What Does Brexit Mean for the Future of SEPA Payments?

Though the UK is no longer part of the EU, it retains its SEPA membership. How much has changed for cross-border payments?

Dima Kats, CEO of global payments company Clear Junction, discusses some of the unforeseen complications of Brexit and the possible solutions.

As people increasingly live and work across borders, there is a greater need for money to move freely too. But what happens when the nature of one of those borders changes? Following the UK’s recent departure from the European Union (EU), there has been a shift in some financial institutions’ behaviour within the EU. Specifically, in the processing of Single Euro Payments Area (SEPA) transfers.

Organisations within the UK are still learning the full impact of the UK’s recent Brexit deal. However, over recent weeks, corporations making SEPA payments from accounts in the UK to the EU are experiencing additional fees and payment refusals.

Starling Bank recently noted that several companies across Europe have been refusing to accept direct debit payments from some Starling euro accounts because they contain the country code ‘GB’.

The UK retains SEPA membership

It is important to note that the UK is still a SEPA member and that even though the UK is no longer part of the EU, it is still very much part of the Single Euro Payments Area. Refusing to accept payment from the IBAN code of a SEPA member is a violation of EU rules.

Some European banks, notably in Spain and Italy, have introduced recent charges to payments coming from or going to the UK. These new fees can vary from an €18 flat charge to a percentage of the amount shared or received, ranging from 0.3-0.5%, which can add up to a significant figure.

Refusing to accept payment from the IBAN code of a SEPA member is a violation of EU rules.

While this situation has understandably caused some consternation, the UK’s continuing membership of SEPA means we believe these rejections are temporary outliers. Indeed, this is merely one of several hiccups because of the regulatory changes. We are still experiencing the aftershocks of Brexit across Europe and will continue to do so for a while. However, in the coming months, we should see a more standardised approach emerge across EU financial institutions, with less disruption to providers and consumers as awareness of the new regulations increases.

Despite the litany of recent Brexit plans formulated by governments and negotiators, none explicitly addressed the fintech industry. Fintech professionals understand the challenges of building relationships and facilitating seamless transactions between institutions. The smooth operation of these processes, established over several years, was hard-won, and it is unlikely that the industry wants to rewind the clock to how things were before SEPA. The mutual participation in the clearing schemes in Europe and the UK has worked well and it would be counterproductive to change this because of Brexit.

We can only praise the European Central Bank’s initiatives to have the UK remain part of SEPA. This decision, taken two years ago, has contributed to the peace of mind of many fintech professionals in relevant countries. As a result, we hope there will be minimal impact on the clearing schemes’ operational process in the coming months.

The need to educate and assist the customer

Currently, regulatory frameworks between the UK and the EU are aligned, and there is no reason for extra fees. Which leaves us wondering what consumers and institutions should do if they do face any additional charges?

As a first step, consumers need to be aware of what is going on and any potential issues. Some banks, such as Starling and Revolut, have already taken proactive action in this area, but more widespread initiatives would be welcome.

For the consumer, there are currently no easy, off-the-shelf solutions. This complexity means that people need to speak to their banks in the first instance and then the local regulator to add pressure and make local banks comply with the SEPA scheme rules.

What would be useful here is the increased provision of easy-to-access and easy-to-use tools, documents and templates for consumers to share with the EU banks they are dealing with that may be implementing additional fees. The right way to address this situation is to give consumers that power.

For financial businesses who are unclear of regulatory frameworks post-Brexit and what this means for their customers, they should work closely with a regulatory services provider that is a participant member of SEPA, enabling clients to have unrestricted access to the EU interbank clearing system.

At Clear Junction, we value our SEPA membership highly and recognise its vital role in simplifying payments across Europe. We want to see common sense prevail and hope that Brexit has no lasting impact on the future of SEPA payments.

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