Over the past few years, regulatory measures have been taken by the EU Commission to favor the convergence of financial practices across the EU and the emergence of a common market with portable products:
The European Commission has the willingness to accelerate in this direction and keep on working on strategies to strengthen the European market for consumer financial services like bank accounts, insurance and mortgages. These services are considered a crucial element of daily life for Europeans, but they are difficult to access - and difficult to provide - across international borders.
They are consulting from the perspective of European consumers, specifically focusing on identifying the barriers that exist to consumers when they want to use financial services from across the border. It also requires making it simpler for financial service providers to offer their services to everyone in all of the EU Member States. This would accomplish the goal of giving consumers access to a broader range of these services at competitive prices. It would also allow people to stay with the same financial service providers should they move to another EU country for any reason.
Jonathan Hill, European Commissioner for Financial Stability, Financial Services and Capital Markets Union claimed that “people often miss out on the best deals, or pay over the odds because of the barriers that exist in the European market. In this, as in other areas, the single market can bring benefits by helping consumers enjoy more competition and pick from the best that Europe has to offer. I hope that citizens and businesses will respond to this consultation to share their experiences and suggest how we can best tackle these barriers."
There are many examples of barriers faced by people in EU Member States: you can’t open a bank account or savings product without providing a national ID card or a proof of local residency; it is difficult to move to another Member State while keeping your current accounts, debit and credit cards (i.e. you subscribe to financial services that are not “portable”) or, you might already have an account, credit or debit card, loan or insurance policy, but it is too expensive or difficult to switch to a provider who could offer a lower price. With regards to this latter example, a Eurobarometer survey showed that 85% of respondents with a personal loan or credit card had not either switched or attempted to switch service providers.
They may be valid reasons for the existence of these barriers. Prices vary, costs vary, and risks vary. But for the 14 million EU citizens currently living outside of their home member state, this means that the quality of services at competitive prices is severely compromised. This means that millions of Europeans may be paying too much for too small a range of options. It also means that the providers of these options are having trouble expanding their products and services to the largest possible market.
Only 3% of European consumers have purchased a financial services product - like a credit card, savings account or mortgages - from another EU Member State. Less than 1% of total loans come from cross-border providers. The goal of this European Commission consultation is not to force consumers and providers to interact across borders; it is simply to make that interaction possible by ensuring an appropriate level of protection and security standards for consumers.
Digital technologies can also help developing a cross-border financial services market. Services like online banking, price comparison sites and peer-to-peer lending might aid the implementation of cross-border standards for bigger financial services providers. Several services already offer cheap cross-border money transfer services while domestic banks charge high fees or exchange rates with a large spread.