Reasons to leave the single market [4]: The damaging and risky harmonisation of euro payments

Reasons to leave the single market [4]: The damaging and risky harmonisation of euro payments

by Brian Monteith
article from Friday 13, January, 2017

AS AN example of how the euro drives EU policy even for Member States outside of the currency – the incoherent legislation and value destruction of the EU's harmonised payments system demonstrates the risks most people are unaware of. It is now so bad that the EU has facilitated the easier funding of terrorism. This will pass most people by because it is highly technical – but you really could not make it up.

Over the last fifteen years the EU has legislated extensively to harmonise payments in euros, enacting laws applying to the whole EU and all EU currencies, costing UK businesses and their customers millions to introduce for purposes that have little to do with us.

The legislation has been incoherent, with recent, major contradictions:

  • Passing several Directives to counter the financing of terrorism, but then enabling any migrant new-arriver to get a bank account, bypassing the normal checks, and start exchanging money with other new-arriver members of their network using mainstream payment methods;
  • Elimination of fees in card transactions supposedly (i) to foster the digital economy (ii) to cut cost and enhance transparency – which can then lead to consumers having to pay to have a credit and debit card, and then reverting to using cheques and cash;
  • Requiring rigorous security procedures for a new class of payment company that the EU wishes to foster; procedures that, absurdly, could block their viability and also lead incumbent banks to withdraw existing services, putting back the evolution of cards and mobile payments by ten years.

This legislation, that the public is generally unaware of, has removed any economic basis for investing in the payments business, whilst supposedly attracting new entrants and fostering new services – but who will earn their returns from where? And while we, the public, become frustrated with all of the checks put in place to prevent the funding of terrorism, the EU actually removes those checks in the name of political correctness towards newly-arrived migrants.

The EU’s payments paradox’ written by Bob Lyddon, a City banking expert, and published by Global Britain, explains how the EU abandoned national scrutiny of new accounts in favour of harmonised EU-wide laws that gave rights to all EU citizens and denied banks the ability to refuse new accounts. This means terrorists posing as new citizens can open legitimate bank accounts and transfer money to each other unmonitored.

Thus far no new payment services have emerged. The EU is wedded to a theoretical market model consisting of a ‘Basic Layer ‘of services, which are free and which act as enablers for the Value-Added Layer of services, where competitors will supposedly vie for customer business on the basis of feature, function and price. But the EU has intervened so frequently and at such a level of detail in its attempts to define what goes on in the Basic Layer, that they have destroyed the attraction of the business to the incumbent banks and also negated the rationale for anyone to invest in Value-Added Services.

Their main detailed intervention is aimed at creating a harmonised payment experience in euro payments – called Single Euro Payments Area (SEPA). The means to this end must – in order to conform to the EU’s theoretical market model – be achieved by replacing the old national payments schemes with new, EU-wide ones.

The problems started to arise when it became clear that the SEPA payment schemes were far more basic than the ones what existed already in some Eurozone Member States. To get around this irritating intrusion of reality into theory it was made illegal to retain the old schemes, despite objections being raised by bankers and retailers that understand how these systems work (and have to use them).

Thus banks and businesses in several Member States firstly had to spend money to go backwards, and then secondly to rebuild a poorer ‘harmonised’ system at a national level to replace what SEPA removed.

This would all be funny if these interventions did not add up to an unmitigated disaster and waste of resources, and if the UK had not had to invest significantly in processes that have as their main objective the shoring up of the euro, which we are not part of.

So, like other EU regulations to do with the making of widgets being outside the Euro is not enough – we need to be outside the Single Market (and Customs Union) as only that way can the UK – and Scotland – determine its own laws and insist on how its regulations, such as payments systems, work in practice.

And again, like so many inconvenient technical reasons that Scottish cheerleaders for the Single Market never actually consider – and especially because any UK-wide problem is not seen as important by nationalist remainers – these Single Market disadvantages are also experienced in Scotland too. Nicola Sturgeon, Derek Mackay and also the likes of Labour’s Ian Murray just do not see the real and present dangers that come to our economy from the Single Market.

The EU’s interventions to protect the euro and design an artificial single market are achieving the opposite of the desired effect. Rather than make it harder for terrorists to finance their operations it is now easier. Rather than encourage the development of interconnected national payments a harmonised Single Market payment system has squandered millions and provided a worse service that charges more and limits product range.

There is a case for Scotland being outside the Single Market whilst maintaining access to it – and it is the same case as the US, Japan and practically every other non-EU country enjoys – it means we make our own laws and take the risks with doing just that. Of all people you might think Scottish nationalists would “get it” – but politics in Scotland is a queer beast and there isn’t much stranger than nationalists that want to regain sovereignty only to hand it over to Brussels.

The EU’s payments paradox – Fifteen years of incoherent legislation and value destruction that now facilitates the financing of terrorism is the third of a new series of essays entitled The Brexit Papers published by Global Britain and can be found at its website here.

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