Back in March, we wrote about some of the potential consequences for payment processing and financial services if Britain were to vote to leave the EU in the June referendum. Now that we know how the country voted – if not necessarily what will happen next in terms of parliament actually implementing the decision – we can begin to speculate, in slightly more concrete terms, about how the country’s exit from the European Union is likely to affect British businesses with regard to payment collection and processing.
The Likely Outcome of the Current Uncertainty
Of course, it first has to be acknowledged that there is still considerable uncertainty over how Brexit will actually work, both in terms of the eventual nature of our renegotiated relationship with the EU, and the time frame for implementation. Some are pushing for a swift exit, while others consider it more likely that it will be at least 2018–2019 before we formally leave the EU. Many analysts certainly seem to feel that rather than a complete separation, Britain will maintain trade agreements with Europe through membership of the European Economic Area (EEA) – possibly by joining Iceland, Liechtenstein, Norway, and Switzerland as a member of the European Free Trade Association (EFTA).
SEPA: If It Ain’t Broke…
Perhaps the biggest factor that will have an impact on how payment processing may be affected post-Brexit is the issue of the Single Euro Payments Area (SEPA). Regardless of the Brexit camp’s arguments against the “undemocratic and overly bureaucratic” nature of the European Union, SEPA undoubtedly works to the advantage of both individuals and businesses making and processing payments across Europe. By providing standardised and harmonised regulation of payments – including card payments, Direct Debits and credit transfers – SEPA is designed to allow efficient transfers of payments across borders at reduced costs. In short, it ensures ease and transparency when making or receiving payments in Europe. The scheme currently covers 35 nations, only 28 of which are EU members. The nations signed up to SEPA are: the 19 EU member states that are in the Eurozone, 9 non-Eurozone EU members (including the UK), 4 members of EFTA, as well as Monaco, San Marino and Andorra. Looking at the current signatories to the scheme, there’s certainly scope for the UK to remain in the Single Euro Payment Area post-Brexit – although, crucially, non-EU SEPA members must be assessed as having an EU-equivalent regulatory framework.
What If the UK is Forced Out of SEPA?
In our view, it’s fairly unlikely that hard negotiation by the EU will force the UK to abandon SEPA when it leaves the EU. However, even if Britain’s EU exit negotiations do take us out of SEPA, that may not be the catastrophic scenario that some have envisaged. By and large, we believe that UK financial service providers, payment processors and other businesses recognise the sound underlying principles of payment standardisation between the neighbouring nations of Europe. And even outside of SEPA, there is plenty of scope for UK government policy to allow – and indeed encourage – businesses to continue using processes and technology that will maintain interoperability with other payment processors across Europe. If you have any questions or concerns, or would simply like to discuss this subject further, please get in touch with our expert consultants today.