28 || They will devote 0.5 to 1 day per institution Daily average labour rate for credit institutions calculated as = EUR 232 The number of credit institutions = 7 855 Applied weighting factor = 0.15 Cost of adapting business processes to facilitate switching in compliance with CP || 1.39- 1.95 || 1 staff members per bank would be involved in this exercise They will devote 5 to 7 days each The number of credit institutions = 7 855 Applied weighting factor = 0.15 Initial staff training on switching process and dealing with customer enquiries || 9- 18 || · They will devote 0.5 to 1 day per staff directly dealing with customers (20% of total staff of credit institutions) · Applied weighting factor = 0.15 || || || One-Off costs to Credit institutions Acquisition costs || Cost of adapting IT systems to facilitate switching in compliance with CP || 6.01- 12.03 || Unit cost per credit institution = range of Euro 5 000 – 10 000 The number of credit institutions = 7.855 Applied weighting factor = 0.15 Updating website to include information on switching process || 0.24- 0.60 || Unit cost per credit institution = range of Euro 200 - 500 Applied to all credit institutions = 7 855 Applied weighting factor = 0.15 || || || Recurring costs to Credit institutions Time-based costs || Staff time involved in implementing switching || 18-36 || Staff dealing directly with consumers will devote additional 1 to 2 days a year Daily average labour rate for credit institutions calculated as = EUR 232 Applied weighting factor = 0.15 Cost of internal compliance - additional staff costs of compliance department || 7 || Yearly costs of 0.1 staff per credit institution Daily average labour rate for credit institutions calculated as = EUR 232, year assumed to have 252 working days Applied weighting factor = 0.15 Submitting compliance statement to regulatory body || 0.9-1.8 || · They will devote 0.5 to 1 day staff cost per credit institution || || || One-Off costs to public authorities Time-based costs || Transposing EU legislation into national law - developing legislation || 1.26 || Assumes 1500 hours' work at average wage rate (EUR 31.5) per Member State Awareness raising campaigns || 1.89 || Average cost per Member States is assumed to be EUR 70.000 || || || Recurring costs to public authorities Time-based costs || Monitoring compliance, Reporting and enforcement costs || 2.13 || Assumes 2500 hours' work at average wage rate (EUR 31.5) per Member State Table 6.X Option 3A: Add provisions to improve the existing Common Principles on bank account switching at domestic level Benefit per stakeholder and cost type || Benefit description || Euro (Millions) || Calculation basis || Benefit accrued from changes in switching behaviour || 1 679.50 || · Present value ('PV') of estimated incremental cost savings accrued to switchers from 2013 to 2022, discounted at 4%. · The impact on consumer switching behaviour is assumed as follows: 2013: +0% of total number of bank account holders; 2014-2022: a constant +0,75%. Amounts are expressed on a cumulative basis. Savings are calculated based on the assumption that switchers would accrue cost savings equal to a constant 20% of an EU yearly average cost of a bank account between 2013 and 2022 Cost per stakeholder and cost type || Cost description || Range in Euro (Millions) || Calculation basis One-Off costs to credit institutions Time-based costs || Time spent by legal department to familiarise with new legislative requirements || 0.31- 0.62 || They will devote 0.5 to 1 day per institution Daily average labour rate for credit institutions calculated as = EUR 232 The number of credit institutions = 7 855 Applied weighting factor = 0.35 Cost of adapting business processes to facilitate switching in compliance with the enhanced CP || 3.1- 4.34 || 1 staff members per bank would be involved in this exercise Time devoted will be 5 to 7 days The number of credit institutions = 7 855 Applied weighting factor = 0.35 Initial staff training on switching process and dealing with customer enquiries || 20.02-40.05 || · They will devote 0.5 to 1 day per staff directly dealing with customers (20% of total staff of credit institutions) · Applied weighting factor = 0.35 || || || One-Off costs to Credit institutions Acquisition costs || Updating website to include information on switching process || 0.53- 1.34 || Unit cost per credit institution = range of Euro 200 - 500 Number of credit institutions = 7 855 Applied weighting factor = 0.35 || Cost of adapting IT systems to facilitate switching in compliance with this option || 13.38- 26.75 || Unit cost per credit institution = range of EUR 5 000 – 10 000 Number of credit institutions = 7 855 Applied weighting factor = 0.35 || || || Recurring costs to Credit institutions Time-based costs || Staff time involved in implementing switching || 80.1-120.1 || Staff dealing directly with consumers will devote additional 2 to 3 days a year Daily average labour rate for credit institutions calculated as = EUR 232 Applied weighting factor = 0.35 Cost of internal compliance - additional staff costs of compliance department || 15.6 || Yearly costs of 0.1 staff per credit institution Daily average labour rate for credit institutions calculated as = EUR 232, year assumed to have 252 working days Applied weighting factor = 0.35 Submitting compliance statement to regulatory body || 0.9-1.8 || · They will devote 0.5 to 1 day staff cost per credit institution · Daily average labour rate for credit institutions calculated as = EUR 232, year assumed to have 252 working days || || || One-Off costs to public authorities Time-based costs || Transposing EU legislation into national law - developing legislation || 1.26 || Assumes 1500 hours' work at average wage rate (EUR 31.5) per Member State Awareness raising campaigns || 1.89 || Average cost per Member States is assumed to be EUR 70 000 || || || Recurring costs to public authorities Time-based costs || Monitoring compliance, Reporting and enforcement costs || 2.13 || Assumes 2500 hours' work at average wage rate (EUR 31.5) per Member State Table 6.Y Option 3B: Broaden the scope of the improved Common Principles to EU-wide cross-border switching Benefit per stakeholder and cost type || Benefit description || EUR (Millions) || Calculation basis Benefits to consumers || Benefit accrued from changes in switching behaviour || 3 655.41 || · Present value ('PV') of estimated incremental cost savings accrued to switchers from 2013 to 2022, discounted at 4%. · The impact on consumer switching behaviour is assumed as follows: 2013: +0% of total number of bank account holders; 2014-2022: a constant +1%. Amounts are expressed on a cumulative basis. · Savings are calculated based on the assumption that switchers would accrue cost savings equal to a constant 20% of an EU yearly average cost of a bank account between 2013 and 2022 Cost per stakeholder and cost type || Cost description || Range in EUR (Millions) || Calculation basis One-Off costs to credit institutions Time-based costs || Time spent by legal department to familiarise with new legislative requirements || 0.52- 1.05 || · 1 staff member per bank would be involved in this exercise · Time spent will be 0.5 to 1 day · Daily average labour rate for credit institutions calculated as = EUR 232 · Applied weighting factor = 0.58 Cost of adapting business processes to facilitate switching in compliance with the measures of this option || 9.1- 12.73 || · 1 staff member per bank would be involved in this exercise · Time devoted will be 5 to 7 days · The number of credit institutions = 7 855 · Applied weighting factor = 0.58 || Cost of adapting business processes to facilitate switching in compliance with the measures of this option || 33.99-67.97 || · They will devote 0.5 to 1 day per staff directly dealing with customers (20% of total staff of credit institutions) · Applied weighting factor = 0.58 || || || One-Off costs to Credit institutions Acquisition costs || Updating website to include information on switching process || 0.91 -2.27 || Unit cost per credit institution = range of EUR 200- 500 Applied to all credit institutions = 7 855 Applied weighting factor = 0.58 Cost of adapting IT systems to facilitate switching in compliance with this option || 22.70- 45.41 || Unit cost per credit institution = range of EUR 5 000 – 10 000 The number of credit institutions = 7 855 Applied weighting factor = 0.58 || || || Recurring costs to Credit institutions Time-based costs || Staff time involved in implementing switching || 203.-271.88 || Daily average labour rate for credit institutions calculated as = EUR 232 Applied weighting factor = 0.58 Cost of internal compliance - additional staff costs of compliance department || 26.5 || Yearly costs of 0.1 staff per credit institution Daily average labour rate for credit institutions calculated as = EUR 232, year assumed to have 252 working days Applied weighting factor = 0.58. Submitting compliance statement to regulatory body || 0.9-1.8 || They will devote 0.5 to 1 day staff cost per credit institution Daily average labour rate for credit institutions calculated as = EUR 232 || || || One-Off costs to public authorities Time-based costs || Transposing EU legislation into national law - developing legislation || 1.26 || Assumes 1500 hours' work at average wage rate (EUR 31.5) per Member State Awareness raising campaigns || 1.89 || Average cost per Member States is assumed to be EUR 70 000 || || || Recurring costs to public authorities Time-based costs || Monitoring compliance, Reporting and enforcement costs || 2.13 || Assumes 2 500 hours' work at average wage rate (EUR 31.5) per Member State Table 6.Z Option 4A: Introduce a domestic automatic redirection service Benefit per stakeholder and cost type || Benefit description || EUR (Millions) || Calculation basis Benefits to consumers || Benefit accrued from changes in switching behaviour || 5 848.65 || · Present value ('PV') of estimated incremental cost savings accrued to switchers from 2013 to 2022, discounted at 4%. · The impact on consumer switching behaviour is assumed as follows: 2013: +0% of total number of bank account holders; 2014-2022: a constant +1%. Amounts are expressed on a cumulative basis. Savings are calculated based on the assumption that switchers would accrue cost savings equal to a constant 20% of an EU yearly average cost of a bank account between 2013 and 2022 || Benefits resulting from direct costs savings || 1 284.2 || · Direct costs savings for postage EUR 83 million: = average number of direct monthly debits multiplied by the number of potentially switched bank accounts multiplied by EUR 0.5 postage fees; this number is multiplied by 0.9 to account for the fact that those consumers who might wish to switch cross-border (estimated as 10% of the switchers) will not incur these benefits · Costs savings resulting from a reduction in errors in transfer of recurrent payments = EUR 140 million: = average number of direct monthly debits multiplied by 8.5% (UK estimate of number of recurrent payment transfers gone wrong[680]) multiplied by EUR 10 (estimate for an average late payment fee or potential overdraft fees resulting from direct debiting to wrong account[681]). This number is multiplied by 0.9 to account for the fact that those consumers who might wish to switch cross-border (estimated as 10% of the switchers) will not incur these benefits. · Costs savings in terms of time value = EUR 1 061 million: = number of switchers[682] multiplied by 1h multiplied by the average hourly wage (1/7 of the average daily rate EUR 232). The assumption of 1 hour[683] is for this calculation as the consumer not only saves time during the switching process, but also time that would be needed to sort out recurrent payments then went wrong. This number is multiplied by 0.9 to account for the fact that those consumers who might wish to switch cross-border (estimated as 10% of the switchers) will not incur these benefits. Cost per stakeholder and cost type || Cost description || Range in EUR (Millions) || Calculation basis One-Off costs to credit institutions || Overall cost of introduction of a redirection service || 500 – 22 734 || · Based on the costs for industry of the re-routing system introduced in 2004 in the Netherlands (EUR 18 million) and the cost estimate for the redirection system that is being developed in the United Kingdom (estimated cost ranges between GBP 650-850 million) · This range was determined by: 1. Identifying a price range for the costs per credit institution calculated as costs of introduction of such service in the Member States were such costs/estimates are available (Netherlands, United Kingdom ) divided by the number of existent credit institution in the respective Member State 2. Then multiplying these range values with the total number of credit institutions in the EU (7 992[684]) -> the resulting range being between EUR 0.5-23 million per credit institution and to EUR 500-22 734 million in total. · The overall average cost of implementation of this option = EUR 11 622 million. || || || Recurring costs to Credit institutions || Not quantified || || || || || Table 6.AA Option 4B: Introduce an EU-wide automatic redirection service Benefit per stakeholder and cost type || Benefit description || EUR (Millions) || Calculation basis Benefits to consumers || Benefit accrued from changes in switching behaviour || 6 579.73 || · Present value ('PV') of estimated incremental cost savings accrued to switchers from 2013 to 2022, discounted at 4%. · The impact on consumer switching behaviour is assumed as follows: 2013: +0% of total number of bank account holders; 2014-2022: a constant +1%. Amounts are expressed on a cumulative basis. · Savings are calculated based on the assumption that switchers would accrue cost savings equal to a constant 20% of an EU yearly average cost of a bank account between 2013 and 2022 || Benefits resulting from direct costs savings || 1 426.9 || · Direct costs savings for postage EUR 92 million: = average number of direct monthly debits multiplied by the number of potentially switched bank accounts multiplied by EUR 0.5 postage fees · Costs savings resulting from a reduction in errors in transfer of recurrent payments = EUR 156 million: = average number of direct monthly debits multiplied by 8.5% (UK estimate of number of recurrent payment transfers gone wrong[685]) multiplied by EUR 10 (estimate for an average late payment fee or potential overdraft fees resulting from direct debiting to wrong account[686]). · Costs savings in terms of time value = EUR 1 179 million: = number of switchers[687] multiplied by 1h multiplied by the average hourly wage (1/7 of the average daily rate EUR 232). The assumption of 1 hour[688] is for this calculation as the consumer not only saves time during the switching process, but also time that would be needed to sort out recurrent payments then went wrong. Cost per stakeholder and cost type || Cost description || Range in EUR (Millions) || Calculation basis One-Off costs to credit institutions || Overall cost of introduction of a redirection service || 500 – 22 734 || · Based on the costs for industry of the re-routing system introduced in 2004 in the Netherlands (EUR 18 million) and the cost estimate for the redirection system that is being developed in the United Kingdom (estimated cost ranges between GBP 650-850 million) · This range was determined by: 1. Identifying a price range for the costs per credit institution calculated as costs of introduction of such service in the Member States were such costs/estimates are available (Netherlands, United Kingdom ) divided by the number of existent credit institution in the respective Member State 2. Then multiplying these range values with the total number of credit institutions in the EU (7 992[689]) -> the resulting range being between EUR 0.5-23 million per credit institution and to EUR 500-22,734 million in total. · The overall average cost of implementation of this option = EUR 11 622 million. || || || Recurring costs to Credit institutions || Not quantified || || || || || Table 6.BB Option 5A: Domestic payment account portability Benefit per stakeholder and cost type || Benefit description || EUR (Millions) || Calculation basis Benefits to consumers || Benefit accrued from changes in switching behaviour || 8 772.98 || · Present value ('PV') of estimated incremental cost savings accrued to switchers from 2013 to 2022, discounted at 4%. · The impact on consumer switching behaviour is assumed as follows: 2013: +0% of total number of bank account holders; 2014-2022: a constant +1%. Amounts are expressed on a cumulative basis. · Savings are calculated based on the assumption that switchers would accrue cost savings equal to a constant 20% of an EU yearly average cost of a bank account between 2013 and 2022 || Benefits resulting from direct costs savings || 1 284.2 || · Direct costs savings for postage EUR 83 million: = average number of direct monthly debits multiplied by the number of potentially switched bank accounts multiplied by EUR 0.5 postage fees; this number is multiplied by 0.9 to account for the fact that those consumers who might wish to switch cross-border (estimated as 10% of the switchers) will not incur these benefits · Costs savings resulting from a reduction in errors in transfer of recurrent payments = EUR 140 million: = average number of direct monthly debits multiplied by 8.5% (UK estimate of number of recurrent payment transfers gone wrong[690]) multiplied by EUR 10 (estimate for an average late payment fee or potential overdraft fees resulting from direct debiting to wrong account[691]). This number is multiplied by 0.9 to account for the fact that those consumers who might wish to switch cross-border (estimated as 10% of the switchers) will not incur these benefits. · Costs savings in terms of time value = EUR 1 061 million: = number of switchers[692] multiplied by 1h multiplied by the average hourly wage (1/7 of the average daily rate EUR 232). The assumption of 1 hour[693] is for this calculation as the consumer not only saves time during the switching process, but also time that would be needed to sort out recurrent payments then went wrong. This number is multiplied by 0.9 to account for the fact that those consumers who might wish to switch cross-border (estimated as 10% of the switchers) will not incur these benefits. Cost