What Impact Will Brexit Have On The Payments Industry?
The deadline for the UK’s departure from the EU is looming, yet there is still a significant absence of clarity on what Brexit will really mean. If you’re considering how best to prepare for Brexit, read on for the latest information on what Brexit might mean for the payments industry.
The payments industry is likely to be affected by the terms of the Brexit arrangement, but it remains uncertain whether or not the UK will leave the EU with or without a deal, and what any agreed deal might mean for business.
The flexibility of digital payment methods has been a huge part of their success, and in the wake of Brexit this flexibility could prove beneficial indeed. However, the rules and regulations that govern the economy as a whole will continue to apply to digital payment methods, so any changes affecting these will have a knock-on effect on digital payments.
EU Legislation on Charges
Regulations that may well be affected by Brexit include EU legislation on payment charges. Currently, cross-border payments made in Euros within the EU must adhere to regulations on charges, set by the European Union. These rules state that charges cannot exceed the amount that an equivalent national transaction would be, if made in Euros. In the event of a no-deal Brexit, we could see these charges increase.
Single Euro Payments Area (SEPA) Schemes
Concerns had been raised over the impact that Brexit might have on the Single European Payments Area (SEPA), but March 2019 saw the UK’s application to remain in the scope of this area approved. Therefore, Euro SEPA payments will be able to continue after Brexit, under the same terms. Read more about the terms of this decision in the EPC Decision Paper: Brexit and UK PSPs’ participation in SEPA schemes.
PSD2 and Brexit
January 2018 saw the introduction of PSD2, an initiative first introduced by the EU in 2007. UK banks and payment services have spent over £750m preparing to implement this legislation, yet it is expected to be replaced by the UK Open Banking initiative following Brexit. However, the effect of this switch is not expected to be significant, so banks and payment services are advised to continue preparing for PSD2.
The FCA’s Advice
The Financial Conduct Authority has advised businesses to decide on their approach to existing contracts with any customers in the European Economic Area, and prepare for any changes that might need to be made in order to ensure their continued operation within the region. In a statement, the FCA said, “Take the steps available to you to continue to service customers in accordance with local law and national regulators’ expectations. We are clear that firms’ decisions need to be guided by what is the right outcome for their customers. In many cases, it would be a poor outcome for the consumer for you suddenly to stop servicing them.”
Preparing for change
The digital payments industry is preparing for Brexit in a number of ways. Many businesses have already chosen to set up subsidiaries in EU countries, to make it absolutely certain that they will be able to continue operating within SEPA. Some businesses have also decided to bank with companies that have established agreements with EU organisations.
Like all UK industries, the digital payments industry is putting plans in place to deal with a whole range of different Brexit scenarios. The effect of Brexit on the industry remains to be seen, but by planning for a host of eventualities, the UK payments industry is paving the way for continued success following the UK’s departure from the European Union. Keep an eye on the latest reports from the FCA, and view the latest considerations to ensure that you’re in the know about plans for digital payments after Brexit.
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