One of the main priorities of the Juncker Commission is to build a deeper and fairer single market that offers consumers access to better products and cheaper prices. In this context, the European Commission on 28 March 2018 put forward a proposal on cross-border payments, including bank transfers, cash machine withdrawals and card payments abroad within the EU. The proposal aims to make euro transfers everywhere in the EU cheaper and currency conversions more transparent and less confusing. It delivers on the first two points of an action plan, presented by the Commission in March 2017, to strengthen the EU single market for retail financial services.

Cross-border transactions

Currently, consumers and businesses within the euro area can carry out cross-border euro transactions at the same cost as they would pay for a domestic transaction. But this does not extend to non-euro Member States. In fact, the approximately 150 million Europeans who live outside the euro area sometimes have to pay disproportionately high fees for such transactions.  

What does this mean in practice? It means that somebody living in Bulgaria, for example, who wants to transfer €50 to Finland could end up paying as much as €24. As a comparison, someone living in Italy sending €50 to Finland would probably only pay a few cents at most. This is because EU rules prevent banks from charging more for this transaction than for a domestic one as both countries are in the euro area.

The Commission's proposal will mean all Europeans benefit from the same conditions when making cross-border payments in euro. The Commission estimates that the move could save consumers and businesses about €1 billion a year.

Currency conversions

As things are now, for someone paying with a card or withdrawing cash at a cash machine in a country using a different currency from their own, it is almost impossible to know exactly how much it's going to cost them. The other part of the Commission's proposal aims to tackle this problem by requiring payment service providers to disclose the full cost of a currency conversion before the payment or transaction is made.

The added transparency will also be a good thing in situations where consumers are given the choice between paying in the local currency or their own. This is called 'dynamic currency conversion'. But because of a lack of clear information, people often find it difficult to choose the cheapest option. Under the proposal, the European Banking Authority will develop transparency standards that will allow travellers to compare the costs of different conversion options and make an informed choice. The proposal provides for a three-year transition period. During this time, consumers will be protected against overcharging by a cap on currency conversion fees.

''We are granting citizens and businesses in non-euro area countries the same conditions as euro area residents when making cross-border payments in euro'', said Valdis Dombrovskis, Vice-President in charge of Financial Stability, Financial Services and Capital Markets Union. The proposal ''will also require full transparency in currency conversion when consumers are paying by card in a country which does not have the same currency as their own'', Vice-President Dombrovskis added.

The proposal is now with the European Parliament and Council for adoption.

Read more on cross-border payments