per stakeholder and cost type || Cost description || Range in EUR (Millions) || Calculation basis One-Off costs to credit institutions || Overall cost of introduction of a redirection service || 14 700 || · This figure has been estimated by a study "Customer Mobility in Relation to Bank Accounts" conducted by BearingPoint GmbH in 2007, (p. 48.) · It seems to be consistent with an estimation quoted by a Dutch bank in the Expert Group, according to which in the Netherlands the number portability would cost, only for the banks, EUR 300-500 million as well as with the Dutch Banking Association who estimated the number portability to cost EUR 260-510 millions. || || || Recurring costs to Credit institutions || Not quantified || || || || || One-Off costs to public authorities Time-based costs || Transposing EU legislation into national law - developing legislation || 1.26 || · Assumes 1 500 hours' work at average wage rate (EUR 31.5) per Member State || Awareness raising campaigns || 1.89 || · Average cost per Member States is assumed to be EUR 70 000 || || || Recurring costs to public authorities Time-based costs || Monitoring compliance, Reporting and enforcement costs || 2.13 || · Assumes 2 500 hours' work at average wage rate (EUR 31.5) per Member State Table 6.CC Option 5B: EU payment account portability Benefit per stakeholder and cost type || Benefit description || EUR (Millions) || Calculation basis Benefits to consumers || Benefit accrued from changes in switching behaviour || 8 772.98 || · Present value ('PV') of estimated incremental cost savings accrued to switchers from 2013 to 2022, discounted at 4%. · The impact on consumer switching behaviour is assumed as follows: 2013: +0% of total number of bank account holders; 2014-2022: a constant +1%. Amounts are expressed on a cumulative basis. · Savings are calculated based on the assumption that switchers would accrue cost savings equal to a constant 20% of an EU yearly average cost of a bank account between 2013 and 2022 || Benefits resulting from direct costs savings || 1 426.9 || · Direct costs savings for postage EUR 92 million: = average number of direct monthly debits multiplied by the number of potentially switched bank accounts multiplied by EUR 0.5 postage fees · Costs savings resulting from a reduction in errors in transfer of recurrent payments = EUR 156 million: = average number of direct monthly debits multiplied by 8.5% (UK estimate of number of recurrent payment transfers gone wrong[694]) multiplied by EUR 10 (estimate for an average late payment fee or potential overdraft fees resulting from direct debiting to wrong account[695]). · Costs savings in terms of time value = EUR 1 179 million: = number of switchers[696] multiplied by 1h multiplied by the average hourly wage (1/7 of the average daily rate EUR 232). The assumption of 1 hour[697] is for this calculation as the consumer not only saves time during the switching process, but also time that would be needed to sort out recurrent payments then went wrong. Cost per stakeholder and cost type || Cost description || Range in EUR (Millions) || Calculation basis One-Off costs to credit institutions || Overall cost of introduction of a redirection service || 14 700 || · This figure has been estimated by a study "Customer Mobility in Relation to Bank Accounts" conducted by BearingPoint GmbH in 2007, (p. 48.) · It seems to be consistent with an estimation quoted by a Dutch bank in the Expert Group, according to which in the Netherlands the number portability would cost, only for the banks, EUR 300-500 million as well as with the Dutch Banking Association who estimated the number portability to cost EUR 260-510 millions. || || || Recurring costs to credit institutions || Not quantified || || || || || One-Off costs to public authorities Time-based costs || Transposing EU legislation into national law - developing legislation || 1.26 || Assumes 1 500 hours' work at average wage rate (EUR 31.5) per Member State || Awareness raising campaign || 1.89 || Average cost per Member States is assumed to be EUR 70 000 || || || Recurring costs to public authorities Time-based costs || Monitoring compliance, Reporting and enforcement costs || 2.13 || Assumes 2 500 hours' work at average wage rate (EUR 31.5) per Member State Administrative burden Administrative burden is calculated for the
package of preferred options set out in Section 8.1, 'Cumulative impacts and
impacts on stakeholders'. Our analysis in Section 8.2.4, 'Administrative
burden' indicates that the preferred set of options in the area of access is
expected to generate only a limited amount of administrative burden. However
administrative burden is expected to arise from the preferred options in the
areas of ease of comparison of bank fees and
requirements covering presentation and payment account switching. Given that the set of preferred options
covering presentation requirements for fees and switching inherently contain
significant information requirements, particularly for credit institutions, it
was necessary to quantify administrative burden as part of this impact
assessment. Our assessment indicates that administrative
costs generated by the package of preferred options would not be incurred by
credit institutions or Member States in the absence of legislation. As a result
cost items that are administrative costs in nature are allocated in full to
administrative burden. The measurement of administrative burden is
derived from the quantification of costs in the study 'Quantification of the
economic impacts of EU action to improve fee transparency, comparability and
mobility in the internal market for bank personal current accounts'. Thus
the computation of burdens on a cumulative basis results from amounts derived
for compliance costs for individual options. Further details on the methodology
used to compute administrative burden is summarised below: 1. Identify administrative
costs within overall costs of compliance: ·
The categories and items of cost incurred by
credit institutions, comparison website operators and Member States in meeting
legal obligations as a result of the package of preferred options are provided
in the table below: Table 6.DD Types of required action || Cost items description (CI – Credit institution; MS – Member States; WO – Comparison website operators) Familiarising with the information obligation: || – Time spent by legal department to familiarise with new legislative requirements (CI) Retrieving relevant information from existing data || – Cost of updating IT systems to enable filtering of transactions, generate summary charges, et c (CI) Adjusting existing data || – Cost of adapting IT systems with list of standard fees (CI) – Time spent by legal department to adapt contractual information (CI) – Updating website with new pricing information (CI) Designing information material || – Adapting format of account statements to include summary box or annex (CI) – Cost of adapting marketing/advertising/promotional material (CI) – Revising list of common fees (MS) Filling forms || – Cost of internal compliance – additional staff costs of compliance department (CI) Holding meetings || – Industry inputs/support to the development of a standard price list with most common fees (CI) – Identifying list of most common fees (MS) – Setting up an accreditation system (MS) Inspecting and checking || – Meeting audit requirements (WO) – Monitoring compliance (MS) – Performing audits - website operators (MS) – Regular monitoring of websites (MS) Submitting information to the relevant authority || – Cost of obtaining accreditation (WO) – Submitting compliance statement/price lists to regulatory body (CI) – Cost of printing price lists (CI) – Disseminating fee information to consumers in standard form (CI) – Reporting to the EU (MS) Buying equipment & supplies || – Initial investments to meet requirement of accreditation system (WO) Other || – Awareness raising campaigns (MS) – Enforcement (MS) 2. Determine the basis for
calculation of administrative burden ·
Administrative costs are calculated in
compliance with the EU Standard Cost Model. As a result all time-based costs
are expressed in terms of the following formula: tariff * time * population (n°
of entities impacted). In some cases, costs of acquisition for services
directly linked to work required to meet legal obligations is computed using an
estimated cost of acquisition * population. ·
A discount factor was applied to the costs
derived using the formula to reflect the incremental nature of costs generated
by EU action. The discount factor reflects the distance between the current
regulatory and market baseline within Member States and the EU proposals
contained in the set of preferred options. For further details on the discount
factor used refer to point 4 below. ·
Unless otherwise specified the same assumptions
were used in deriving the amounts underlying administrative burden as in the
quantification of costs as described in section "Ease of comparison of
bank fees, requirements covering presentation and payment account
switching" above. ·
A detailed description of the calculation basis
for each item of administrative burden is provided in table 6.EE below. 3. Eliminate double counting
of administrative costs relevant to more than one preferred option within the
package ·
Administrative burden for the package of preferred
options is calculated based on the costs determined on an individual option
basis, for relevant administrative costs in point 1 above. ·
Items of administrative costs that are generated
by a single option within the package: The calculation basis used to appear
only in one preferred option within the package, the same calculation basis is
used to derive administrative burden as that used to quantify the item of cost
in the option ·
Items of administrative costs incurred in more
than one preferred option within the package: In none of these cases (relevant
to time-based costs), was it considered appropriate to cumulate the time
allocation attributed to each option to derive total time for the action on a
cumulative basis. As a result the amount corresponding to the highest time
based effort assessed for the preferred options on an individual basis was
applied to avoid overstating administrative costs common to more than one
option. 4. Determine an appropriate
discount factor to apply to administrative costs on a cumulative basis ·
The use of a discount factor to reflect the
incremental nature of costs derived from the proposed EU action with respect to
the regulatory and market baseline within Member States is part of the
methodology used in the study 'Quantification of the
economic impacts of EU action to improve fee transparency, comparability and
mobility in the internal market for bank personal current accounts' ·
Items of administrative costs that are generated
by a single option within the package: The same discount factor as the one
applied to the relevant option was used. As in the quantitative assessment
performed for options on an individual basis, discount factors are only applied
to costs items where relevant. The same approach was adopted in the calculation
of administrative costs. ·
Items of administrative costs incurred in more
than one preferred option within the package: A discount factor of 0.5[698] is applied to amounts of
administrative costs computed using the formulae set out in point 1. This is a
weighted average discount factor computed for the preferred package of options
based on the calculation used to derive discount factors determined on a per
option basis. Table: 6.EE:
Administrative burden per stakeholder group and per cost item Preferred options reference || Cost description || Range from – to in Euro (Millions) || Calculation basis Credit institutions – One off costs Bank fees option 2 || Input into the process of determining a list of most relevant fees || 0.77 – 1.28 || · 2 staff members per bank would be involved in this exercise · They will devote 3 to 5 days each · Not all credit institutions across the EU would contribute to this exercise – it is assumed that 20% ( of the total of 7.855) credit institutions, would contribute to this process · Discount factor – distance from policy frontier = 0.35 Bank fees options 2, 8 Payment account switching option 3b || Time spent by the legal department to familiarise with legislation || 0.91 – 1.82 || · 1 staff member per bank would be involved in this exercise · Time spent 1 to 2 days · Discount factor – distance from policy frontier = 0. 5 Bank fees options 2, 8 || Time spent by legal department to adapt contractual documentation || 0.91 – 1.82 || · 1 member of the legal team per bank · 0.5 to 1 day per person · Discount factor not applied as all banks would have to update contracts to include references to the standard price list which would now have a specific name under national law Bank fees options 2, 8 || Cost of updating/adapting IT applications to provide standard price lists || 117.82 – 196.37 || – Unit cost per credit institution = range of EUR 30 000 – 50 000 · Discount factor – distance from policy frontier = 0.5 Bank fees options 2, 8 || Cost of adapting marketing/advertising promotional material || 117.82 – 196.37 || Unit cost per credit institution = range of EUR 30 000 – 50 000 · Discount factor – distance from policy frontier = 0.5 Bank fees option 8 || Adapting format of account statements to include summary box or annex || 13.62 – 27.25 || · Unit cost per credit institution = range of EUR 5 000 - 10 000 · Discount factor – distance from policy frontier = 0.35 Bank fees options 2, 8 Payment account switching option 3b || Updating website with common fee terms/pricing information || 0.79 – 1.96 || · Unit cost per credit institution = range of EUR 200 – 500 · Discount factor – distance from policy frontier = 0. 5 || || 253.55 – 428.69 || Credit institutions – Recurring costs Bank fees option 2 || Costs of printing price lists || 32.30- 96.89 || · Unit cost = Euro 0.10 to 0.30 per print out · Lists are made available in hard copy format to 10% of customers [consider bank account holders] · Discounting factor not applied as new price lists would need to be printed in accordance with standard format and a given name Bank fees options 2, 8 Payment account switching option 3b || Additional staff costs generated by new compliance requirements || 202.27 || · 10% of 1 Full Time Equivalent per credit institution per annum · Discount factor: Distance from the policy frontier = 0.5 Bank fees options 2, 8 Payment account switching option 3b || Recurring reporting requirements || 8.03 – 16.05 || · 1 person per bank · 1 day per year · No discount factor applied. Bank fees options 8 || Disseminating fee information to consumers in standard EU form - assumed annually || 112.02 – 336.07 || · Unit cost = Euro 0.10 to 0.30 per print out · Lists are made available in hard copy to customers [consider bank account holders] · Discount factor: Distance from the policy frontier = 0.35 || || 354.61 – 651.28 || Comparison website operators – One off costs Bank fees option 4b || Cost of obtaining accreditation || 0.05- 0.11 || · Assumed 2 websites per MS on average · Each website operator will incur EUR 1 000 – EUR 2 000 on obtaining accreditation per year No Discount factor applied. Bank fees option 4b || Initial investments to meet requirements of accreditation system e.g. setting up a complaints handling mechanism ting up internal process || 0.27- 0.54 || · Assumed 2 websites per MS on average · Each website operator will spend EUR 5 000 – EUR 10 000 No Discount factor applied. || || 0.32 – 0.65 || Comparison website operators – Recurring costs Bank fees option 4b || Meeting requirements - annual audit || 4.77 – 9.53 || · Each website operator will incur EUR 10 000 – EUR 20 000 · No Discount factor applied. || || 4.77 – 9.53 || Member States – One off costs Bank fees options 2, 8 || Identifying and agreeing 20 most common fees || 0.06 – 0.09 || · 2 officials are involved · Each official spends 20 to 30 days per year on this activity · Discount factor: Distance from the policy frontier = 0.5 Bank fees options 4b || Setting up an accreditation system || 0.36 - 0.66 || · 2 officials involved · Each official will spend 15 to 20 days on this activity · No Discount factor applied. · Additional acquisition costs within a range of EUR 10 000 – EUR 20 000 Payment account switching option 3b || Awareness raising campaigns (introductory) || 1.89 || · Average cost per Member State assumed to be EUR 70 000 || || 2.32 – 2.65 || Member States – Recurring costs Bank fees options 2, 8 || Revising list of common fees || 0.14- 0.27 || · 2 officials are involved · Time spent estimated at 5 to 10 days per year on this activity · Discount factor: Distance from the policy frontier = 0.5 Bank fees options 2, 8 Payment account switching option 3b || Monitoring compliance || 18.76 || · Assumes 2500 hours' work at an average wage rate (EUR 31.5) per Member State · No discount factor applied. Bank fees options 2, 8 || Reporting to EU || 0.05 - 0.08 || · 1 official involved · 2 to 3 days per official per year · Discounting factor not applied – as not a requirement under current situation Bank fees options 2, 8 || Enforcement costs || 0.33 – 0.66 || · 1 official involved · 12 to 24 days per year · No discount factor applied. Bank fees options 4b || Quarterly audits || 0.44- 0.66 || · 1 official involved · Each official will spend 16 to 24 days on this activity · No Discount factor applied. Bank fees options 4b || Regular monitoring of sites || 0.66 – 1.32 || · 1 official involved · Each official will spend 24 to 48 days on this activity · No Discount factor applied. Bank fees options 4b || Awareness raising campaigns || 2.38 - 4.77 || · Each MS spends EUR 10 000 – EUR 20 000 on promotional activities/ information campaigns per year · No Discount factor applied. || || 22.77 – 26.52 || [1] The European Platform against Poverty
and Social Exclusion: A European framework for social and territorial cohesion
[COM(2010) 758], and accompanying document [SEC(2010)1654]. [2] Article 4(14) of Directive 2007/64/EC
describes a payment account as "an
account held in the name of one or more payment service users, which is used
for the execution of payment transactions". [3] Commission Recommendation 2011/442/EU
of 18 July 2011 on access to a basic payment account [OJ L 190, 21.7.2011, p.
