European Union finance ministers have agreed on the final terms of the payment services directive (PSD), which will set a new legal framework aimed at cutting costs for cross-border cash transations in the European Union.
The final details of the legislation were hammered out by the 27 member states at the monthly Ecofin council in Brussels today. Lawmakers were expected to pass the PSD legislation by the end of 2006.
The proposals will bring down legal barriers to the implementation of a single euro payments area (Sepa) and will make cross-border payments - by credit card, debit card, electronic bank transfer and any other means - as cheap as domestic transactions.
But the issue has pitted countries in the north of Europe such as the UK and Sweden, which favour a free market approach and want to expand use of payment cards and credit across the region, with countries like France, Spain and Italy which want to protect their more traditional banking industries.
According to a Financial Times report debate has also raged around around non-bank entities, such as e-payment providers, which the legislation will also cover.
But now that member states have agreed a deal, the legislation could theoretically be passed at its first reading next month.
Agreement on the directive is vital to the implementation of Sepa, the first phase of which is slated for introduction in January 2008.
Commenting on the PSD, Charlie McCreevy, internal market and services commissioner, says the framework "is a decisive milestone towards making the single euro payments area a reality".
"The introduction of the first Sepa instruments is now less than 10 months away. This unanimous agreement sends signals that will be well received by all those, and there are many, who believe in Sepa and have already invested massively in it."
In a separate statement the European Banking Federation (EBF) says today's deal "strikes a good balance between the various points of view" and allow for an implementation which will make payments technically workable.
But the EBF says the long delay in the decision will mean that the direct debit part of Sepa cannot be implemented before the end of 2009.
In January Gerard Hartsink, chair of the European Payments Council (EPC), warned that Europe's banks will miss the first Sepa deadline for direct debits because of delays in passing the PSD.
Hartsink predicted that even if the PSD legislation is passed in April 2007 in one reading, Sepa-related direct debit services won't be delivered by banks until the end of 2008.