Why international payment hurdles caused by Brexit continue to impact business growth

How Brexit is impacting cross-border payments

Enjoying seamless cross-border payments is a massive advantage of being in the European Union. The trading bloc has spent the last two decades or so formulating the Payment Services Directive (PSD) and the PSD2 in order to create a single payments market for the EU/EEA (the European Economic Area). This is called the Single Euro Payments Area (SEPA) and it came into force in January 2018, allowing those in member states to make transfers in their own currencies to other EU countries without incurring any transfer costs or meeting complex data requirements. All in all, these transactions are essentially treated as domestic payments by payment service providers.

But, now that the UK has officially left the EU (after the Brexit transition period ended in January 2021), those in Britain no longer have access to the payment market created by the PSD2. This has inevitably caused issues for UK companies doing business in the EU and vice versa. These issues can lead to increased costs and slower transfers, which can lead to difficulties in paying international suppliers on time.  

So, what are the exact problems businesses are encountering, and what is the best way to avoid (or at least mitigate) such issues?

Extra charges

Considering transactions between the UK and EEA/EU aren’t deemed intra-EEA payments under the PSD2, the money received is no longer excluded from fee reductions and chargebacks. Some European banks are now imposing extra charges on payments received from the UK with GB IBANs resulting in costlier cross-border transfers.

On the other side of things, those in the EEA selling to UK cardholders have seen interchange rates rise for Mastercard not present transactions. This is because the UK is no longer following the EU’s Interchange Fee Regulation (IFR), which regulates the cost of these interchanges.

Additional data requirements

Anybody transferring money between the EU and the UK will now need to provide additional information under the union’s Funds Transfer Regulation. While such transactions always required the payer and payee’s names and account numbers, now their addresses, official personal document numbers, customer identification numbers or dates and place of birth must also be provided. The PSP may reject the payment if this data isn’t given, and all of this makes cross-border payments more onerous.

IBAN discrimination

International Bank Account Numbers (IBANs) are a way of identifying bank accounts from around the world, with each starting with a two character country code to signify where the account is based. Although the UK has remained part of the EU’s SEPA market, there’s been evidence of European companies refusing to accept SEPA payments and direct debits from “GB” IBANs. Called IBAN discrimination, this is actually in contravention of EPC SEPA governing regulations (Eu No 260/2012) and can result in heavy fines for perpretrators. However, it still remains a real risk and can cause further trouble to those making cross-border payments after Brexit.

How to mitigate Brexit’s impact on cross-border payments

Although there’s little that can be done about the extra data requirements and IBAN discrimination, it certainly is possible to reduce the costs. One way of doing so is by using a cross border-payment solution like Inpay. Our state-of-the-art technology enables our customers to make fast, easy, secure and cost-effective international payments. As a result, we offer cross-border payment services for UK and EEA transactions at a significantly lower cost than a standard bank transfers.

This is down to our direct access to domestic clearing channels, which therefore eliminate the fees usually charged by banks. What’s more, we negotiate an optimal foreign exchange rate with our local providers, further reducing costs. With the Inpay team closely screening all payments ourselves, we also make cross-border payments more transparent and accessible. 

Learn more about our solutions below, and don’t hesitate to get in touch with us if you have any questions.