87–91]. It defines a 'payment account' as "an account held in the name
of one consumer which is used for the execution of payment transactions". [4] http://europa.eu/rapid/pressReleasesAction.do?reference=MEMO/12/661 [5] "Single Market Act II - Together for new
growth", COM(2012) 573 of 3 October 2012, page 16. [6] European Parliament Resolution
2010/2278(INI). [7] European Parliament Resolution
2012/2055(INI). [8] Opinion on the White Paper on
Financial Services Policy 2005-2010, OJ
C309, 16 December 2006; Opinion on the Green Paper on Retail
Financial Services in the Single Market,
OJ C151, 17 June 2008; Opinion on Socially responsible
financial products, C21, p. 33, 21 January 2011; Opinion
on the Communication Towards a Single Market Act – For a highly competitive
social market economy – 50 proposals for improving our work, business and
exchanges with one another, OJ C132, p. 47, 3 May 2011; Opinion on
Financial education and responsible consumption of financial products,
C318, p. 24, 29 October 2011. [9] Opinion on the Communication
'Towards a Single Market Act – For a highly competitive social market economy –
50 proposals for improving our work, business and exchanges with one another',
OJ C132, 3 May 2011, point 2.2.1. [10] Consultations on the report of the Expert Group on
Customer Mobility (2007), on financial inclusion (2009), on access to a basic payment account (2010). See Annex I for details. [11] Public Consultation on Bank Accounts
(20 March to 12 June 2012). See Consultation document, Summary of
responses and stakeholders' responses, published at http://ec.europa.eu/internal_market/finservices-retail/policy_en.htm#consultation and http://ec.europa.eu/consumers/consultations/bank_accounts_consultation-2012_03_20_en.htm [12] Replies from public authorities
include: Austria, Belgium, Czech Republic, Estonia, Spain, France, Finland,
Hungary, Ireland, Lithuania, Latvia, Netherlands, Poland, United Kingdom as
well as Norway. [13] Summary of responses to the public
consultation on financial inclusion: ensuring access to a basic bank account,
14 September 2009. http://ec.europa.eu/internal_market/finservices-retail/docs/inclusion/consultation_summary_en.pdf
[14] Ibid. [15] The Common Principles, developed by the
European banking industry in 2008, define a model switching aiming at such a
facilitation of switching by clearly defining the process of switching
(deadlines, tasks of the two banks involved, limiting of certain cost to
consumer) and providing for adequate information and assistance to the consumer
by bank staff.; The Common Principles for Bank Account Switching", http://www.eubic.org/Position%20papers/2008.12.01%20Common%20Principles.pdf
[16] Estimate by Commission services based
on the number of EU citizens above the age of 15 with a payment account.
Source: Measuring Financial Inclusion, The Global Findex Database, World
Bank, April 2012 and Eurostat. [17] Similar conclusions are reached in Measuring
Financial Inclusion, The Global Findex Database, World Bank, April 2012,
p. 5. [18] In most EU Member States, the size of
national financial sectors oscillates between 2 and 4 times the domestic GDP;
however, in some of them it exceeds by far the country's GDP, e.g. 22 times in
Luxembourg and more than 6 times in Malta, Ireland and Cyprus. [19] Special Eurobarometer on Retail
Financial Services, European Commission, February 2012, P31, http://ec.europa.eu/internal_market/finservices-retail/policy_en.htm
[20] Ibid. [21] Ibid. [22] Commission Recommendation 2011/442/EU
(see footnote 3). [23] Commission Recommendation 2011/442/EU
(see footnote 3). [24] Commission Staff Working Document: National
measures and practices as regards access to basic payment accounts - Follow-up
to the Recommendation of 18 July 2011 on access to a basic payment account,
22.08.2012 http://ec.europa.eu/internal_market/finservices-retail/docs/inclusion/followup_en.pdf
[25] http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2007:319:0001:0036:EN:PDF [26] COM(2007) 33, 31.1.2007 and SEC(2007) 106,
31.1.2007 [27] SEC(2007)1520 [28] The Common Principles for Bank Account
Switching, http://www.eubic.org/Position%20papers/2008.12.01%20Common%20Principles.pdf
[29] EBIC reports: 2009 and 2010 available
at: http://www.ebf-fbe.eu [30] Notably the mystery shopping studies
performed on behalf of the European Commission in Consumer Market Study on
the consumers’ experiences with bank account switching with reference to the
Common Principles on Bank Account Switching, GfK, January 2012 (http://ec.europa.eu/consumers/rights/docs/switching_bank_accounts_report_en.pdf)
and by BEUC and also demonstrated in studies performed at national level (UK,
Ireland, Austria) cited below . [31] See Section 3.2.3 for more details. [32] Denmark, Estonia, Finland, Lithuania
and Luxembourg, Portugal and Sweden. [33] Germany, Hungary, Ireland, the
Netherlands and the UK. [34] Austria, Bulgaria, the Czech Republic,
Cyprus, Greece, Spain, Latvia, Malta, Poland, Romania, Slovenia and Slovakia. [35] Market study of the current state of
play in Member States regarding initiatives in bank fee transparency and
comparability in personal current bank accounts. Van Dijk Management consultants, 2011, http://ec.europa.eu/consumers/rights/docs/1912012_market_study_en.pdf [36] In France: "Rapport de Georges Pauget et
Emmanuel Constans sur la tarification des services bancaires", 07/2010
(http://www.ladocumentationfrancaise.fr/var/storage/rapports-publics/
104000365/0000.pdf). In
Hungary, the Hungarian Financial Supervision Authority: "Financial
consumer risk report", 09/2011 (http://www.pszaf.hu/data/cms2325056/CP_riskreport_2011H1.pdf)
and "Consumer protection risk report", 03/2011 (http://www.pszaf.hu/data/cms2309653
/cons_report_2010H2.pdf); the Central bank of Hungary: "Study on
the pricing of payment services, also focusing on pricing in different customer
groups" (recently conducted Publication of the survey results is
forthcoming); the Hungarian Competition Authority, GVH: "Survey on
switching service" (completed in 2006-2007, available only in HU
language, at http://www.gvh.hu/gvh). In Ireland, the IE Central Bank: "Review
of the transparency of fee brochures and account statements of personal current
accounts to improve the transparency of banking products", July 2009 (http://www.centralbank.ie/regulation/processes/consumer-protection-code/compliance-monitoring/Documents)
as part of the work set out in its 2007-2009 Strategic Plan. In the UK, several
analyses conducted by the Office of Fair Trading between 2008 and 2012. [37] Code of Conduct on the Switching of
Current Accounts with Credit Institutions, Central Bank of Ireland, 2010, http://www.centralbank.ie/regulation/processes/consumer-protection-code/documents/
[38] See Annex IV for more information. [39] Consumer Market Study on the
consumers’ experiences with bank account switching with reference to the Common
Principles on Bank Account Switching, GfK, February 2012 (http://ec.europa.eu/consumers/rights/fin_serv_en.htm#fin). [40] See Annex IV for more information. [41] Special Eurobarometer on Retail
Financial Services, European Commission, February 2012, p.87 http://ec.europa.eu/internal_market/finservices-retail/policy_en.htm [42] If, for example, we wished to have a
statistically significant sample of 1% of account holders, we would need to
have a more that 3.68 million enquiries, which
would be unreasonable. [43] Examples: ·
Tarifs et mobilité
bancaires: le désolant palmarès des Banques, UFC Que Choisir, October 2010, http://image.quechoisir.org/var/ezflow_site/storage/original/application/961abc610b3b1f8bd82e9ad5ed117a5f.pdf ·
Central Bank Inspection
and Mystery Shop Identifies Concerns about Information Provided on Current
Account Switching,
Central Bank of Ireland, December 2011, http://www.centralbank.ie/press-area/press-releases/Pages/CentralBankInspectionandMysteryShopIdentifiesConcernsaboutInformationProvidedonCurrentAccountSwitching.aspx ·
Kontowechsel: Wie funktioniert
er?, VKI, March 2010,
http://www.arbeiterkammer.at/bilder/d118/Studie_Kontowechsel2010.pdf [44] BEUC response to the 2012 Public
consultation on bank accounts (see footnote 11), p. 20. [45] 2012 Public consultation on bank
accounts (see footnote 11), p. 19. [46] Rapport Inclusion Financière 2011, Réseau
Financement Alternatif, 2011, http://www.financite.be/financite/recherche,fr,152.html#_tude
[47] 2012 Public consultation on bank
accounts (see footnote 11), p. 10. [48] Consumer Decision-Making in Retail
Investment Services, November 2010, p. 40, http://ec.europa.eu/consumers/strategy/docs/final_report_en.pdf
[49] Financial Capability: A Behavioural
Economics Perspective, Financial Services Authority, p. 7-8 [50] The Impact of Financial Literacy
Education on Subsequent Financial Behavior, Lewis Mandell and Linda Schmid
Klein, 2009, p. 17-18, http://www.afcpe.org/assets/pdf/lewis_mandell_linda_schmid_klein.pdf
[51] COM(2007) 808 final. [52] Consumer Decision-Making in Retail
Investment Services, November 2010, http://ec.europa.eu/consumers/strategy/docs/final_report_en.pdf [53] Tying occurs when two or more products
are sold together in a package, and at least one of these products is not sold
separately. Tying should not be confused with bundling where financial
institutions sell two or more products together as a package at a discount
despite each product being available separately. Source: SEC(2007) 106,
European Commission, 31.1.2007, p. 77; Interim report II: current
accounts and related services, European Commission, 17.7.2006, p. 96. [54] Measuring Financial Inclusion, The
Global Findex Database, World Bank, April 2012, p. 11 [55] Interim report II: current accounts
and related services, European Commission, 17.7.2006. [56] Ibid. [57] See for instance, OFT 1282 "Review
of barriers to entry, expansion and exit in retail banking", Office of
Fair Trading, November 2010 (http://www.oft.gov.uk/OFTwork/markets-work/othermarketswork/review-barriers/). [58] Tying and other potentially unfair
commercial practices in the retail financial service sector, CEPS, November
2009, http://ec.europa.eu/internal_market/consultations/docs/2010/tying/report_en.pdf
[59] See Section 3.2.2. [60] Tying and other potentially unfair
commercial practices in the retail financial service sector, CEPS, November
2009, http://ec.europa.eu/internal_market/consultations/docs/2010/tying/report_en.pdf
[61] See, for instance, COM(2011) 656 of
20 October 2011, COM(2012) 360/2 of 3 July 2012, and
European Parliament Economic and Monetary Affairs Committee report on the
Commission proposal for a Directive on credit agreements relating to
residential property of June 2012. [62] See European Parliament Economic and
Monetary Affairs Committee report on the Commission proposal for a Directive on
credit agreements relating to residential property of June 2012. [63] World Payments Report 2011, CapGemini. [64] Ibid. [65] http://www.businesswire.com/news/home/20101219005008/en/BookIT-Oy-50-Finns-Mobile-Phone-Bookings [66] http://www.nytimes.com/2012/04/29/sunday-review/the-post-cash-post-credit-card-economy.html [67] Measuring Financial Inclusion, The
Global Findex Database, World Bank, April 2012. [68] http://www.moneysavingexpert.com/cards/prepaid-cards;
[69] http://www.bpost.be/site/fr/residential/finance/bpaid/index.html;
[70] http://www.corpedia.fr/index.html [71] http://www.moneyguideireland.com/category/prepaid-debit-cards [72] Ibid. [73] Basic banking services, London
Economics for European Parliament's Committee on the Internal Market and
Consumer Protection, November 2011, p. 11. [74] Costs of retail payment instruments
for Finnish banks, Bank of Finland, 23.12.2011, p. 5. [75] Nothing is free: A survey of the
social cost of the main payment instruments in Hungary, National Bank of
Hungary, p. 96. [76] Ibid. [77] Ibid. [78] http://www.lavenir.net/article/detail.aspx?articleid=DMF20120504_00154656 [79] http://www.droitbelge.be/news_detail.asp?id=693 [80] http://www.abc.es/20120413/economia/abci-fraude-fiscal-consejo-ministros-201204131356.html [81] http://www.businessweek.com/magazine/italys-cap-on-cash-payments-12082011.html [82] 2012 Public consultation on bank
accounts (see footnote 11), p. 18-19. [83] Directive 2005/60/EC of 26 October
2005, L
309/15, Article 8. [84] Anti-money laundering and terrorist
financing measures and financial inclusion, Financial Action Task Force,
2011, p. 27. [85] Ibid. [86] Ibid. [87] Ibid. [88] Financial Services User Group (FSUG)
response to the 2012 Public consultation on bank accounts (see footnote
11), p. 13. [89] See responses from consumer and civil
society representatives in the 2012 Public consultation on bank accounts
(see footnote 11), p. 18. [90] Measuring Financial Inclusion, The
Global Findex Database, World Bank, April 2012, p. 20 [91] See responses from consumer and civil
society representatives in the 2012 Public consultation on bank accounts
(see footnote 11), p. 18. [92] See for example, Study on the costs
and benefits of policy actions in the field of ensuring access to basic account
– Final Report, Centre for Strategy and Evaluation Services (CSES), July
2010, p. 14,
http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study. [93] Study on the costs and benefits of
policy actions in the field of ensuring access to basic account – Final Report,
Centre for Strategy and Evaluation Services (CSES), July 2010, Ibid, p. 14-15 [94] 2012 Public consultation on bank
accounts (see footnote 11), p. 19. [95] Global consumer Banking Survey 2011,
Ernst&Young, available at: http://www.ey.com/Publication/vwLUAssets/A_new_era_of_customer_expectation:_global_consumer_banking_survey/$FILE/A%20new%20era%20of%20customer%20expectation_global%20consumer%20banking%20survey.pdf
[96] Department of Justice, Canada,
http://laws-lois.justice.gc.ca/PDF/SOR-2003-184.pdf [97] Study on the costs and benefits of
policy actions in the field of ensuring access to basic account – Final Report,
Centre for Strategy and Evaluation Services (CSES), July 2010, p. 14, estimated that 30 million Europeans over the age of 18
do not have a payment account. Calculations based on the Special Eurobarometer on Retail Financial
Services (European
Commission, February 2012) put
the number of Europeans over the age of 15 without a current account at more
than 68 million. Differences
between the 2010 and 2012 calculations can be attributed to the scope of the
question asked by the surveys and divergences in the population sample. [98] Commission calculations based on data
on the number of unbanked consumers from Measuring Financial Inclusion, The
Global Findex Database, World Bank, April 2012. [99] It should be noted that whereas there are
few data on individuals’ access to a payment account, there is even fewer
research and data on households, which make it a less reliable basis on which
to base a policy. [100] Measuring Financial Inclusion, The
Global Findex Database, World Bank, April 2012. [101] Commission calculations based on World
Bank and Eurostat data. [102] Basic banking services, London Economics for European Parliament's
Committee on the Internal Market and Consumer Protection, November 2011, p. 11 [103] Costs of retail payment instruments for
Finnish banks, Bank of
Finland, 23.12.2011, p. 5. [104] Nothing is free: A survey of the social cost
of the main payment instruments in Hungary, National Bank of Hungary, p. 96. [105] Ibid. [106] 56% of people without an account state
that they do not need or want one. Special Eurobarometer on Retail Financial
Services, European Commission, February 2012, p. 31, http://ec.europa.eu/internal_market/finservices-retail/policy_en.htm. [107] Special Eurobarometer on Retail
Financial Services, European Commission, February 2012, p. 29, http://ec.europa.eu/internal_market/finservices-retail/policy_en.htm
[108] Ibid. [109] European Parliament Resolution
2012/2055(INI). [110] European Banking Federation response to
the 2012 Public consultation on bank accounts (see footnote 11), p. 13. [111] Measuring Financial Inclusion, The
Global Findex Database, World Bank, April 2012, p. 3. [112] Special Eurobarometer on Retail
Financial Services, European Commission, February 2012, p. 29 [113] Ibid. [114] Commission services calculations based
on Eurostat, Measuring Financial Inclusion, The Global Findex Database,
World Bank, April 2012, and Special Eurobarometer on Retail Financial
Services, European Commission, February 2012. The World Bank data on
the percentage of consumers ( > 15 years) without a payment account and
Eurostat data on the size of the population (> 15 years), the number of consumers
without payment accounts is calculated for each Member State. Eurobarometer
data is then used to calculate the number of consumers in each Member State who
would like an account. [115] Banking services and poorer households, Financial Inclusion Task Force, December
2010, p.6.
http://www.hm-treasury.gov.uk/d/fin_inclusion_taskforce_poorerhouseholds_dec2010.pdf [116] BEUC response to the 2012 Public
consultation on bank accounts (see footnote 11), p. 20. [117] http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/3-08022012-AP/EN/3-08022012-AP-EN.PDF [118] Financial Services Provision and Prevention
of Financial Exclusion, European
Commission, March 2008, http://ec.europa.eu/employment_social/spsi.
