Since the introduction of the euro, private customer prices of cross-border payment services have not decreased and in too many cases, the payee has been charged with some costs even though the payer has been requested to bear all costs. Furthermore, as the service provided in the case of cross-border payments is still poorer than that for domestic transfers in terms of the speed of the transaction, the higher price is not justified by better quality. In a report published by the Eurosystem in September 1999, it was emphasised that consumers should be able to transfer money as rapidly, reliably and cheaply from one part of the euro area to another as is now the case within each Member State. However, it was also acknowledged that this objective was far from being reached. Since the publication of this report, substantial progress has been made in preparing the ground for a more efficient handling of cross-border retail payments. The banking sector has agreed on so-called straight-through processing standards, which will allow the automated execution of cross-border payments. Furthermore, the Euro Banking Association has announced the development of a payment system specifically designed for low-value cross-border payments. In addition, the European Credit Sector Associations have taken two initiatives to further improve the prices and quality of cross-border customer payment services.
It has also affected banks’ income and cost structures, as they have been able to make profits as a result of advances in technology. That is, banks have been able to specialise in the provision of information and the monitoring of credit exposures, for example in the context of loan securitisation, thus raising the share of non-interest income. On the other hand, banks’ profits have come under pressure in some areas, such as lending to large firms. This resulted from the fact that technological progress has opened these areas to competition from inside the domestic banking sector, from international banks and also from other financial intermediaries such as institutional investors. In point of fact, the development of institutional investors has been facilitated by technological changes reducing the costs of collecting savings, gathering and disseminating public information, and assessing risks. Technological development has also facilitated the rapid development of new financial products. While a large proportion of innovations would not have been possible without the breakthroughs achieved in financial theory, it has been predominantly technological progress that has made the widespread use of these innovations possible. The second factor underlying the structural changes in the financial system and banking sector is the process of financial liberalisation which has been ongoing for some time already. It has allowed an increase in the overall level of competition in financial systems. In the EU, financial liberalisation gained momentum with the Single Market programme.