Commentary by Mike Strawhecker & Jared Drieling
Now that the British public has voted to exit the European Union (EU), the UK will no longer be required to implement or follow any EU payments legislation which could clearly impact the payments environment. What will happen to the Single European Payments Area (SEPA)? Will the UK still follow the EU payment initiatives such as the Payment Service Directive (PSD2), interchange fee regulations (and the common interchange fee (MIF), money laundering rules or the Directive on Transparency and Comparability of Payment Account fees?
In addition, like other multinationals, payments companies that participate in the UK market will likely see some headwinds due to the UK’s vote to leave the EU. The International Monetary Fund predicted a Brexit would lead to UK recession as early as next year. A recession in Britain will impact Europe’s economy as well. According to The Economist, “whatever the reduction in Britain’s GDP growth, Europe’s economy will suffer a drop of about half as much.” A slowdown or recession in the UK/EU includes drops in consumer spending – the heartbeat of the payments industry. Less spending means less transaction volume for those in the payments ecosystem including card brands, issuers/banks, processors, acquirers, and other technology providers. With 23% of global card purchase transactions occurring in Europe, the shockwaves will be felt.
Furthermore, the UK is a leading market for both import and export cross-border eCommerce, with 71% of online merchants offering delivery outside of the UK and 48% of UK online shoppers making purchases with a non-UK retailer. These types of transactions may see new barriers given the questions surrounding the UK’s new trade position and how it complicates cross-border commerce. Having said that, US-based companies may now see opportunities given the prospects of less red tape vis-à-vis trade from London than from Brussels.
Let the uncertainty begin.