Other 'vulnerable' factors are also indicated, such as being retired or unable
to work, being a student as well as, to a lesser extent, age, gender and type
of locality lived in. [119] Measuring Financial Inclusion, The
Global Findex Database, World Bank, April 2012, p. 1 [120] Eurostat data on total population and
resident non-national population by group of citizenship http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Migration_and_migrant_population_statistics
[121] Erasmus, facts, figures and trends, European
Commission, 2011. (http://ec.europa.eu/education/pub/pdf/higher/erasmus0910_en.pdf) [122] Eurostat data on tertiary education students
studying in another EU country: there were 581 400 EU students enrolled at
foreign universities in another EU Member State in 2010. [123] Erasmus, facts, figures and trends,
European Commission, 2011, p. 4. http://ec.europa.eu/education/pub/pdf/higher/erasmus1011_en.pdf. [124] Commission staff working document
Demography Report 2010, p. 86. http://epp.eurostat.ec.europa.eu/portal/page/portal/population/documents/Tab/report.pdf
[125] For the purposes for calculation, it is
assumed that the number of non-resident migrants is 3 million people. [126] http://epp.eurostat.ec.europa.eu/statistics_explained/index.php?title=File:Total_population_and_resident_non-national_population_by_group_of_citizenship,_2010-de.png&filetimestamp=20120713140446
and Commission staff working
document Demography Report 2010, p. 46. http://epp.eurostat.ec.europa.eu/portal/page/portal/population/documents/Tab/report.pdf [127] http://epp.eurostat.ec.europa.eu/statistics_explained/index.php?title=File:Total_population_and_resident_non-national_population_by_group_of_citizenship,_2010-de.png&filetimestamp=20120713140446 [128] Commission Recommendation 2011/442/EU
(see footnote 3), recital (19). [129] National measures and practices as
regards access to basic payment accounts. Follow-up to the Recommendation of 18
July 2011 on access to a basic payment account. http://ec.europa.eu/internal_market/finservices-retail/docs/inclusion/followup_en.pdf
[130] Commission Recommendation 2011/442/EU
(see footnote 3), recital (19). [131] 2012 Public consultation on bank
accounts (see footnote 11), p. 20. [132] European Parliament Resolution
2012/2055(INI) p. 5, "not all Member States have taken adequate
action required by Commission Recommendation 2011/442/EU of 18 July 2011 on
access to a basic payment account and too many Member States still have no
legal or voluntary requirement for providers to offer basic payment services". [133] See consumer, civil society and some
Member States' responses to the 2012 Public consultation on bank accounts
(see footnote 11), p. 20. [134] Based on information provided to the
Commission by Member States for the report on national measures and practices
as regards access to basic payment accounts. Follow-up to the Recommendation of
18 July 2011 on access to a basic payment account. Figures calculated by
Commission services based on World Bank and Eurostat data. [135] Réseau Financement Alternatif, Rapport
Inclusion Financière 2011, p. 16 [136] Ibid, p. 20. [137] European Banking Federation response to
the 2012 Public consultation on bank accounts (see footnote 11), p. 13. [138] FSUG response to the 2012 Public
consultation on bank accounts (see footnote 11), p. 25. [139] Consumer/civil society responses, in Summary
of responses to the public consultation on bank accounts, European
Commission (http://ec.europa.eu/internal_market/finservices-retail/docs/policy/ba_summary-2012_07_25_en.pdf). [140] See, for instance, Tying and other
potentially unfair commercial practices in the retail financial service sector,
Centre for European Policy Studies (CESP), 2009. Understanding and Combating
Financial Exclusion and Overindebtedness in Ireland: A European Perspective,
Georges Gloukoviezoff, p. 9. [141] Understanding and Combating Financial
Exclusion and Overindebtedness in Ireland: A European Perspective, Georges
Gloukoviezoff, p. 9. [142] 2012 Public consultation on bank
accounts (see footnote 11), p. 18. [143] BEUC response to the Commission
Consultation on access to a basic payment account, 25.01.2011, p. 18,
http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm [144] Measuring Financial Inclusion, The
Global Findex Database, World Bank, April 2012, p. 4. [145] See for instance, UK poverty rip-off: The
poverty premium 2010 briefing, p. 4; Financial Inclusion for the Roma:
Banking As a Key to Social Progress, Open Society Foundations, March 2012,
p. 3. http://www.soros.org/sites/default/files/roma-financial-inclusion-20120321.pdf [146] Understanding and Combating Financial
Exclusion and Overindebtedness in Ireland: A European Perspective, Georges
Gloukoviezoff, p. 4. [147] European Parliament Resolution 2010/2278(INI). [148] Le point sur le service bancaire de
base, cinq ans après son introduction, Réseau Financement Alternatif, 2008,
p. 4. [149] Rapport Inclusion Financière 2011,
Réseau Financement Alternatif, 2011, p. 22. [150] 2012 Public consultation on bank
accounts (see footnote 11), p. 18. [151] Ibid. [152] Ibid., p. 10. [153] BEUC response to the 2012 Public
consultation on bank accounts (see footnote 11), p. 20. [154] Calculations by Commission services
based on Measuring Financial Inclusion, The Global Findex Database,
World Bank, April 2012, Special Eurobarometer on Retail Financial
Services, European Commission, February 2012 and Eurostat population
data. [155] Ibid., pp. 18/19. [156] Ibid., p. 18. [157] Special Eurobarometer on Retail Financial
Services, European
Commission, February 2012, http://ec.europa.eu/internal_market/finservices-retail/policy_en.htm. [158] Commission calculation based on Eurostat
data: http://epp.eurostat.ec.europa.eu/statistics_explained/index.php?title=File:Total_population_and_resident_non-national_population_by_group_of_citizenship,_2010-de.png&filetimestamp=20120713140446 [159] Special Eurobarometer on Retail
Financial Services, European Commission, February 2012, http://ec.europa.eu/internal_market/finservices-retail/policy_en.htm. [160] Commission survey of Erasmus students, 2012. [161] See, for instance, Feedback from
consumer representatives, See feedback statement to the consultation, p. 19. [162] Rapport Inclusion Financière 2011,
Réseau Financement Alternatif. [163] Study on the costs and benefits of
policy actions in the field of ensuring access to basic account – Final Report,
Centre for Strategy and Evaluation Services (CSES), July 2010, p. 44-45, http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study. [164] FSUG response to the 2012 Public
consultation on bank accounts (see footnote 11), p. 13. [165] Financial Inclusion Evidence Review:
the costs of banking exclusion and the benefits of access to bank accounts,
Claire Whyley, 2010, p. 32. [166] Les conditions d'accès aux services bancaires des
ménages vivant sous le seuil de pauvreté,
CREDOC, Février 2010. http://www.banque-france.fr/ccsf/fr/telechar/publications/
rapport_credoc_etude_conditions_acces_services_bancaires_pauvrete.pdf [167] Based on information provided to the
Commission by Member States. [168] Ibid. [169] Ibid. [170] Nothing is free: A survey of the
social cost of the main payment instruments in Hungary, National Bank of
Hungary, p. 27. [171] Fee structures and frequency of charge
may differ as explained in the paragraph "Pricing models" below. [172] Personal Current Accounts in the UK – An
OFT Market Study (2008), p.55. [173] Bank fees behavioural study, 2012, TNS
Opinion Ltd. [174] The table comprises the basket of
services included in World Retail Banking Report's analysis of account price
trends in constructing price indices. The list of services is provided above
for illustration purposes. [175] 2012 World Retail Banking Report, Cap
Gemini, available at: http://www.efma.com/wrbr
[176] Preparing the monitoring of the impact of
the Single European Payments Area (SEPA) on consumers, Van Dijk Management Consultants, 2008, p.
17. [177] Data collection for prices of current
accounts provided to consumers, Van Dijk Management Consultants, 2009. [178] 2007 data. [179] Belgium, Germany, Estonia, Finland,
Lithuania, Luxembourg, Latvia, Malta, Netherlands, Portugal, Sweden, Slovenia
and Slovakia. [180] The data sources supporting this
statement are analysed in Annex III. The data collected is sourced mainly from
a Commission study, "Data collection for prices of current accounts
provided to consumers, 2009, Van Dijk Management Consultants", which
assessed the degree of transparency in bank fees and provided a comparative
analysis of fee levels within EU Member States. Additional evidence is provided
from studies carried out by Member States (France, Italy). [181] "Rapport
de Georges Pauget et Emmanuel Constans sur la tarification des services
bancaires", 07/2010, p.32 (http://www.ladocumentationfrancaise.fr/var/storage/rapports-publics/
104000365/0000.pdf) [182] Ibid. [183] World Retail Banking Report, Cap Gemini,
2012. [184] Data collection for prices of current
accounts provided to consumers, Van Dijk Management Consultants, 2009. [185] This model falls under the
"indirect revenue-based" model described in Table 6 above. [186] Independent Commission on Banking,
Final report recommendations, 2011 [187] Ibid. [188] World Retail Banking Report, Cap
Gemini, 2007. [189] Tarifs et mobilité bancaires: Le désolant
palmarès des banques! UFC-
Que choisir, 2010. [190] Data collection for prices of current accounts provided
to consumers, 2009, Van Dijk Management Consultants. [191] See
footnote 174. [192] "Monitoring consumer markets in the European
Union", GfK, 2011, http://ec.europa.eu/consumers/strategy/docs/EC_Market_Monitoring_2011_en.pdf
[193] Ibid. [194] COM(2007) 33, 31.1.2007 and SEC(2007)
106, 31.1.2007 quoted in Tying and other potentially unfair commercial
practices in the retail financial service sector, CEPS, November 2009, http://ec.europa.eu/internal_market/consultations/docs/2010/tying/report_en.pdf
[195] Special Eurobarometer on Retail
Financial Services, European Commission, March 2012, p.85,
http://ec.europa.eu/internal_market/finservices-retail/docs/policy/eb_special_373-report_en.pdf [196] Ibid., p. 87. [197] http://ec.europa.eu/internal_market/finservices-retail/docs/policy/ba_summary-2012_07_25_en.pdf [198] Consumer Market Study on the
consumers’ experiences with bank account switching with reference to the Common
Principles on Bank Account Switching, GfK, January 2012, http://ec.europa.eu/consumers/rights/docs/switching_bank_accounts_report_en.pdf [199] Mystery shopping is a technique used
widely for checking the performance of traders or service providers towards
consumers. It is a very useful technique to assess compliance with detailed
rules and procedures and is often the only effective means to truly test
compliance by traders. [200] Tarifs et mobilité bancaires: le désolant
palmarès des Banques, UFC
Que Choisir, October 2010, p.14-15, http://image.quechoisir.org/var/ezflow_site/storage/original/application/961abc610b3b1f8bd82e9ad5ed117a5f.pdf
[201] http://ec.europa.eu/internal_market/finservices-retail/docs/policy/ba_summary-2012_07_25_en.pdf [202] See footnote 192. [203] Ibid. [204] 2012 Public consultation on bank
accounts (see footnote 11), p.15. [205] Tarifs et mobilité bancaires: le désolant palmarès des
Banques, UFC Que Choisir, October
2010, p.16, http://image.quechoisir.org/var/ezflow_site/storage/original/application/961abc610b3b1f8bd82e9ad5ed117a5f.pdf [206] ICB Final report recommendations, ICB, September 2011, p. 220, http://www.ecgi.org/documents/icb_final_report_12sep2011.pdf [207] Trapped at the Bank: Removing Obstacles To
Consumer Choice In Banking,
Consumers Union, May 2012, pp.6-8,
http://defendyourdollars.org/wp-content/uploads/2012/05/TrappedAtTheBank-Complete.pdf [208] Tarifs et mobilité bancaires: le
désolant palmarès des Banques, UFC Que Choisir, October 2010, p.15, http://image.quechoisir.org/var/ezflow_site/storage/original/application/961abc610b3b1f8bd82e9ad5ed117a5f.pdf [209] Central Bank Inspection and Mystery Shop
Identifies Concerns about Information Provided on Current Account Switching, Central Bank of Ireland, December 2011, http://www.centralbank.ie/press-area/press-releases/Pages/CentralBankInspectionandMysteryShopIdentifiesConcernsaboutInformationProvidedonCurrentAccountSwitching.aspx
[210] http://ec.europa.eu/internal_market/finservices-retail/docs/policy/ba_summary-2012_07_25_en.pdf [211] Consumers' views on switching service
providers, Eurobarometer 243, European Commission, p. 18. [212] Consumer Market Study on the consumers’
experiences with bank account switching with reference to the Common Principles
on Bank Account Switching,
GfK, January 2012, http://ec.europa.eu/consumers/rights/docs/switching_bank_accounts_report_en.pdf [213] Tarifs et mobilité bancaires: le désolant palmarès des
Banques, UFC Que Choisir, October
2010, p.19, http://image.quechoisir.org/var/ezflow_site/storage/original/application/961abc610b3b1f8bd82e9ad5ed117a5f.pdf [214] Kontowechsel: Wie funktioniert er?, VKI, March 2010. [215] http://ec.europa.eu/internal_market/finservices-retail/docs/policy/ba_summary-2012_07_25_en.pdf
[216] ACP rapport sur la mobilité bancaire, ACP, September 2011 [217] Consumers' views on switching service
providers, Eurobarometer 243, European Commission, p. 19. [218] ICB Final report recommendations, ICB, September 2011, p. 220, http://www.ecgi.org/documents/icb_final_report_12sep2011.pdf [219] OFT 1282 Review of barriers to entry,
expansion and exit in retail banking, Office of Fair Trading, November 2010 ,
p. 127-130, http://www.oft.gov.uk/OFTwork/markets-work/othermarketswork/review-barriers/, The underlying OFT consumer survey was
performed in July 2010, base: 932 PCA holders. [220] See footnote 120 [221] Data collection for prices of current
accounts provided to consumers, Van Dijk Management Consultants, 2009. [222] Eurobarometer: Qualitative study on
cross-border shopping in 28 European Countries, European Commission, 2004,
p.9, and p.15. [223] The estimates is based on a study
carried out by the French consumers' association UFC-Que Choisir. La mobilité bancaire, UFC Que choisir, p.4, Juin 2006, http://www.industrie.gouv.fr/biblioth/docu/dossiers/sec/pdf/annexe12.pdf As the figures stem
from 2004 a inflation rate of 2% p.a. used to update the figures to 2012 price
level. [224] Report on the implementation of the
EBIC Common Principles on bank account switching, EBIC, 2009, Table 1,
p.5ff http://www.ebf-fbe.eu/uploads/documents/publications/Reports/2%20march%202010%20-%20PUBLIC-%20EBIC%20Implemenation%20Report%20(final)%20-%20Common%20Principles%20on%20Bank%20Account%20Switching.pdf
[225] A statutory Switching Code replaced the Voluntary
Switching Code as of 1 October 2010. [226] Easy switching? – A long way to go; BEUC
Monitoring Report of the 'Common Principles for Bank Account Switching', BEUC, January 2011, p. 6-12. [227] Switching evaluation Belgium,
Belgian Bankers' and stockbroking Firms' Association, 2010. [228] EU Banking structures, ECB 2010,
p.20; http://www.ecb.int/pub/pdf/other/eubankingstructures201009en.pdf [229] Expert Group on Customer Mobility in
Relation to Bank Accounts, Report, June 2007, p.12 [230] Report on the retail banking sector
inquiry, SEC(2007) 106, European Commission, 31.1.2007;
http://ec.europa.eu/competition/sectors/financial_services/inquiries/sec_2007_106.pdf [231] Defined as the share of customers who change
providers in a given year. [232] E.g. the direct effect of switching costs on
customer mobility; levels of customer satisfaction in explaining customer
mobility; or the impact of differing levels of banking sector stability on
market performance. [233] Financial Services Taskforce, Banking
services and poorer households, December 2010. [234] Ibid. [235] Basic banking services, London Economics for European Parliament's Committee
on the Internal Market and Consumer Protection, November 2011, p. 19. [236] Ibid. [237] The UK poverty rip-off, Save the children
UK, January 2011.
