Brexit – How might it affect payments?
On both sides of the argument there are claims and counterclaims about how Brexit – the potential occurrence of UK leaving the European Union if the referendum on the 23rd of June sees a vote in favour of leaving – will unravel pivotal social, economic and political changes.
No matter what the view on the UK’s relationship with the EU is, there is no doubt that we are closely intertwined with the organisation and its member states. Of course, whether this is a good thing is one of the many bones of contention between the Stay and Leave camps.
We live in a world where, increasingly, global barriers to trade are coming down. Online revolution has led to international trade and not just on a corporate level but also on a personal level.
This boom in trade has necessitated supra-national standards in payments and security to ensure a level playing field, fairness and transparency for all the stakeholders. And, naturally, the EU has played a significant role in this.
Yet, if the UK were to leave the EU, would there be a marked change in payment and security standards? To examine this, we can consider two main EU payments standards the UK is part of.
- Single Euro Payments Area (SEPA)
First launched in 2008, SEPA is a European Union initiative to develop common financial instruments, standards, procedures, and infrastructure to facilitate the simple movement of capital across members. Although SEPA only facilitates the transfer and movement of the euro currency, given that so much of UK trade is carried out using the euro, our membership of this body is important for trade with the Eurozone.
The question arises as to what impact there would be with Brexit? The fact that a number of members of SEPA (such as Norway, Iceland and Switzerland) are not members of the EU suggests that membership of the EU is not necessary to be a member of SEPA. In this case, Brexit would possibly not mean immediate changes.
- Payment Services Directive (PSD)
Linked to SEPA, the PSD is another EU initiative. The European Commission describes it as providing the “legal foundation for the creation of an EU-wide single market for payments. The target is to make cross-border payments as easy, efficient and secure as ’national’ payments within a Member State. The PSD also seeks to improve competition by opening up payment markets to new entrants, thus fostering greater efficiency and cost-reduction.”
For the payments industry this is obviously a great help. Our industry thrives when new entrants are allowed a level playing field and easy cross-border payments are critical to facilitate digital commerce.
Again, though, like SEPA, it is not necessary to be an EU member to be a signatory to the PSD. So, Brexit may not affect the UK’s membership of it.
Taking these two examples, it is clear that if the UK were to leave the EU, the cross-border standards in payments and banking that benefit UK business as envisaged today would not necessarily be affected. The counter to that argument is that, so far, only EU members were able to influence and determine what these standards ultimately looked like. Non-EU members were able to join yet they had no say in the content. Hence, the debate should centre more on what impact the loss of a seat at that discussion table might have in future policy and planning.
With the campaigns for each case opening today, it is in all our interests to ensure we have full and open transparency as to how Brexit might impact, not only membership, but also the UK’s ability to influence these initiatives and directives. This will set the premise on how we will continue to take a leading role in payments policy development.