[Dave Birch] The European Central Bank, which has already said that it would like banks to set up a debit card scheme to challenge the dominance of Maestro in the eurozone and proposed a a new cross-border legal framework to oversee all card payment schemes operating in that zone, is very keen on new regulation to improve the state of the European payments market. One of the ECB’s points is that they want to create a level playing field of payments. This is a good idea: so is there a single or simple action that could be taken to do this?

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As Chris Skinner noted, there’s an analysis of the most recent SEPA progress report over at Linkdump. It’s well worth reading, but in case you haven’t the time to pop over there I’ll just highlight one quote from the analysis:

The ECB don’t apply their own one-SEPA-size fits all-reasoning to their own product: cash. In the cash area they go out of their way to explain that they are unable to harmonize cash rules in Europe.

If there is going to be a level playing field, then lightening the regulatory burden on e-cash might be an obvious place to begin. One source of costs is the requirement to verify the identity of e-cash users. There is a simplified due diligence procedure for a limited set of circumstances:

  1. if the device cannot be recharged, the maximum amount stored in the device is no more than 150 euro; or
  2. if the device can be recharged, a limit of 2,500 euro is imposed on the total amount transacted in a calendar year, except when an amount of 1,000 euro or more is redeemed in that same calendar year by the bearer. Where e-money purses cannot be recharged, and the total purse limit does not exceed €150, verification of identity does not need to be undertaken.

These limits seem low to me. I think the limit should have some symbolic value: since the largest denomination banknote is 500 euros, that should be the limit. If a purse can store more than 500 euros then KYC/AML applies, if it can store less than 500 euros then KYC/AML should not. This reasonable compromise would stimulate the pre-paid market and provide for a much lower cost of operation, enabling new entrants (and therefore more competition) to the e-purse, m-purse and whatever else purse market. This, in turn, I am sure would lower transaction costs across a swathe of the online marketplace and therefore stimulate further growth.

These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]

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