http://www.savethechildren.org.uk/sites/default/files/docs/UK_Poverty_Rip_Off_Brief_1.pdf
[238] UK Office for National Statistics (http://www.ons.gov.uk/ons/rel/ashe/annual-survey-of-hours-and-earnings/ashe-results-2011/ashe-statistical-bulletin-2011.html
) [239] Bericht der Bundesregierung zur
Umsetzung der Empfehlungen des Zentralen Kreditausschusses zum Girokonto für
jedermann, Drucksache 17/8312, German Bundestag, 27.12.2011, p. 8 [240] Ibid. [241] Anecdotal evidence provided to the
Commission. [242] Study on the costs and benefits of policy
actions in the field of ensuring access to basic account – Final Report, Centre for Strategy and Evaluation Services
(CSES), July 2010,
p. 44-45, http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study. [243] Financial Inclusion Evidence Review: the
costs of banking exclusion and the benefits of access to bank accounts, Claire Whyley, 2010, p. 22. [244] Report on the retail banking sector
inquiry, SEC(2007) 106, European Commission, 31.1.2007. [245] Ibid. [246] Report of the Expert Group on
Customer Mobility In Relation To Bank Accounts.
http://ec.europa.eu/internal_market/finservices-retail/mobility/bank_switching_en.htm
[247] Law 214 of 22 December 2011, Article
12(3) http://www.aitecweb.com/Portals/0/pubnoaut/varie/Legge%2022%20dicembre%202011,%20n.%20214.pdf
[248] 2012 Public consultation on bank accounts
(see footnote 11), p. 10. [249] Strategy for Financial Inclusion,
Final Report, 2011, p. 14.
http://www.finance.gov.ie/documents/publications/reports/2011/Fininclusreport2011.pdf [250] Strategy for Financial Inclusion,
Final Report, 2011, p. 11. [251] Nothing is free: A survey of the
social cost of the main payment instruments in Hungary, National Bank of
Hungary, p. 94. [252] Study on the cost of cash,
European Payments Council, 2010; World Payments Report 2011, Capgemini,
RBS,Efma, 2011. [253] World Payments Report 2011,
Capgemini, RBS and Efma, 2011 [254] Nothing is free: A survey of the
social cost of the main payment instruments in Hungary, National Bank of
Hungary [255] FSUG response to the 2012 Public
consultation on bank accounts (see footnote 11), p. 28. [256] EU 2020 strategy aims to reduce a number
of poor and socially excluded by at least 20 million by 2020 through, among
others, improved access to essential services and tackling financial exclusion. http://ec.europa.eu/social/main.jsp?catId=751&langId=en [257] Ibid. [258] Special Eurobarometer on Retail
Financial Services, European Commission, February 2012, p. 31, http://ec.europa.eu/internal_market/finservices-retail/policy_en.htm. [259] Common Principles on Bank Account
Switching, European Banking Industry Committee, December 2008,
http://www.eubic.org/Position%20papers/2008.12.01%20Common%20Principles.pdf [260] Commission Recommendation 2011/442/EU
(see footnote 3). It defines a 'payment account' as "an account held in
the name of one consumer which is used for the execution of payment
transactions". [261] See for instance Recommendation on
access to basic payment accounts (see footnote above). [262] Commission calculations based on data on
the number of unbanked consumers from Measuring Financial Inclusion, The
Global Findex Database, the World Bank, April 2012. [263] SEPA: potential benefits at stake,
Capgemini Consulting, 2007. [264] Together with various enabling services,
such as healthcare, childcare, social housing, or life-long-learning. [265] European Parliament Resolution
2012/2055(INI). [266] "Single Market Act II - Together for new
growth", COM(2012) 573
of 3 October 2012, page 16. [267] "Commission Work Programme
2013", COM(2012) 629 of 23 October 2012, Annex I, page 5. [268] http://www.nrsr.sk/web/Default.aspx?sid=zakony/zakon&MasterID=4018
[269] COM(2007) 808. [270] Commission Staff Working Document:
National measures and practices as regards access to basic payment accounts -
Follow-up to the Recommendation of 18 July 2011 on access to a basic payment
account, 22.08.2012 http://ec.europa.eu/internal_market/finservices-retail/docs/inclusion/followup_en.pdf [271] Calculations by Commission services on the basis of
Member States' notifications, Special Eurobarometer on Retail Financial Services, European Commission, February 2012,
p. 31, http://ec.europa.eu/internal_market/finservices-retail/policy_en.htm. For the
purpose of calculations, Italy has been included under "industry
charters" as while the law entered into force on 28 December 2012, the
convention setting out the conditions for access only entered into force as of
June 2012. [272] Study on the costs and benefits of
policy actions in the field of ensuring access to basic account – Final Report,
Centre for Strategy and Evaluation Services (CSES), July 2010, http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study. [273] Ibid. [274] Special Eurobarometer on Retail
Financial Services, European Commission, February 2012, p. 29, http://ec.europa.eu/internal_market/finservices-retail/policy_en.htm [275] Consumer Market Study on the
consumers’ experiences with bank account switching with reference to the Common
Principles on Bank Account Switching, GfK, January 2012, http://ec.europa.eu/consumers/rights/docs/switching_bank_accounts_report_en.pdf
[276] Rapport de Georges Pauget et Emmanuel Constans
sur la tarification des services bancaires", 07/2010 (http://www.ladocumentationfrancaise.fr/var/storage/rapports-publics/
104000365/0000.pdf) [277] Tarifs
et mobilité bancaires: le désolant palmarès des Banques, UFC Que Choisir, October 2010 [278] Study on the costs and benefits of
policy actions in the field of ensuring access to basic account – Final Report,
Centre for Strategy and Evaluation Services (CSES), July 2010, http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study. [279] Ibid. [280] SEC(2011) 906: Impact Assessment on the
Commission Recommendation on access to a basic payment account. [281] Austria, Belgium, Bulgaria, Germany,
Denmark, Spain, Finland, France, Italy, Lithuania, Luxembourg, Latvia,
Netherlands, Poland, Portugal, United Kingdom. [282] Summary of responses to the public
consultation on financial inclusion: ensuring access to a basic bank account,
14.09.2009. http://ec.europa.eu/internal_market/finservices-retail/docs/inclusion/consultation_summary_en.pdf [283] FSUG response to the 2012 Public
consultation on bank accounts (see footnote 11), p. 14. [284] European Savings Banks Group
response to the 2012 Public consultation on bank accounts (see footnote
11), p. 8 [285] European Association of Public
Banks response to the 2012 Public consultation on bank accounts (see
footnote 11), p. 6 [286] Summary of responses to the public
consultation on access to a basic payment account, 25.01.2011, p. 10, http://ec.europa.eu/internal_market/finservices-retail/docs/inclusion/consultation_summary-2010_en.pdf
[287] European Parliament Resolution
2012/2055(INI), Recommendation 3. [288] European Banking Federation response to
the 2012 Public consultation on bank accounts (see footnote 11), p. 13. [289] Summary of responses to the public
consultation on access to a basic payment account, 25.01.2011, p. 3, http://ec.europa.eu/internal_market/finservices-retail/docs/inclusion/consultation_summary-2010_en.pdf
[290] BEUC response to the Commission
Consultation on access to a basic payment account, 25.01.2011, p. 9, http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm
[291] FSUG response to the 2012 Public
consultation on bank accounts (see footnote 11), p. 14. [292] 2012 Public consultation on bank
accounts (see footnote 11), p. 11. [293] European Banking Federation response to
the 2012 Public consultation on bank accounts (see footnote 11), p. 12. [294] 2012 Public consultation on bank
accounts (see footnote 11), p. 4. [295] Measuring Financial Inclusion, The
Global Findex Database, World Bank, April 2012, p.50-52, http://www-wds.worldbank.org/external/default/WDSContentServer/IW3P/IB/2012/04/19/000158349_20120419083611/Rendered/PDF/WPS6025.pdf [296] Austria, Bulgaria, Czech Republic, Cyprus, Greece,
Latvia, Malta, Poland, Romania, Slovakia, Slovenia and Spain [297] Portugal, Denmark, Estonia, Finland, Lithuania,
Luxembourg, Sweden, Germany, Hungary, Ireland, Netherlands, and the UK. [298] "Consumer Policy Toolkit"
– OECD, Paris 2010, p.86. [299] Bank fees behaviour study (2012, TNS
Opinion Ltd), results of the multivariate analysis. [300] As indicated in Section 2.2, public
authorities from 14 EU Member States replied to the 2012 Public Consultation on
Bank Accounts. [301] Standard European Consumer Credit
Information. [302] European Standard Information Sheet. [303] 2012 Public consultation on bank
accounts (see footnote 11). [304] Commission Staff Working Paper: "The
functioning of the retail electricity markets for consumers in the European
Union", SEC(2010) 1409. [305] CEER
(Council of European Energy Regulators): "Guidelines of Good Practices
on Price Comparison Tools", 10 July 2012, available at: http://www.energy-regulators.eu
[306] BEUC's response to the CEER consultation
"Energy: Price Comparison Tools" refers to successful
accreditation scheme Confidence Code in the United Kingdom that is run by
Consumer Focus. [307] 2012 Public consultation on bank
accounts (see footnote 11), p.10-11. [308] Consumer Market Study on the
consumers’ experiences with bank account switching with reference to the Common
Principles on Bank Account Switching, GfK, January 2012, http://ec.europa.eu/consumers/rights/docs/
switching_bank_accounts_report_en.pdf. For further detail please refer also
to Section 3.2.3 of this report. [309] 2012 Public consultation on bank
accounts (see footnote 11), p. 14. [310] Please refer to the "Restricted cross-border
switching" analysis of Section 3.2.3, p.38. [311] 2012
Public consultation on bank accounts (see footnote
11), BEUC response, p.18. [312] For detailed problem analysis please refer to Section 3.2.3
of this report. [313] The detailed
description of methodology of the calculation of the potential costs and
benefits including related assumptions are presented in Annex VI. [314] See Section 3.2.3 for further details. [315] Account Switching, Australian Government, July 2012, http://www.bankingreforms.gov.au/content/Content.aspx?doc=switching.htm;
12-139MR ASIC implements new bank account switching rules, June 2012, http://www.asic.gov.au/asic/asic.nsf/byHeadline/12-139MR%20ASIC%20implements%20new%20bank%20account%20switching%20rules?opendocument
[316] For further detail please refer to Table
22, in Section 8.2.2 [317] Data for AT, BE, BG, DE, DK, ES, FI, FR, IT, LT, LU, LV, NL, PL, PT,
UK is derived from the study; Quantification of the economic impacts of EU
action to improve fee transparency, comparability and mobility in the Internal
Market for personal current accounts", ICF GHK, 2012; for the other MS the
category of impact was assessed by Commission staff. [318] "Single Market Act II, Together for
new growth", COM(2012) 573, key action 12. [319] SEC(2011)906. [320] Data for AT, BE, BG, DE, DK, ES, FI, FR,
IT, LT, LU, LV, NL, PL, PT, UK is derived from the study "'Quantification
of the economic impacts of EU action to improve fee transparency, comparability
and mobility in the internal market for bank personal current accounts' by ICF GHK, 2012; for the other MS the
category of impact was assessed by Commission staff. [321] Measuring Financial Inclusion,
The Global Findex Database, World Bank, April 2012, p. 5. [322] Strategy for Financial Inclusion,
Final Report, 2011, p. 14 http://www.finance.gov.ie/documents/publications/reports/2011/Fininclusreport2011.pdf
[323] Total compliance costs in this case
exclude costs of compliance related to access given that the analysis did not
identify any significant administrative costs in this area. As a result the
table compares relevant administrative burden in the areas of presentation
requirements for bank fees and switching with total compliance costs in these
two areas. [324] Measuring Financial Inclusion, The
Global Findex Database, World Bank, April 2012, p. 1. [325] http://www.ecb.int/euro/html/environment.en.html
[326] Relevant documents available at:
http://ec.europa.eu/competition/sectors/financial_services/inquiries/retail.html [327] SEC (2007)16 accompanying COM(2007)33,
p. 77. [328] http://ec.europa.eu/internal_market/finservices-retail/docs/baeg/composition-en.pdf [329] http://ec.europa.eu/internal_market/finservices-retail/baeg_comments_en.htm
[330] http://ec.europa.eu/internal_market/finservices-retail/docs/baeg/summary_consultation_en.pdf
[331] http://ec.europa.eu/internal_market/consultations/2010/payment_account_en.htm [332] "Single Market Act II - Together for new
growth", COM(2012) 573 of 3 October 2012, page 16. [333] COM(2011)206. [334] A New Strategy for the Single Market (Monti
Report), 2010, http://ec.europa.eu/bepa/pdf/monti_report_final_10_05_2010_en.pdf
