EUobserver opinion: Let the retail finance market flourish

This Monday, the economic and monetary affairs committee of the European Parliament will discuss the so-called Green Paper on Retail Financial Services, presented by the European Commission last December.

The commission is aiming to complete the internal market for retail finance in Europe by identifying the existing barriers and further unlocking its potential for both businesses and consumers.

Consumer finance includes credit cards, current and savings accounts, car, life and health insurance, mortgages and other loans. 


The internal market for retail financial products has huge potential, but is at the moment practically non-existent.

First some statistics: less than 3 percent of all Europeans purchase credit cards or mortgages from other European member states, outside their home country. This is striking, given that one in three European Union citizens live in regions bordering other EU countries and 13.6 million EU citizens are living in other EU countries. When it comes to consumer credit, Europeans only buy 5 percent of their loans abroad.

Stifled competition

In practice, the barriers that consumers experience within the European Union's retail financial services sector are countless.

For example, when you try to open a bank account in another EU country; or when you buy goods in another European currency with your credit card and you have to pay high commissions on top of the indicated price. And what happens to your pension, if you have worked in various European countries?


The aim of the commission is to promote the purchase of financial products in other European countries and make the cross-border consumption of retail financial services more accessible.

The proposal aims to improve consumers’ awareness of the retail financial products that are available. Currently there are too many barriers preventing these ideas from flourishing.

One of the main problems is the fact that the 28 European member states each have their own national laws and fiscal regimes. As a result, markets are fragmented and competition is stifled.

This leads to large differences in price and choice across European countries. For example, the annual mortgage rate in Hungary is 8.5 percent, whereas the rate in Finland is only 1.8 percent.

Furthermore, structural barriers such as languages and different taxation rules discourage consumers from switching banks.

The low level of harmonisation of consumer rights and the lack of European system for collective redress is also problematic. This makes it risky to deal with financial products from abroad.

Lastly, norms and technical standards are not harmonised enough.

Multinationals are not affected: they can simply open branches in every member state. However, small businesses cannot afford to open offices wherever they would like. Those firms would benefit from breaking down the barriers that are currently holding back the internal market for retail financial services.

In an era in which internet-based trade is growing rapidly, open borders and an internal market for retail financial services are of vital importance.

Consumers' trust is key

Unfortunately, national governments do not practice what they preach. They pretend to be enthusiastic about breaking down barriers, but are in practice not willing to compromise on the issue.

In the background, former national champions such as insurance providers and banks play a pivotal role. They have been privatised, but they are still very close to governments and have huge political influence. These companies do not have any interest in more competition and innovation, indeed they are trying to slow this process down.


Opening up the internal market in retail financial services will give consumers more possibilities and choice. Consequently, the costs of financial products such as car insurances will drop. There are huge opportunities for European companies and new, innovative products such as crowd funding.

What we need is trust; the trust of consumers is key to cross-border financial transactions. And we can build trust by breaking down the barriers that are holding back the internal market for retail finance in order for it to flourish.

Airbnb recently changed the hotel market for good, as did Uber in the taxi business. It will not be long before FinTech companies create new retail financial products that shake up the market. We have to anticipate that moment or we will be confronted with a fait accompli.

Sophie in 't Veld is a member of the ALDE group in the European Parliament.