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Payment Accounts Directive​

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Payment Accounts Directive

Updated: October 2020


PROPOSED SOLUTIONS AND ACTIONS


It is very easy for consumers to change accounts due to the account switching services, especially since the implementation of the Payment Account Directive 2014/92, which specifies the requirements for account switching services within the European Union. As a consequence, there is also no demand worth mentioning with regard to portable account numbers. In addition, its implementation would require a huge technical effort; modifying current procedures in order to implement bank account portability would be extremely difficult, both at the operational and at the linguistic level. Moreover, implementation would require a huge financial effort. 

It is misleading to compare the IBAN to the case of phone number portability, they are not equivalent nor comparable situations. Policymakers should acknowledge that despite technological development, the IBAN is a very unique mechanism. The IBAN includes, for example, the country code, two check digits, the domestic bank account number, branch identifier. In addition, the length is not the same in every country, it ranges from 16 to 30 digits. 

Account number portability requires significant changes in a series of non-negligible technical and operational standards which will hamper the routing of international payments without actually solving the underlying issue. European policymakers should take into account the following arguments:  

  • ​​Banks already provide consumers with swift and comprehensive assistance upon request when changing accounts, as well as relevant information concerning existing orders, existing direct debit mandates, incoming transfers and direct debits issued by the consumer. 

  • a fully portable account number would necessarily have to be devoid of any features connecting it to a specific bank or country. This would be disadvantageous to both banks and consumers and puts at risk, the architecture of the IBAN, which does indeed identify the given bank and country, is structurally opposed to portability: Banks require this information for clearing purposes, for example, and consumers would have issues determining the recipient of a payment in case of a failed transaction.​


IDENTIFIED CONCERNS​


The PAD has been implemented too late in some member states, and therefore it is too early to make an assessment. In addition, ESBG would like to underline how the PAD was extremely burdensome and costly for operators did not always fulfil customer needs. In addition, customer mobility is a means to an end and should not become an end in itself. 

In other words, we should remember the initial problem customer mobility is trying to solve. Reading the PAD review material, it seems that this problem is a perceived lack of competition. ESBG believes that if there was already a competition issue at the time of writing– this has well and truly been addressed not only by PAD but also: ​

  • by PSD2, which enabled service providers to offer services other than the traditional bank account, making it more attractive;

  • by digitalisation itself which has enabled many neo bank/FinTech/BigTech type financial service providers to enter the market.​


WHY POLICYMAKERS SHOULD ACT


EU legislators and the European Commission should continue improving the transparency and comparability of fees related to payment accounts that are used for day-to-day payment transactions. They should also ensure that consumers have access to bank accounts with basic features. Policymakers should consider the results of numerous studies which show that a majority of consumers are quite satisfied with their accounts, instead of thinking of addressing non-existent problems linked to market inefficiency and switching. 

ESBG is well aware of the current debate around customer mobility and in particular account number portability that has started again as part of the review of the Payment Accounts Directive. ESBG urges the European institutions, in particular, the European Commission to look at this topic from a broader perspective and to consider the different investments imposed on the banking sector in the area of bank accounts/payments and not treat it in the isolation of the PAD review only​​.



BACKGROUND​​

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The Payment Accounts Directive (PAD) was adopted within the European Union in 2014 and is being implemented by EU countries with the main aim of helping the EU internal market foster payment accounts. 

The European Commission is currently evaluating the objectives, and a report on the application of this Directive is to be expected soon. However, some may argue that it might be premature to already conduct a full assessment of the Directive’s impact on the market. 

Complying with the above, the European Commission (i.e. DG FISMA) commisioned a study to assess whether the PAD meets its objectives (transparency of fees, ease in switching accounts and access to accounts (incl. cross-border access to accounts)). With this in mind, the study will provide an overview of the European payment accounts market and will be used to support the review of the PAD. ​

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