[335] http://eur-lex.europa.eu/LexUriServ/site/en/com/2007/com2007_0724en01.pdf [336] http://ec.europa.eu/citizens_agenda/docs/sec_2007_1520_en.pdf [337] European Parliament Resolution
2012/2055(INI). [338] European Banking Federation response to
the 2012 Public consultation on bank accounts (see footnote 11), p. 13. [339] European Parliament Resolution
2011/2319(INI). [340] European Parliament resolution 2010/2278(INI),
p. 4. [341] Opinion on the White Paper on
Financial Services Policy 2005-2010, OJ
C309, 16 December 2006; Opinion on the Green Paper on Retail
Financial Services in the Single Market,
OJ C151, 17 June 2008; Opinion on Socially responsible
financial products, C21, p. 33, 21 January 2011; Opinion
on the Communication Towards a Single Market Act – For a highly competitive
social market economy – 50 proposals for improving our work, business and
exchanges with one another, OJ C132, p. 47, 3 May 2011; Opinion on
Financial education and responsible consumption of financial products,
C318, p. 24, 29 October 2011. [342] Opinion on the Communication from the
Commission to the European Parliament, the Council, the Economic and Social
Committee and the Committee or the Regions: Towards a Single Market Act – For a
highly competitive social market economy – 50 proposals for improving our work,
business and exchanges with one another, OJ C132, p. 47, 3 May 2011,
point 2.2.1. [343] Opinion on the White Paper on
Financial Services Policy 2005-2010, OJ C309, 16 December 2006, points
4.3.3.2 and 4.3.3.3. [344] Opinion on the 'Communication Towards
a Single Market Act – For a highly competitive social market economy – 50
proposals for improving our work, business and exchanges with one another',
OJ C132, 3 May 2011, point 2.2.1. [345] Opinion on Financial education and
responsible consumption of financial products, C318, 29 October 2011,
points 5.2, 7.5 and 7.8. [346] Ibid. [347] Opinion on the Green Paper on Retail
Financial Services in the Single Market, OJ C151, 17.6.2008, points 1.11,
1.13, 1.16, 1.19, 3.2.2.1, 3.3.3, 4.4, 6.10, 7.2.1, 7.3. [348] Opinion on the Communication Towards
a Single Market Act – For a highly competitive social market economy – 50
proposals for improving our work, business and exchanges with one another,
OJ C132, 3.5.2011, point 2.2.1. [349] Opinion on the White Paper on
Financial Services Policy 2005-2010, OJ C309, 16 December 2006, points
4.3.3.2 and 4.3.3.3. [350] Opinion on the Green Paper on Retail
Financial Services in the Single Market, OJ C151, 17 June 2008, points
1.11, 1.13, 1.16, 1.19, 3.2.2.1, 3.3.3, 4.4, 6.10, 7.2.1, 7.3. [351] Study on the costs and benefits of
policy actions in the field of ensuring access to basic account – Final Report,
Centre for Strategy and Evaluation Services (CSES), July 2010, p. 14, (http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study) estimated that 30 million Europeans over the age of 18 do not have a
bank account. Calculations based on the Special Eurobarometer on Retail Financial Services (European Commission, February 2012) put the number of Europeans over the age of
15 without a current account at more than 68 million. Differences between the 2010 and 2012 calculations can
be attributed to the scope of the question and divergences in the population
sample. [352] Commission calculations based on data on
the number of unbanked consumers from Measuring Financial Inclusion, The
Global Findex Database, the World Bank, April 2012. [353] Study on the costs and benefits of policy
actions in the field of ensuring access to basic account – Final Report, Centre for Strategy and Evaluation Services
(CSES), July 2010,
p. 18, http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study [354] Special Eurobarometer on Retail Financial
Services, European
Commission, February 2012, http://ec.europa.eu/internal_market/finservices-retail/policy_en.htm
http://ec.europa.eu/internal_market/finservices-retail/policy_en.htm [355] Banking services and poorer households, Financial Inclusion Task Force, December
2010, p.6. Available at http://www.hm-treasury.gov.uk/d/fin_inclusion_taskforce_poorerhouseholds_dec2010.pdf
[356] Les conditions d'accès aux services
bancaires des ménages vivant sous le seuil de pauvreté, CREDOC, 2010, p.19 http://www.banque-france.fr/ccsf/fr/telechar/publications/rapport_credoc_etude_conditions_acces_services_ bancaires_pauvrete.pdf. [357] Special Eurobarometer on Retail
Financial Services, European Commission, February 2012, p. 10-11
http://ec.europa.eu/internal_market/finservices-retail/policy_en.htm. [358] Ibid., p.17. [359] Statistical data provided by Member
States. [360] New York Times. 28 April, 2012. See: http://www.nytimes.com/2012/04/29/sunday-review/the-post-cash-post-credit-card-economy.html?_r=1
[361] Ibid. [362] World Payments Report 2011, CapGemini,
p.4. [363] Ibid. [364] Special Eurobarometer on Retail Financial
Services, European
Commission, February 2012, p.8 http://ec.europa.eu/internal_market/finservices-retail/policy_en.htm
http://ec.europa.eu/internal_market/finservices-retail/policy_en.htm [365] Commission services calculations based
on Eurostat population data and Special Eurobarometer on Retail Financial
Services, European Commission, February 2012, p. 31, http://ec.europa.eu/internal_market/finservices-retail/policy_en.htm
[366] Calculations by Commission services
based on Measuring Financial Inclusion, The Global Findex Database,
World Bank, April 2012, Special Eurobarometer on Retail Financial
Services, European Commission, February 2012 and Eurostat population
data. [367] Calculations by Commission services based
on Special Eurobarometer on Retail Financial Services, European
Commission, February 2012 and Eurostat population data. [368] BEUC response to the 2012 Public
consultation on bank accounts (see footnote 11), p. 20. [369] Directive 2011/83/EU of the European
Parliament and of the European Council of 25 October 2011 on consumer
rights. [370] Financial Services Provision and Prevention
of Financial Exclusion,
European Commission, March 2008, http://ec.europa.eu/employment_social/spsi [371] See Section 1.2.5. in Annex II. [372] Calculations by Commission services
based on data from Eurostat, Measuring Financial Inclusion, The Global
Findex Database, World Bank, April 2012, and Commission staff
working document Demography Report 2010, p. 46. [373] http://www.natwest.com/personal/current-accounts/g1/students-graduates/international-students.ashx
[374] http://ec.europa.eu/education/higher-education/doc1290_en.htm [375] Erasmus, facts, figures and trends,
European Commission, 2011, p. 4, http://ec.europa.eu/education/pub/pdf/higher/erasmus1011_en.pdf
[376] Study on the costs and benefits of
policy actions in the field of ensuring access to basic account – Final Report,
Centre for Strategy and Evaluation Services (CSES), July 2010, p.45 (http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study)
and Commission survey of Erasmus
students, 2012. [377] European Commission estimation based on
the Eurostat data on tertiary education students studying in another EU country
in 2010: there were 581 400 EU students enrolled at foreign universities in
another EU Member State. [378] Commission survey of Erasmus students,
2012, see previous paragraph. [379] Ibid. [380] Ibid. [381] Ibid. [382] National measures and practices as
regards access to basic payment accounts. Follow-up to the Recommendation of 18
July 2011 on access to a basic payment account, 22.8.2012, http://ec.europa.eu/internal_market/finservices-retail/docs/inclusion/followup_en.pdf
[383] European Banking Federation response to
the 2012 Public consultation on bank accounts (see footnote 11), p. 13 [384] Calculations by Commission services on the basis of
Member States' notifications, Special Eurobarometer on Retail Financial Services, European Commission, February 2012, p.31, http://ec.europa.eu/internal_market/finservices-retail/policy_en.htm. For the purpose of calculations, Italy has been
included under "industry charters" as the law entered into force on
28 December 2012, the convention setting out the conditions for access only
entered into force as of June 2012. [385] This implies that the citizen would request
a written confirmation of the reasons for the refusal and provide it to the
Banque de France, which will then designate a bank that will be required to
open an account. [386] Special Eurobarometer on Retail Financial
Services, European
Commission, February 2012, http://ec.europa.eu/internal_market/finservices-retail/policy_en.htm [387] BEUC response to the 2012 Public
consultation on bank accounts (see footnote 11), p. 20. [388] See, for instance, Tying and other
potentially unfair commercial practices in the retail financial service sector,
Centre for European Policy Studies (CESP), 2009. Understanding and Combating
Financial Exclusion and Overindebtedness in Ireland: A European Perspective,
Georges Gloukoviezoff, p. 9. [389] Understanding and Combating Financial
Exclusion and Overindebtedness in Ireland: A European Perspective, Georges
Gloukoviezoff, p. 9. [390] Special Eurobarometer on Retail
Financial Services, European Commission, February 2012, p.26 http://ec.europa.eu/internal_market/finservices-retail/policy_en.htm. [391] Understanding and Combating Financial
Exclusion and Overindebtedness in Ireland: A European Perspective, Georges
Gloukoviezoff, p. 4. [392] Financial Inclusion for the Roma:
Banking as a Key to Social Progress, Open Society Foundations,
March 2012, p. 3,
http://www.soros.org/sites/default/files/roma-financial-inclusion-20120321.pdf. [393] UK poverty rip-off: The poverty
premium 2010 briefing, p. 4. [394] Le point sur le service bancaire de base, cinq
ans après son introduction,
Réseau Financement Alternatif, 2008, p. 4. [395] Banking services and poorer households, Financial Inclusion Taskforce,
December 2010. [396] BEUC response to the 2012 Public
consultation on bank accounts (see footnote 11), p. 20. [397] Calculation by Commission services based
on data from Measuring Financial Inclusion, The Global Findex Database,
World Bank, April 2012, Eurostat and Eurobarometer. [398] European Parliament resolution of 4
July 2012 with recommendations to the Commission on Access to Basic Banking
Services, 2010/2278(INI), 4 July 2012, p. 4. [399] Rapport Inclusion Financière 2011,
Réseau Financement Alternatif, 2011, p.17. [400] Study on the costs and benefits of
policy actions in the field of ensuring access to basic account – Final Report,
Centre for Strategy and Evaluation Services (CSES), July 2010, p. 44-45, http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study [401] FSUG response to the 2012 Public
consultation on bank accounts (see footnote 11), p. 13. [402] See Section 3.1 for further information. [403] Financial Inclusion Evidence Review: the
costs of banking exclusion and the benefits of access to bank accounts, Claire Whyley, 2010, p. 32. [404] Strategy for Financial Inclusion, Steering Group on Financial Inclusion,
Irish Department of Finance, June 2011, p. 56, http://www.finance.gov.ie/documents/publications/reports/2011/Fininclusreport2011.pdf
[405] Ibid. [406] Realising banking inclusion: the
achievements and challenges,
Financial Inclusion Taskforce, August 2010, p. 54 (http://www.hm-treasury.gov.uk/d/realising_banking_inclusion_report.pdf). [407] Basic banking services, by London Economics for European
Parliament's Committee on the Internal Market and Consumer Protection, November
2011, p. 19. [408] Nothing is free: A survey of the
social cost of the main payment instruments in Hungary, National Bank of
Hungary, p. 117. [409] Ibid., p. 27. [410] Ibid., p. 27. [411] Cost of payments in Denmark,
Denmark's National Bank, November 2011, p. 76. [412] Banking services and poorer households, UK Financial Services Taskforce,
December 2010, p.8-9 http://www.hm-treasury.gov.uk/d/fin_inclusion_taskforce_poorerhouseholds_dec2010.pdf. [413] Ibid. [414] Bericht der Bundesregierung zur
Umsetzung der Empfehlungen des Zentralen Kreditausschusses zum Girokonto für
jedermann, Drucksache 17/8312, German Bundestag, 27.12.2011, p. 8. [415] Ibid. [416] The UK poverty rip-off, Save the children UK, January 2011.
P.6 http://www.savethechildren.org.uk/sites/default/files/docs/UK_Poverty_Rip_Off_Brief_1.pdf
[417] Strategy for Financial Inclusion,
Steering Group on Financial Inclusion, Irish Department of Finance, June 2011,
p. 47, http://www.finance.gov.ie/documents/publications/reports/2011/Fininclusreport2011.pdf
[418] Study on the costs and benefits of policy
actions in the field of ensuring access to basic account – Final Report, Centre for Strategy and Evaluation Services
(CSES), July 2010,
p. 44-45, http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study. [419] Ibid., p.
