Tuesday, December 12, 2006

Dutch competition authority pleased with competiton for POS-switching but concerned/monitoring competition side-effects of evolution towards SEPA

Today the Dutch competition authority released their financial monitor 2006 (in Dutch) which contained two chapters on payments. One chapter outlined that as of the structural change to move the responsibility for negotiating POS-switching fees to banks, the competition increased. Small and large retailers get cheaper POS-switching. So that was a bit of good news.

But a bit of bad news as well. Chapter 6 demonstrates that the Dutch competition authority is still struggling to come to terms with SEPA. Their description is not so bad, but then again; not completely accurate either. The report speaks of one SEPA-system (implying one scheme/brand rather than standardised messages) and suggests that SEPA stands for Single European Payments Area (forgetting the focus on the Euro-zone: Single Euro Payments Area). Furthermore they take the migration deadline 2010 as a fixed deadline where all credit-transfers and direct debits in all the Eurozone will be sepa-compliant (whilst some national variations may still exist).

Furthermore the analysis of risks occurs on a card-based view of payments. Leading to a situation where the competition authority may forbid Dutch banks to agree bilaterally on lower interchange fees amongst them (in order to preserve the possibility for outside players to compete with the Dutch in the Netherlands). And funnily there is still the fear that the acuirer market is concentrated with one player (while effectively there are about 20 active in the market right now).

So, if one thing is clear, it is that it will be impossible for banks to satisfy all expectations. Politicians desire no fee hikes but do wish a payment service directive (which is going to cost). Retailers wish no fee rise but competition authority will not allow low-cost local agreements between Dutch banks. Central banks do not wish to see local variations of debit cards, but local interest groups do wish such a thing.

Where this will end is quite clear. Continued debates, bank-blaming and no consensus whatsoever. And later, when we are all old, we will come to realize that at this point in time we were trying to come to terms with the shift from domestic retail payments markets to European markets. Which brings us in a situation in which many fear to lose what they have and few are able to imagine the future and the benefits of what is to come. But assuming that we will not be hindered by geopolitical interruptions, these benefits will in the long run stand out: a deeper market in Europe, more competition, lower cost and convergence of fees.