How could Brexit affect Britain's payments industry and what effect could it have on businesses, payment service providers (PSPs) and consumers? Payments UK addresses some of the practical implications for payments arising from the UK’s exit from the EU in its report, The UK’s exit from the EU: How could payments be affected?, published yesterday.

The report specifically looks at how Brexit could impact four key payments policy areas:

1. the Payment Services Directive (PSD),
2. passporting,
3. the Single Euro Payments Area (SEPA) and
4. UK access to euro payment systems.

Most UK payments regulation based on EU legislation

The report says: “Much of the financial regulation applicable to the payments industry in the UK today is derived from EU legislation, which is part of what makes our payments systems work so seamlessly for customers. This makes negotiating our exit from the EU particularly important from a payments perspective, to ensure that there is no detriment for customers or businesses, and the UK economy continues to operate smoothly.”

The report outlines three possible scenarios for the UK's future trading relationship with the EU and then goes on to examine what this could mean from a payments perspective. Payments UK specifies some of the ways in which the UK's changed status could affect each of the above payments policy areas:

PSD

PSD2 will be in place before the UK exits the EU. After Brexit, it's possible that only some of the legal provisions and protections in PSD2 would apply. Brexit could potentially have ramifications as to how payments (in sterling, euro and other currencies) will be treated and what rights and obligations customers and UK PSPs will have. It's possible that Britain's domestic payment schemes could have greater freedom to define their rules in future.

Passporting

Since on companies in the EU or EEA are entitled to passporting rights, British companies could face a number of licensing regimes after Brexit and, potentially, would be subject to a range of local requirements. Passporting rights have been a significant factor in attracting firms to the UK to take advantage of London’s position as a global financial centre and for the pan-European access it has given to firms from outside Europe. While firms incorporated outside Europe cannot benefit from passporting rights, their EU subsidiaries can. Such firms may now consider the possibility of relocating some or even all of their business and operations to another member state.

SEPA

The UK could lose its automatic qualification to be part of the geographical scope of the area. Use of alternative mechanisms is likely to make euro payments to and from the UK less efficient and more costly, with potential implications for the continued support for UK-EU trade.

UK access to euro payment systems

Although UK retail and corporate customers would continue to be able to send and receive euro-denominated transactions, the conditions may well be less favourable than today with higher fees and longer settlement times.  

---

CTMfile take: The picture just isn't clear enough yet to say with any certainty how UK-based companies will be affected in terms of payments after Brexit. But it does seem highly likely, particularly considering the huge question mark over passporting rights and access to euro payment systems, that British companies will be affected and could face paying higher fees for access to euro payments. This report by Payments UK gives a good overview of the payments issues that will need to be resolved during Brexit talks.