44. [420] Financial Inclusion Evidence Review: the
costs of banking exclusion and the benefits of access to bank accounts, Claire Whyley, 2010, p. 22. [421] Costs of retail payment instruments
for Finnish banks, Bank of Finland, 23 December 2011, p. 5. [422] Cost of payments in Denmark,
Denmark's National Bank, November 2011, p. 9. [423] Ibid., pp. 9-10. [424] Ibid., p. 29. [425] Cost of payments in Denmark,
Denmark's National Bank, November 2011, p. 11. [426] Ibid. [427] Strategy for Financial Inclusion,
Steering Group on Financial Inclusion, Irish Department of
Finance, June 2011, p. 14, http://www.finance.gov.ie/documents/publications/reports/2011/Fininclusreport2011.pdf
[428] Ibid., p. 18. [429] Ibid., p. 11. [430] Data for 2009 on the basis of the latest
available Eurostat statistics. [431] Bericht der Bundesregierung zur
Umsetzung der Empfehlungen des Zentralen Kreditausschusses zum Girokonto für
jedermann, Drucksache 17/8312, German Bundestag, 27.12.2011, p. 7. [432] Nothing is free: A survey of the
social cost of the main payment instruments in Hungary, National Bank of
Hungary, p. 94. [433] Ibid., p. 94. [434] Ibid., p. 108. [435] http://www.fms.treas.gov/eft/regulations/31cfr208_text.html
[436] We Must Do Better Than Cash. USAID Impact
Blog, 2012. http://blog.usaid.gov/2012/02/we-must-do-better-than-cash/
[437] FSUG response to the 2012 Public
consultation on bank accounts (see footnote 11), p. 28 [438] EU 2020 strategy aims to reduce a number
of poor and socially excluded by at least 20 million by 2020 through, among
others, improved access to essential services and tackling financial exclusion. http://ec.europa.eu/social/main.jsp?catId=751&langId=en
[439] Ibid. [440] FSUG response to the 2012 Public
consultation on bank accounts (see footnote 11), p. 15. [441] BEUC response to the 2012 Public
consultation on bank accounts (see footnote 11), p. 22. [442] Bericht der Bundesregierung zur
Umsetzung der Empfehlungen des Zentralen Kreditausschusses zum Girokonto für
jedermann, Drucksache 17/8312, German Bundestag, 27.12.2011 [443] According to a December 2010 HM Treasury
statistical release (http://www.hm-treasury.gov.uk/d/stats_briefing_101210.pdf)
1 020 000 unbanked households received at least one benefit. The cost
of cashing a cheque of £200 has been reported to be £12 at Cash Converters (http://www.savethechildren.org.uk/sites/default/files/docs/UK_Poverty_Rip_Off_Brief_1.pdf)
If a household receives 4 cheques a month (weekly benefits), cost=
£12*1 020 000*12*4= £587,520,000/year. Assumptions: 1) all unbanked
households receive their benefits by cheque and cash it at Cash Converters; 2)
The cost of cashing a cheque of a different value (i.e. more or less than £200)
is still £12. [444] European Payments Council Newsletter,
October 2010, http://www.europeanpaymentscouncil.eu/pdf/EPC_Article_45.pdf
[445] Ibid. [446] Summary of responses to the public
consultation on access to a basic payment account, 25.01.2011, p. 3, http://ec.europa.eu/internal_market/finservices-retail/docs/inclusion/consultation_summary-2010_en.pdf
[447] http://www.fms.treas.gov/eft/regulations/31cfr208_text.htm
[448] Strategy for Financial Inclusion,
Steering Group on Financial Inclusion, Irish Department of Finance, June 2011,
p. 19 (http://www.finance.gov.ie/documents/publications/reports/2011/Fininclusreport2011.pdf)
[449] http://www.dailymail.co.uk/news/article-2136439/Now-elderly-told-collect-pension-local-shops-Giro-cheques-set-scrapped.html
[450] http://www.numericable.be/news/60/Numericable_tarifs_2012_be.pdf
[451] http://www.savethechildrefen.org.uk/sites/default/files/docs/UK_Poverty_Rip_Off_Brief_1.pdf
[452] Total number of unbanked households is 1
140 000. Cost= £253*1 1400 000= £288 420 000/year. [453] European Resolution with
recommendations to the Commission on access to basic banking services,
2012/2055(INI), 4 July 2012, p. 5. [454] BEUC response to the 2012 Public
consultation on bank accounts (see footnote 11), p. 22. [455] European Resolution with
recommendations to the Commission on access to basic banking services,
2012/2055(INI), 4 July 2012, p. 10. [456] Ibid., p. 4. [457] European Resolution with recommendations
to the Commission on access to basic banking services, 2012/2055(INI), 4 July
2012, p. 9. [458] Measuring Financial Inclusion, The
Global Findex Database, World Bank, April 2012, p. 50-52. [459] Summary of responses to the public
consultation on access to a basic payment account, 25.01.2011, p. 10, http://ec.europa.eu/internal_market/finservices-retail/docs/inclusion/consultation_summary-2010_en.pdf
[460] Study on the costs and benefits of
policy actions in the field of ensuring access to basic account – Final Report,
Centre for Strategy and Evaluation Services (CSES), July 2010, http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study [461] Study on the costs and benefits of
policy actions in the field of ensuring access to basic account – Final Report,
Centre for Strategy and Evaluation Services (CSES), July 2010, p. 51, http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study [462] Measuring Financial Inclusion,
The Global Findex Database, World Bank, April 2012, p. 5. [463] Strategy for Financial Inclusion,
Steering Group on Financial Inclusion, Irish Department of Finance, 2011,
p. 14
http://www.finance.gov.ie/documents/publications/reports/2011/Fininclusreport2011.pdf
[464] Study on the costs and benefits of
policy actions in the field of ensuring access to basic account – Final Report,
Centre for Strategy and Evaluation Services (CSES), July 2010, p. 40. http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study [465] Study on the costs and benefits of
policy actions in the field of ensuring access to basic account – Final Report,
Centre for Strategy and Evaluation Services (CSES), July 2010, p. 52. http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study [466] Impact assessment accompanying the
document Commission Recommendation on access to a basic payment account,
SEC(2011) 906, p. 41. [467] Study on the costs and benefits of
policy actions in the field of ensuring access to basic account – Final Report,
Centre for Strategy and Evaluation Services (CSES), July 2010, http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study [468] Ibid. [469] FSUG response to the 2012 Public consultation
on bank accounts (see footnote 11), p. 15. [470] FSUG response to the 2012 Public
consultation on bank accounts (see footnote 11), p. 16. [471] 2012 Public consultation on bank
accounts (see footnote 11), p. 10. [472] Summary of responses to the public consultation
on access to a basic payment account, 25.01.2011, p. 7, http://ec.europa.eu/internal_market/finservices-retail/docs/inclusion/consultation_summary-2010_en.pdf
[473] European Resolution with recommendations
to the Commission on access to basic banking services, 2012/2055(INI),
4 July 2012, p. 4. [474] European Resolution with
recommendations to the Commission on access to basic banking services,
2012/2055(INI), 4 July 2012, p. 13. [475] BEUC response to the Commission
Consultation on access to a basic payment account, 25.01.2011, p. 4, http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm
[476] Ibid., p. 6. [477] Study on the costs and benefits of
policy actions in the field of ensuring access to basic account – Final Report,
Centre for Strategy and Evaluation Services (CSES), July 2010, p.41 http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study [478] Summary of responses to the public
consultation on access to a basic payment account, 25.01.2011, p. 5, http://ec.europa.eu/internal_market/finservices-retail/docs/inclusion/consultation_summary-2010_en.pdf
[479] Study on the costs and benefits of
policy actions in the field of ensuring access to basic account – Final Report,
Centre for Strategy and Evaluation Services (CSES), July 2010, p. 51, http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study [480] Nothing is free: A survey of the
social cost of the main payment instruments in Hungary, National Bank of
Hungary, p. 27. [481] Strategy for Financial Inclusion,
Steering Group on Financial Inclusion, Irish Department of
Finance, June 2011, p. 14, http://www.finance.gov.ie/documents/publications/reports/2011/Fininclusreport2011.pdf
[482] In particular, Directive 2008/48/EC and
the Commission proposal for a Directive on credit agreements relating to
residential property, COM (2011) 142. [483] European Banking Federation (EBF)
response to the public consultation on access to a basic payment account,
25.01.2011, p. 6, http://ec.europa.eu/internal_market/finservices-retail/docs/inclusion/consultation_summary-2010_en.pdf
[484] BEUC response to the Commission
Consultation on access to a basic payment account, 25.01.2011, p. 7, http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm
[485] Information provided to the Commission
by Member States. [486] Market study of the current state of
play in Member States regarding initiatives in bank fee transparency and
comparability in personal current bank accounts, Van Dijk Management
consultants, 2011, http://ec.europa.eu/consumers/rights/docs/1912012_market_study_en.pdf. [487] Initiatives on glossaries that are owned
by a single financial institution (e.g. in Finland and Ireland) are not
considered. These glossaries solely cover terms used by a single bank, which
may increase transparency for a better understanding of list of fees of that
particular bank; however if all banks adopt this practice without concerting on
a common glossary, it may hinder comparability of fees between banks.
Glossaries targeting solely professionals, i.e. comprising exceedingly specific
terms and complex definitions, were excluded from the initiatives as these do
not target consumers at large and were considered to be hardly understandable
for the average consumer. [488] The survey conducted by this study
included Norway. [489] Recent initiatives from the Comité
Consultatif du Secteur Financier and the Conseil Français de Normalisation
Bancaire were launched regarding the disclosure of banking fees on monthly
statements, harmonisation of the terminology of monthly statements and
harmonisation of commercial brochures, as well as the legal obligation
concerning the annual statement of bank fees issued in 2009. These initiatives
are based on self-commitment by industry, but steered and monitored ex-post by
authorities. [490] An initiative on self-regulation has
been launched by personal current account providers under the pressure of the Office
of Fair Trading. It specifically aims at increasing transparency and
comparability through commitments related to disclosure of lists of fees. This
initiative is based on self-commitment by the industry, but steered and
monitored ex-post by authorities. [491] Data collection for prices of current
accounts provided to consumers, 2009, Van Dijk Management Consultants. [492] Indagine 2011 Sul Costo Dei Conti
Correnti Bancari, Banca D'Italia [493] Rapport
de Georges Pauget et Emmanuel Constans sur la tarification des services
bancaires", 07/2010 (http://www.ladocumentationfrancaise.fr/var/storage/rapports-publics/
104000365/0000.pdf) [494] Review of barriers to entry, expansion
and exit in retail, OFT, November 2010, available at: http://www.oft.gov.uk/OFTwork/markets-work/othermarketswork/review-barriers/
[495] The Internationalisation of Retail
Banking: Banco Santander’s Journey towards Globalisation - Long Range Planning
42 (2009) 654 e 677. [496] "Consumer Policy Toolkit"
– OECD, Paris 2010. [497] Unlike the proposal above, the
provisions in the “code monetaire et financier” do not foresee that fee lists
and fee brochures would include fully standardised terminology. Reference to
the French case is relevant in this context to assess the potential for
information overload of the measure under consideration. [498] Rapport sur la tarification des
services bancaires, July 2010, compiled for the French Ministry of the
Economy. [499] 2012 Public consultation on bank
accounts (see footnote 11). [500] See reply of the French Banking
Federation to the Public consultation on bank accounts, 2012, available at: http://ec.europa.eu/internal_market/finservices-retail/policy_en.htm#consultation and
http://ec.europa.eu/consumers/consultations/bank_accounts_consultation-2012_03_20_en.htm [501] Commission Staff Working Paper: "The
functioning of the retail electricity markets for consumers in the European
Union", SEC(2010) 1409. [502] CEER (Council of European Energy
Regulators): "Guidelines of Good Practices on Price Comparison Tools",
10 July 2012 (available at: http://www.energy-regulators.eu). [503] The proportion of households in the EU
with access to the internet reached 73% in 2011, representing an increase of 24
percentage points compared with 2006 according to Eurostat data. [504] Markets and Households on Low Incomes,
Office of Fair Trading, September 2010. [505] Initial Overview of Key Consumer
Trends in the EU, European Insurance and Occupational Pensions Authority
(EIOPA), February 2012. [506] Market study of the current state of
play in Member States regarding initiatives in bank fee transparency and
comparability in personal current bank accounts, Van Dijk Management
consultants, 2011. http://ec.europa.eu/consumers/rights/docs/1912012_market_study_en.pdf [507] Ibid. [508] BEUC's response to the CEER consultation
"Energy: Price Comparison Tools" refers to successful
accreditation scheme Confidence Code in the United Kingdom that is run by
Consumer Focus. [509] This assessment is based Data
collection for prices of current accounts provided to consumers, Van Dijk
Management Consultants (2009), which identified a total of 8 profiles of which,
4 were retained for the purposes of the analysis. The World Retail Banking
Report 2009, Cap Gemini, uses 5 usage patterns to construct price indices. [510] Bank fees behaviour study, 2012, TNS
Opinion Ltd. [511] France, Italy, Latvia, Lithuania,
Luxembourg, Spain, Poland, Portugal, United Kingdom. [512] Table 3.4 'Prevailing pricing
characteristics in selected Member States' in Section 2. [513] http://www.bis.gov.uk/policies/consumer-issues/consumer-empowerment/personal-data
[514] As referred to in the Consumer Credit
Directive (Directive 2008/48/EC on credit agreements for consumers and
repealing Directive 87/102/EEC, OJ L 33 of 22.05.2008, p. 66). [515] Measuring the Benefits of Mobile
Number Portability, Sean Lyons, Department of Economics Trinity College
Dublin, 2006, main conclusion on p. 27, http://www.tcd.ie/Economics/TEP/2006_papers/TEP9.pdf
[516] To estimate the average treatment
effects of mobile number portability on retail prices and switching by
customers, the study performed an econometric analysis of international
time-series cross-section data of 38 countries for the time period 1999-2004. [517] Good quality of the service was defined
as portability service with duration of up to 5 days. [518] Defined as real revenue per minute. [519] Proxied by 'churn' measured on a
quarterly basis. [520] Regulation of Mobile Telephony across
the European Union: An Empirical Analysis, Lukasz Grzybowski, University of
Munich, Journal of Regulatory Economics 28:1, p.47-67, 2005 http://www.researchgate.net/publication/
5156175_Regulation_of_Mobile_Telephony_across_the_European_Union_An_Empirical_Analysis [521] PCA Consumer Research Findings,
Quadrangle-2011, p.13 http://www.quadrangle.com/PCA_switching_consumer_research.pdf [522] ICB Final report recommendations,
ICB, September 2011, p. 184, http://www.ecgi.org/documents/icb_final_report_12sep2011.pdf
[523] Review of the EBIC Common Principles
on bank account switching in the European Member States, EBIC, 2011, p.4. [524] Ibid. [525] Easy switching? – A long way to go;
BEUC Monitoring Report of the 'Common Principles for Bank Account Switching',
BEUC, January 2011, p.6-12,
http://docshare.beuc.org/docs/1/DFMPDNNCIAHOOIFKIKKAABFKPDWY9DBYC69DW3571KM/BEUC/docs/DLS/2011-00183-01-E.pdf [526] Tarifs et mobilité bancaires: le désolant
palmarès des Banques, UFC
Que Choisir, October 010, pp.14-15, http://image.quechoisir.org/var/ezflow_site/storage/original/application/961abc610b3b1f8bd82e9ad5ed117a5f.pdf [527] Special Eurobarometer on Retail Financial
Services, European Commission, March 2012, p.87, http://ec.europa.eu/internal_market/finservices-retail/docs/policy/eb_special_373-report_en.pdf
[528] Ibid. [529] Consumers' views on switching service
providers, Eurobarometer 243, European Commission, January 2009, p. 35,
http://ec.europa.eu/public_opinion/flash/fl_243_en.pdf [530] Stick or twist? An analysis of consumer
behaviour in the personal current account market, Consumer Focus, October 2010, p.21,
http://www.consumerfocus.org.uk/files/2010/10/Stick-or-twist-for-web1.pdf. [531] Consumer Market Study on the consumers’
experiences with bank account switching with reference to the Common Principles
on Bank Account Switching,
GfK, January 2012, pp 28, 292, http://ec.europa.eu/consumers/rights/docs/switching_bank_accounts_report_en.pdf [532] Kontowechsel: Wie funktioniert er?, VKI, March 2010, p.12, http://wien.arbeiterkammer.at/bilder/d118/Studie_Kontowechsel2010.pdf [533] 2012 Public consultation on bank
accounts (see footnote 11), p. 195 [534] Which! Consultation response,
p.6, http://ec.europa.eu/internal_market/finservices-retail/policy_en.htm
[535] 2012 Public consultation on bank
accounts (see footnote 11), p.10. [536] FSUG response to the 2012 Public
consultation on bank accounts (see footnote 11), p.12. [537] 2012 Public consultation on bank accounts
(see footnote 11), p.11-12. [538] Code of Conduct on the Switching of
Current Accounts with Credit Institutions, Republic of Ireland, 2010,
http://www.centralbank.ie/regulation/processes/consumer-protection-code/Documents/Code%20of%20Conduct%20on%20the%20Switching%20of%20Current%20Accounts%20with%20Credit%20Institutions%201%20October%202010.pdf [539] Ibid., p.14. [540] Australian banking reforms, Australian Government, July 2012,
http://www.bankingreforms.gov.au/content/Content.aspx?doc=switching.htm [541] The analysis for AT, BE, BG, DE, DK, ES,
FI, FR, IT, LT, LU, LV, NL, PL, PT, UK is derived from the study;
Quantification of the economic impacts of EU action to improve fee
transparency, comparability and mobility in the Internal Market for personal
current accounts", ICF GHK, 2012; for the other MS the category of impact
was assessed by Commission staff. [542] BEUC response to the 2012 Public
consultation on bank accounts (see footnote 11), p. 19. [543] Data for AT, BE, BG, DE, DK, ES, FI, FR,
IT, LT, LU, LV, NL, PL, PT, UK is derived from the study; Quantification of the
economic impacts of EU action to improve fee transparency, comparability and
mobility in the Internal Market for personal current accounts", ICF GHK,
2012; for the other MS the category of impact was assessed by Commission staff. [544] [545] 2012 Public consultation on bank
accounts (see footnote 11),
p.12. [546] Background paper on the Dutch
Interbank Switch Support Service (Overstapservice), NVB, May 2006, p.1, http://www.nvb.nl/publicaties/switchsupportmay20061.pdf
[547] ICB Final report recommendations,
ICB, September 2011, p. 220, http://www.ecgi.org/documents/icb_final_report_12sep2011.pdf
[548] Ibid., p. 221. [549] Ibid. [550] Calculated as for variant A; assumption:
benefits increase by 10%. [551] Quantification of the economic
impacts of EU action to improve fee transparency, comparability and mobility in
the Internal Market for personal current accounts, ICF GHK, 2012. [552] International Bank Account Number [553] Bank Identifier Code [554] Single European Payments Area [555] See also: The SEPA IBAN Strategy,
June 2006, p. 2. The bank identifier that is embedded in the IBAN is the
identifier assigned by national clearing systems or other national bodies. Most
national clearing codes in the IBAN identify the bank at branch level. [556] 2012 Public consultation on bank
accounts (see footnote 11), p. 16. [557] response to the 2012 Public consultation on bank
accounts (see footnote 11), p. 16. [558] Customer Mobility in Relation to Bank
Accounts, BearingPoint GmbH, 2007, p. 48. This figure seems to be
consistent with an estimation quoted by a Dutch bank in the Expert Group,
according to which in the Netherlands the number portability would cost, only
for the banks, EUR 300-500 million as well as with the Dutch Banking
Association who estimated the number portability to cost
EUR 260-510 million. [559] Consumers' views on switching service
providers, Eurobarometer 243, European Commission, January 2009, p.85,
http://ec.europa.eu/public_opinion/flash/fl_243_en.pdf, [560] Calculated as for variant A; assumption:
benefits increase by 10%. [561] Based on model of analysis of potential
reduction of PCA prices resulting from switching options by the contractor
(GfK), Quantification of the economic impacts of EU action to improve fee
transparency, comparability and mobility in the Internal Market for personal
current accounts, ICF GHK, 2012. [562] Study on the costs and benefits of policy
actions in the field of ensuring access to basic account – Final Report,
Centre for Strategy and Evaluation Services (CSES), July 2010, p. 44. http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study. [563] Ibid. [564] Ibid., p. 46. [565] Ibid., p. 46. [566] Ibid., p. 46. From Family Welfare Association (retrieved
from http://www.inclusioncentre.org.uk/3.html).
