Brexit: What You Need To Know - Cards and Payments

Locke Lord LLP

The payments industry is by and large a forward-looking and innovative sector. As such, whilst the temptation may be to focus on the negative implications of Brexit, not least the threat of jeopardising London’s status as the preferred location for global companies to conduct European business and the possible relocation of payment service providers in order to allow them to conduct business in other European countries, there are also a number of potential opportunities that may now become available:

  • Money Remittance companies: With remittance companies partly earning revenue based on the difference between the exchange rate applied to the sender and the exchange rate applied at payout, the unpredictability of currencies, such as the US dollar, British pound and the Euro, could allow companies to obtain an additional margin to compensate for the volatility and risk.
  • Interchange fee rates: Under the current regime, the European Multilateral Interchange Fee Regulation caps interchange fees, a charge enforced by an issuing payment service provider to an acquiring payment service provider, to 0.2% for debit cards and 0.3% for credit cards. A split from the EU could see the UK gain control over its own interchange fee caps, which, in turn, could see revenue collected by various payment providers on transactions affected. However, it should be noted that, this would be a benefit for the issuing entities rather than the consumer.
  • Cross-border payments: A weaker British pound may increase international volume for UK-based payment companies with cross-border operations.
  • Lower barriers of entry into UK: With countries benefitting from a fall in the value of the British pound, and therefore cheaper British products and services, the UK should find itself more competitive with an increase in exports outside the EU.
  • Opening up of global markets: Like Norway and Switzerland, the UK will be able to set up special trade agreements with European and non-European countries without the shackles currently enforced upon it by the European Parliament. This, in turn, should increase the markets available to payments and fintech businesses based in the UK at present. However, it will be essential that any such agreement does not significantly increase the complexity of importing and exporting of goods in order to ensure a level playing field on which to compete across Europe.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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