Brussels, 31/01/2007 (Agence Europe) - On Wednesday 31 January, the European Commission published its final report of its competition inquiry into the retail banking sector. The inquiry has found a number of competition concerns in the markets for payment cards, payment systems and retail banking products. By attacking these obstacles, the Commission, working closely with national authorities, hopes to boost retail banking competition in the run-up to the creation of the Single Euro Payment Area (SEPA).
The major players have, of course, made their protests heard, but the sector has already begun significant reforms in several member states since the mid-term report in April 2006, which raised concerns over payment cards. The Commission welcomed this, but castigated recalcitrants, promising them imminent infringement procedures.
On “self-regulating reformers” like Portugal, Finland and Austria, Competition Commissioner Neelie Kroes told press, “They are aware that they are not acting in line with our rules ands regulations, and they are correcting that. I am grateful and they should continue”.
With regard to the least cooperative, like Belgium and Italy, she said she sincerely hoped “that this final report will be a clear signal for those not already taking action that they have to do so. We won't wait too long. I have no excuse for all those consumers and retailers that we know something is rotten and we are not acting on it”.
The report is made up essentially of two sections, one on payment cards and the other on the retail banking products market. With regard to payment cards and systems, nearly 2% (€25 billion) of the total spent by card in the EU goes directly from retailers to banks. In particular, the Commission inquiry found several areas of concern, including the highly concentrated markets in several member states, and large variations (up to 400%) between fees and interchange fees to be paid by retailers in different member states. The Commission does not propose zero interchange fees, but the way the fees operate in some payment networks was of concern. In addition, the Commission is not satisfied with the high and sustained profitability in card issuing; rules and practices which weaken competition at retailer level; and divergent technical standards across the EU, which may prevent service providers from operating efficiently on a pan-EU scale.
As for the second section, devoted to retail baking products market, the report reveals several concrete and implicit obstacles to competition. The very fact of constantly high profitability along with high market concentration stokes fears that the banks are not able to influence the level of prices for consumers and small firms. In addition, some credit registers may be used to exclude new entrants to retail banking markets. Then, cooperation between banks can reduce competition, as can the very common practice of product tying, where, for example, a customer is forced to buy an extra insurance or current account. Product tying and additional fees can also constitute obstacles to customer mobility, another anti-competition factor.
Reaction to the report depends on the respondent's area of involvement. Peter Ayliffe, head of Visa Europe, said, “We will analyse today's report carefully but are initially pleased (by) Nellie Kroes('s) measured approach”. He had initially feared the very real possibility of a total ban on interchange fees (see EUROPE 9346). EuroCommerce, which represents retail, wholesale and international trade in Europe, welcomed the report: “The banks and card companies have had it their own way for too long,” it said on a press release. Secretary General Xavier Durieu said, “The Commission's report is a very important step”.
Ahead of the SEPA initiative, which is currently being developed, the Commission has these anti-competition practices in its sights. Asked by press if national authorities could count on the backing of the Commission in their initiatives in this area, the answer Ms Kroes gave was short and to the point: “Yes”. (cd)