[567] Ibid., p. 40. The data was collected by CSES associates
across the European Union from local banks. [568] Ibid., p. 41. [569] Estimate by Commission services. [570] Study on the costs and benefits of
policy actions in the field of ensuring access to basic account – Final Report,
Centre for Strategy and Evaluation Services (CSES), July 2010, p. 44. http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study,
p. 41 [571] Ibid., p. 40. [572] Ibid., p. 54. [573] Ibid., p. 54. [574] Ibid.,
p. 50. [575] Ibid., p. 52. Data is based on national studies,
notably from the UK as well as research by external consultants. The study
specifically states that in at least one case, stakeholders consider the UK
data as representative of other countries. [576] Study on the costs and benefits of policy
actions in the field of ensuring access to basic account – Final Report, Centre for Strategy and Evaluation
Services (CSES), July 2010, p. 52. http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study.
Data is based on national
studies, notably from the UK as well as research by external consultants. The
study specifically states that in at least one case, stakeholders consider the
UK data as representative of other countries. [577] Study on the costs and benefits of
policy actions in the field of ensuring access to basic account – Final Report,
Centre for Strategy and Evaluation Services (CSES), July 2010, p. 54.
http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study. [578] Calculation by Commission services. [579] SEC(2011)906, annexes, p. 58. [580] Eurostat 2008, Average Hourly Labour
costs, Nace Rev. 1.1. [581] SEC(2011)906. [582] SEC(2011)906, annexes, p. 58. [583] Eurostat 2008, Average Hourly Labour
costs , Nace Rev. 1.1. [584] SEC(2011)906. [585] Study on the costs and benefits of
policy actions in the field of ensuring access to basic account – Final Report,
Centre for Strategy and Evaluation Services (CSES), July 2010, p. 60.
http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study; [586] Calculation by Commission services. [587] Study on the costs and benefits of
policy actions in the field of ensuring access to basic account – Final Report,
Centre for Strategy and Evaluation Services (CSES), July 2010, p. 44. http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study. [588] Ibid., p. 44. [589] Ibid., p. 46. [590] Ibid., p. 46. [591] Ibid., p. 46. From Family Welfare Association (retrieved
from http://www.inclusioncentre.org.uk/3.html). [592] Study on the costs and benefits of
policy actions in the field of ensuring access to basic account – Final Report,
Centre for Strategy and Evaluation Services (CSES), July 2010, p. 40. http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study.
The data was collected by CSES associates across the European Union from local
banks. [593] Ibid., p. 41. [594] Estimate by Commission services. [595] Study on the costs and benefits of
policy actions in the field of ensuring access to basic account – Final Report,
Centre for Strategy and Evaluation Services (CSES), July 2010, p. 41. http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study. [596] Ibid., p. 40. The data was collected by CSES associates
across the European Union from local banks. [597] Study on the costs and benefits of
policy actions in the field of ensuring access to basic account – Final Report,
Centre for Strategy and Evaluation Services (CSES), July 2010, p. 54. http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study. [598] Ibid., p. 54. [599] Ibid., p. 52. Data is based on national studies,
notably from the UK as well as research by external consultants. The study
specifically states that in at least one case, stakeholders consider the UK
data as representative of other countries. [600] Study on the costs and benefits of policy
actions in the field of ensuring access to basic account – Final Report, Centre for Strategy and Evaluation
Services (CSES), July 2010, p. 52. http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study.
Data is based on national
studies, notably from the UK as well as research by external consultants. The
study specifically states that in at least one case, stakeholders consider the
UK data as representative of other countries. [601] Study on the costs and benefits of
policy actions in the field of ensuring access to basic account – Final Report,
Centre for Strategy and Evaluation Services (CSES), July 2010, p. 50. http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study. [602] Study on the costs and benefits of
policy actions in the field of ensuring access to basic account – Final Report,
Centre for Strategy and Evaluation Services (CSES), July 2010, p. 54.
http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study. [603] Calculation by Commission services. [604] SEC(2011)906, annexes, p. 58. [605] Eurostat 2008, Average Hourly
Labour costs, Nace Rev. 1.1. [606] SEC(2011)906. [607] SEC(2011)906, annexes, p. 58. [608] Eurostat 2008, Average Hourly
Labour costs , Nace Rev. 1.1. [609] SEC(2011)906. [610] Study on the costs and benefits of
policy actions in the field of ensuring access to basic account – Final Report,
Centre for Strategy and Evaluation Services (CSES), July 2010, p. 60.
http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study; [611] Calculation by Commission services. [612] http://epp.eurostat.ec.europa.eu/statistics_explained/index.php?title=File:Total_population_and_resident_non-national_population_by_group_of_citizenship,_2010.png&filetimestamp=20111125175609
[613] Study on the costs and benefits of
policy actions in the field of ensuring access to basic account – Final Report,
Centre for Strategy and Evaluation Services (CSES), July 2010, p. 44. http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study. [614] Ibid., p. 44. [615] Ibid., p. 46. [616] Study on the costs and benefits of
policy actions in the field of ensuring access to basic account – Final Report,
Centre for Strategy and Evaluation Services (CSES), July 2010, p. 46. http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study. [617] Ibid., p. 46 from Family Welfare Association (retrieved
from http://www.inclusioncentre.org.uk/3.html).
[618] Study on the costs and benefits of policy
actions in the field of ensuring access to basic account – Final Report,
Centre for Strategy and Evaluation Services (CSES), July 2010, p. 40. http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study.
The data was collected by CSES associates across the European Union from local
banks. [619] Study on the costs and benefits of
policy actions in the field of ensuring access to basic account – Final Report,
Centre for Strategy and Evaluation Services (CSES), July 2010, p. 41. http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study. [620] Estimate by Commission services. [621] Study on the costs and benefits of
policy actions in the field of ensuring access to basic account – Final Report,
Centre for Strategy and Evaluation Services (CSES), July 2010, p. 41. http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study. [622] Ibid., p. 40. The data was collected by CSES associates
across the European Union from local banks. [623] Study on the costs and benefits of
policy actions in the field of ensuring access to basic account – Final Report,
Centre for Strategy and Evaluation Services (CSES), July 2010, p. 54. http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study. [624] Ibid., p. 54. [625] Study on the costs and benefits of policy
actions in the field of ensuring access to basic account – Final Report, Centre for Strategy and Evaluation
Services (CSES), July 2010, p. 52. http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study.
Data is based on national
studies, notably from the UK as well as research by external consultants. The
study specifically states that in at least one case, stakeholders consider the
UK data as representative of other countries. [626] Ibid., p. 52. [627] Study on the costs and benefits of
policy actions in the field of ensuring access to basic account – Final Report,
Centre for Strategy and Evaluation Services (CSES), July 2010, p. 50. http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study. [628] Ibid., p. 54. [629] Calculation by Commission services. [630] SEC(2011)906, annexes, p. 58. [631] Eurostat 2008, Average Hourly Labour
costs, Nace Rev. 1.1. [632] SEC(2011)906. [633] SEC(2011)906, annexes, p. 58. [634] Eurostat 2008, Average Hourly
Labour costs , Nace Rev. 1.1. [635] SEC(2011)906. [636] Study on the costs and benefits of
policy actions in the field of ensuring access to basic account – Final Report,
Centre for Strategy and Evaluation Services (CSES), July 2010, p. 60.
http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study; [637] Calculation by Commission services. [638] http://epp.eurostat.ec.europa.eu/statistics_explained/index.php?title=File:Total_population_and_resident_non-national_population_by_group_of_citizenship,_2010.png&filetimestamp=20111125175609 [639] Study on the costs and benefits of
policy actions in the field of ensuring access to basic account – Final Report,
Centre for Strategy and Evaluation Services (CSES), July 2010, p. 44. http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study. [640] Ibid., p. 44. [641] Ibid., p. 46. [642] Ibid., p. 46. [643] From Family Welfare Association (retrieved from http://www.inclusioncentre.org.uk/3.html).
[644] Study on the costs and benefits of
policy actions in the field of ensuring access to basic account – Final Report,
Centre for Strategy and Evaluation Services (CSES), July 2010, p. 40. http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study.
The data was collected by CSES associates across the European Union from local
banks. [645] Study on the costs and benefits of
policy actions in the field of ensuring access to basic account – Final Report,
Centre for Strategy and Evaluation Services (CSES), July 2010, p. 41. http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study. [646] Estimate by Commission services. [647] Study on the costs and benefits of
policy actions in the field of ensuring access to basic account – Final Report,
Centre for Strategy and Evaluation Services (CSES), July 2010, p. 41. http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study. [648] Ibid., p. 40. The data was collected by CSES associates
across the European Union from local banks. [649] Study on the costs and benefits of
policy actions in the field of ensuring access to basic account – Final Report,
Centre for Strategy and Evaluation Services (CSES), July 2010, p. 54. http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study. [650] Ibid., p. 54. [651] Ibid., p. 52. Data is based on
national studies, notably from the UK as well as research by external
consultants. The study specifically states that in at least one case,
stakeholders consider the UK data as representative of other countries. [652] Study on the costs and benefits of policy
actions in the field of ensuring access to basic account – Final Report, Centre for Strategy and Evaluation
Services (CSES), July 2010, p. 52. http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study.
Data is based on national
studies, notably from the UK as well as research by external consultants. The
study specifically states that in at least one case, stakeholders consider the
UK data as representative of other countries. [653] Study on the costs and benefits of
policy actions in the field of ensuring access to basic account – Final Report,
Centre for Strategy and Evaluation Services (CSES), July 2010, p. 50. http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study. [654] Ibid, p. 54. [655] Calculation by Commission services. [656] SEC(2011)906, annexes, p. 58. [657] Eurostat 2008, Average Hourly
Labour costs, Nace Rev. 1.1. [658] SEC(2011)906. [659] SEC(2011)906, annexes, p. 58. [660] Eurostat 2008, Average Hourly
Labour costs , Nace Rev. 1.1. [661] SEC(2011)906. [662] Study on the costs and benefits of
policy actions in the field of ensuring access to basic account – Final Report,
Centre for Strategy and Evaluation Services (CSES), July 2010, p. 60.
http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study; [663] Calculation by Commission services. [664] Study on the costs and benefits of
policy actions in the field of ensuring access to basic account – Final Report,
Centre for Strategy and Evaluation Services (CSES), July 2010, p. 44. http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study. [665] Estimate by Commission services. [666] Study on the costs and benefits of
policy actions in the field of ensuring access to basic account – Final Report,
Centre for Strategy and Evaluation Services (CSES), July 2010, p. 44. http://ec.europa.eu/internal_market/finservices-retail/inclusion_en.htm#study. [667] Ibid., p. 46. [668] Ibid., p. 46. [669] Ibid., p. 46 from Family Welfare Association (retrieved
from http://www.inclusioncentre.org.uk/3.html).
[670] Data collection for prices of current
accounts provided to consumers – Van Dijk Management Consultants (2009). [671] Eurostat: HICP (2005=100) - Annual Data
(average index and rate of change) – Changes in prices of financial services,
2009 – 2011. [672] Specific price information for Belgium,
Poland and Spain was used to further adjust the evolution in prices.
Information was collected as part of the study Quantification of the
economic impacts of EU action to improve fee transparency, comparability and
mobility in the internal market for bank personal current accounts, GHK
consulting. [673] Source: Hourly labour costs, Financial
Intermediation – Nace Rev. 1.1, Eurostat, 2007. [674] Hourly labour costs, Public
administration and defence; compulsory social security – Nace Rev. 1.1,
Eurostat, 2007. [675] European Central Bank: (List of MFIs ;
Frequency: Monthly ; MFI category: Credit Institutions). [676] European Central Bank: (Number of
employees of credit institutions). [677] Eurostat Population data; Population
projections – both figures are computed as total EU population less EU
population under 15 years of age. [678] Special Eurobarometer on Retail
Financial Services, European Commission, February 2012, figure 2,
p. 13, http://ec.europa.eu/internal_market/finservices-retail/policy_en.htmhttp://ec.europa.eu/internal_market/finservices-retail/policy_en.htm. [679] The regulatory baseline assessment and
methodology used to compute the discounting factor were provided in the study Quantification
of the economic impacts of EU action to improve fee transparency, comparability
and mobility in the internal market for bank personal current accounts, GHK
consulting. [680] ICB Final report recommendations, ICB,
September 2011, p. 220, http://www.ecgi.org/documents/icb_final_report_12sep2011.pdf. [681] Ibid. [682] Estimated as 10% of Europe-wide payment
account users. [683] Conservative estimate of time saved by
consumers due to redirection service. [684] Current number of credit institutions in
Europe (ECB data). [685] ICB Final report recommendations, ICB,
September 2011, p. 220, http://www.ecgi.org/documents/icb_final_report_12sep2011.pdf. [686] Ibid. [687] Estimated as 10% of Europe-wide payment
account users. [688] Conservative estimate of time saved by
consumers due to redirection service. [689] Current Number of credit institutions in
Europe (ECB data). [690] ICB Final report recommendations, ICB,
September 2011, p. 220, http://www.ecgi.org/documents/icb_final_report_12sep2011.pdf. [691] Ibid. [692] Estimated as 10% of Europe-wide payment
account users. [693] Conservative estimate of time saved by
consumers due to redirection service. [694] ICB Final report recommendations, ICB,
September 2011, p. 220, http://www.ecgi.org/documents/icb_final_report_12sep2011.pdf. [695] Ibid. [696] Estimated as 10% of Europe-wide payment
account users. [697] Conservative estimate of time saved by
consumers due to redirection service. [698] Quantification of the
economic impacts of EU action to improve fee transparency, comparability and
mobility in the internal market for bank personal current accounts, GHK consulting