Brussels paves way for speedier cross-border payment system

European consumers will be able to make electronic payments anywhere in the EU within 36 hours under new laws proposed by the European commission and designed to save the economy up to €100bn a year.

Charlie McCreevy, internal market commissioner, said yesterday cross-border payments of up to €50,000 (£34,000) by credit card, debit card, bank transfer or direct debit would be "as easy, cheap and secure" as transactions within one country.

Warning banks that new service providers would enter the market if they refused to lower their costs, he insisted that by 2010 customers should be able to complete cross-border transactions by the end of the next working day.

The banks, which have lobbied for three days to carry out such payments, say the new "single payments area" will be costly but Mr McCreevy said: "In this era of advanced technology there's no reason why you could not do it in real time and a day plus one is not an excessive burden."

According to the commission, the annual cost of making payments between national systems is 2-3% of GDP while only 3% of the €52 trillion in 231bn transactions involving goods and services is cross-border.

The draft directive, Mr McCreevy said, "is designed to lower transaction costs for all the citizens of Europe" and would enable them to pay less for basic banking services, which cost between €34 and €252 a time across the EU.

Saying that banks use the current system as "a nice little earner", he indicated he would give them incentives to adopt the new one. "It won't just be the banks which are service providers and, if they find it too costly, others will be there to do the business and lower transaction costs.

"I guarantee they will wake up very quickly when they see someone taking slices of a very lucrative market."

The former Irish finance minister has been told by the banks that they prefer to begin operating a single euro payments area in 12 countries but he said: "This covers all 25 EU countries and the banks will have to rethink."