Many businesses are still reeling from the UK’s decision to leave the European Union. It invites the question as to if, where and how Brexit will impact the way their UK businesses manage and process payments to and from EU countries and the rest of the world.

Exchange Rate Fluctuations

The first obvious disruption of Brexit on international payments is the increased volatility of FX rates, due to uncertainties about the UK’s future relationship and trade terms with the EU. As exchange rates fluctuate, it is important for businesses to have clear visibility and strong control of their payments and cash management, reducing any unnecessary errors and delays in moving money and optimising the use of cash balances in disparate bank accounts and currencies.

SEPA Compliance

Looking ahead, if we are no longer part of the EU, the SEPA rules and benefits may no longer apply – such as abiding by SEPA scheme rules, next day processing times, paying fees at domestic rates, etc.  Being out of SEPA is likely to cause considerable headaches for UK companies paying into and collecting funds from Europe using UK domiciled bank accounts.

Regardless, SEPA compliance will continue to be important as the preferred payment instruments of the EU trading bloc. As part of European Free Trade Association (EFTA) or the European Economic Area (EEA), the United Kingdom may still be able to be a part of SEPA and agree to comply with SEPA regulation – as is the case with Switzerland.

PSD2 Initiative

Using Switzerland as the example, whilst they are not part of the EU but they have opted in to regulations such as SEPA and PSD. It is expected that they will also decide to adopt PSD2 which will open up the European payments landscape to a new breed of Payment Initiation Service Providers and Account Information Service Providers, with innovative payment offerings for consumers and businesses. This regulation is due for implementation in January 2018. Depending on how long it takes to exit the EU, it is unknown whether the UK will still be a member of the EU at that point. Given the extent of work done already done by the UK Government and payment regulators to open up UK payment systems to improve customer experience, and competition, it is debatable whether the UK will withdraw from this initiative or, like Switzerland, choose to participate regardless.

Global Trade and Funds Transfer

Irrespective of the Brexit outcome, the UK will clearly continue trading with the EU and aims to strengthen its trade ties with other regions.  The growth in trade with other regions is likely to increase the need for efficient international payment reach into other geographies beyond the EU, meaning it is more important than ever to have payment platforms that are capable of handling multiple payment types internationally, such as cross-border and in-country payments for the rest of the world, including secure bank connectivity with banks globally.

Payment Institutions located and regulated in the UK who have been relying on EU passporting rights to do business across the EU will need to consider opening operations within the EU in order to retain access rights currently available as part of the Single Market. But the payment types and systems they use are unlikely to deviate from their current path of innovation, with increasing speed and ease of use.

A Sequence of Events

The upshot is that the status quo will be disrupted – of that you can be sure.  Although there are a few immediate impacts, Brexit is unlikely to have any further influence until we know the outcome of negotiations around the UK leaving the EU.

Any compliance and regulatory changes which Brexit brings will take time to unfold and will be a slow process of incremental change to numerous business agreements, processes and possibly supporting technology.  So until these come to pass, it’s business as usual.