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Going against the trend?European integration for retail payments
Wiebe Ruttenberg
Joint ECB-MNB Conference, Budapest, 15-16 November 2012
ECB-CONFIDENTIAL
Contents
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3
I. Why do retail payments matter?
Efficient, robust, standardised,
integrated retail payment systems
Facilitate trade
Increase competition and
innovation
Foster financial
integration
Completion of the EU monetary union
4
I. Why do retail payments matter?
Social costs of retail payment instruments • 0.96 % GDP or 45 billion euro for participating countries
• 1 % GDP or 130 billion euro for all EU27ECB Occasional Paper; Social and private costs of retail payment instruments (2012)
Bank stability and performance • Effective retail payment services entail higher bank stability
• Higher performance through more developed retail payment services
ECB Working Paper; Return to retail banking and payments (2009)
Social relevance of retail banking• Taking deposits, providing credit to real economy, and provision
of payment services to firms and households are key public services
• Evidence positive impact of retail payments on economic growthAdvisory Committee on the Future of Banks in the Netherlands (“Restoring Trust”, April 2009)
UK HM Treasury (“Banking reform: delivering stability and supporting a sustainable economy”, June 2012)
ECB (work in progress); Retail payments and economic growth (2012)
I. Retail payments on the agenda of many authorities
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Worldbank
National Central Banks
Bank for International Settlement - CPSS
European Commission
European Central BankInternational Monetary Fund
Federal Reserve System
I. Why is the ECB involved?
One of the basic tasks to be carried out through the ESCB is to “promote the smooth operation of payment systems” Article 127(2) of the Treaty on the Functioning of the European Union
“the ECB may make regulations, to ensure efficient and sound clearing and payment systems”Article 22 of the Statute of the European System of Central Banks and of the European Central Bank
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I. Catalyst mandate
Source: Eurosystem’s third SEPA Progress Report (June 2003)
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Actions to be taken under the Eurosystem’s catalyst role
Monitoring of progress of and cooperation with the banking industry and the EPC in particular
Eurosystem offers assistance in developing cross-border services for payment instruments
Increase of transparency and analysis on retail issues
Cooperation with the European Commission
I. ECB as a catalyst
Interacting with:•Banking industry: establishment of SEPA credit transfers and SEPA direct debits•EU legislator: the Payment Services Directive, Regulation on Cross-border Payments, SEPA End-date Regulation, Green Paper on Cards, Internet & Mobile, etc.•EU Competition authority: cards, direct debit, internet payments, etc.•National Central Banks: from reactive to proactive stance
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II. What has been achieved so far?
Stylised facts and figures
•Retail payment markets show healthy
growth
•Convergence of retail payment markets
•SEPA update
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II. Retail payment markets show healthy growth
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II. Retail payment markets show healthy growth
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II. Retail payment markets withstood turmoil times
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Growth in euro area payments volumes below the 12-year average in 2011 due to financial turmoil and European economy downturn
But payments growth being still far above average GDP growth
Substantial differences across European payments markets CAGR
(GDP)
2000-2011
CAGR(GDP)
2010-2011
Total euro area 4.5% (1.2%) 2.3% (1.4%)
Total non-euro area 6.5% (2.0%) 7.7% (1.7%)
Total all EU 27 5.1% (1.4%) 4.1% (1.5%)
Note: “CAGR” is Compound Annual Growth Rate for the volume of non-cash transactionsSource: European Central Bank Statistical Data Warehouse
II. Convergence of retail payments, volume
Some convergence in
payment behavior in EU
for all payment
instruments
except cheques & e-money
Euro introduction
accelerated speed of
convergence
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Notes: Convergence is measured as the decrease in the dispersion of payment instrument use across countries. Source: ECB (2012) forthcoming.
II. Convergence of retail payments, value
14
Notes: Convergence is measured as the decrease in the dispersion of payment instrument use across countries. Source: ECB (2012) forthcoming.
Some convergence in
payment behavior in EU
for all payment
instruments
except cheques & e-
money
Euro introduction
accelerated speed of
convergence
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II. SEPA update
Fees for cross-border credit transfers have dropped by around 90% between 2001 and 2011. (EU Regulation 2560/2001 and 924/2009)
Transaction time has decreased from 3.3 days in 2001 to max. 1 day in 2012. (EU Payment Services Directive / 2007)
EMV migration of cards was 88% and of terminals 94% in the EU-27 end-Q4 2011. (market self-regulation)
III. What about the future?
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III. What about the future?
Retail banking and - with it - retail payments will continue to have high social relevance
The financial crisis should not slow down retail payment integration, as this affects trade, financial integration and EU markets competitiveness
Vision for ECB role in retail payments:
transfer knowledge as expertise and influence centre in retail payments;
manage at EU level the political and policy dialogue with financial industry, end-users, EU legislator and other EU authorities;
have an equal, mutual respected and trusted relationship with the EC (MARKT, COMP, SANCO);
increase European influence on global level.17
III. What about the future? (2)
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III. What about the future? (3)
19
Conclusions
Retail banking and - with it - retail payments will continue to have high social relevance
The financial crisis should not slow down retail payment integration, as this affects trade, financial integration and EU markets competitiveness
Evidence shows that financial integration through convergence of payments behaviour is happening, but at a slow pace
Europe and beyond: SEPA continues to drive change
An integrated and efficient market of secure payment services in Europe is a moving and dynamic target
Need strong public authorities to set the framework
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Thank you for your attention!
Questions and comments?