The positive impact of Brexit on international business payments

If you sell your goods and services around the globe, then you will know how complex navigating the rules and regulations of different markets can be. So, how has Brexit impacted on international business payments? Are there any positives?

Prior to 2021, selling from the UK to the EU was relatively simple, thanks to the UK’s membership of the single market and customs union. This changed at the end of 2020, when the yearlong transition period for Brexit ended and the new trading agreement came into play.

When it comes to handling international business payments the impact of Brexit can be summarised in two ways – complex and shifting.

Complex because, for the first time ever, a new trading agreement has been created with the express intention of erecting barriers to trade between the two parties, and shifting because it seems we still have many years of negotiation ahead of us and some of the so-called ‘teething problems’ which businesses are now facing will turn out to be exactly that.

Working with the right partners

Any business which is serious about selling into the EU from the UK, or importing from the EU to the UK, that works in partnership with a payment services provider, such as Noire, will have a huge advantage.

At Noire, we have extensive experience of working with the varied and complex payment regimes operated in different parts of the world, including emerging markets such as China and India, and we’ve written before on the topic.

This same expertise and proactive mind-set is really useful in today’s payment climate and we will be the first to know and react when any changes take place.   

Added complexity

Previously, banking and payment services authorised in the UK would also automatically be authorised across the EU, but post-Brexit means this no longer applies. The so-called ‘EU Passport’ is no longer valid and payment services based in the UK will be treated differently. Authorisations issued in the UK are no longer reliable and will have to be authorised in accordance with the rules set out in the Member State in question.

Some good news is that credit transfers and direct debits in Euros will continue to take place within the Single Euro Payments Area (SEPA), but with the rules that apply outside of the European Economic Community.

This will mean more information required in order to avoid transactions being rejected, under the requirements of Regulation (EU) 2015/847 on payments to and from non-EU countries. Under these rules only transfers under €1000 are exempt from having to provide verified information on both parties.          

Another aspect which is likely to be impacted by Brexit is the use of passports, under which payment firms in the UK could operate in the EU and vice versa.

While the UK Financial Conduct Authority (FCA) in the UK has introduced a Temporary Permissions Regime, allowing European payment firms to continue operating in the UK under licences until 2024, the European Central Bank (ECB) has stated that UK payment companies now have to be licenced in the EU.

As stated on the ECBs own website; “The ECB’s expectation is very clear: all activities related to European products or European customers should … be managed and controlled … in the EU.”

This has already led to some UK payments companies setting up EU subsidiaries, including the expected shifting of material assets and the relocation of personnel such as CEOs and Managing Directors. Once an EU base is established the payment companies can then apply for ‘passports’ to work across Europe, and those which offer payments through European bank accounts can expect to be dealing with standards and regulations which differ from country to country.

In Lithuania, for example, a full licence and passporting system for businesses is promised within three months, while other parts of Europe can take three times longer. Many payment firms and electronic money institutions, therefore, are choosing Lithuania for their European base, rather than countries such as France or Malta.   

Diverging standards

One of the main arguments in favour of Brexit was the ability for the UK to diverge from EU standards and regulations as and when it wished.

When it comes to matters such as the second Payment Services Directive (PSD2), and the provision of Strong Customer Authentication, it seems unlikely that the UK would wish to move away from systems which are designed to protect customers and merchants alike from fraud.

The model pursued by Iceland, which is not part of the EU, but still fully complies with PSD2, seems likely to have set a template for the UK. Although, innovations in technology such as face, fingerprint and voice recognition could see us leading the way in making biometric security the norm, and the UK approach to Open Banking could also see merchants based here enjoying an advantage.

Alternative payments

The UK has led the way in Europe when it comes to Open Banking – with more than 2.5 million[D1]  opting to connect their bank accounts to trusted third parties, and 178 UK firms in the UK being permitted to share bank account and payment information by October 2020.

This contrasts with just 36 in Germany, 18 in France and 9 in Spain and so demonstrates a thirst for innovation in financial products amongst UK customers.

Post-Brexit, this spirit of innovation could see more people using payment methods which rely upon Open Banking, such as payment initiation. Payment initiation enables users to connect to their bank and authorise payments or transfers without leaving the environment they are in. In other words, payment can be made without having to open a banking app or other online payment interface, making for a completely seamless and quick process.

UK shoppers may be keen to take advantage of innovations of this kind in the light of the recent announcement by Barclaycard, who recently announced plans  to raise the interchange rate charged on transactions carried out by cards or digital wallets.

The EU has taken a strong line on this and capped the rates at 0.3% for credit cards and 0.2% for debit cards, but Mastercard intend to increase credit card fees to 1.5% and debit card fees to 1.15%, a change which was strongly criticised, amidst charges of opportunism.

Merchants who may benefit from such decisions taken by Mastercard are those who offer a wide range of alternative payment methods to customers making online purchases. To date, no other card providers have joined Mastercard in increasing the rates, nor have any come out and said they will definitely not do so.

If interchange rates on card payments start to rise across the board, then merchants enabling customers to pay with a range of alternative methods will be able to offer these choices as a point of differentiation, as well as a money saving feature.

At NOIRE, we help merchants operate in all markets, including China, India and South Korea – where popular payment methods include the likes of Alipay, Stripe, Razorpay, CCBill and Braintree. We offer our clients the flexibility that the post-Brexit payments landscape is likely to reward.    

Trust NOIRE to help

The post-Brexit landscape is likely to see the UK taking advantage of regulatory divergence to press ahead with innovations in the field of Open Banking and tech driven payment solutions.

Partnering with NOIRE will mean your business is perfectly placed to take advantage of these changes and offer your customers the widest possible range of payment options. At the same time, you can always be certain that the transactions we handle reflect each and every shift in the regulatory relationship between the UK and the EU.   

Let our expert team deal with the complex and multi-faceted regulation regimes in markets all over the world and ensure that all payments continue to flow freely and in line with all relevant legislation.

Get in touch with us today – we would be very happy to help you.