How UK Companies Have Prepared for Cross-Border Payments Post-Brexit
The transitional period that has kept the United Kingdom attached to the European Union expired on the 31st of December. Although both sides managed to negotiate the new trade deal, there is still a lot of uncertainty surrounding the agreement. Marius Galdikas, CEO at ConnectPay, has shared insights on a pre-exit strategy some of the UK’s market players’ executed beforehand seeking to remain in the EU regulatory framework.
ConnectPay, an online banking service provider, has been working closely with a few UK-based firms. Marius Galdikas, CEO at ConnectPay, has shared that even before the new trade deal was announced, their UK partners had started establishing out-of-country entities in order to remain inside the European Union’s regulatory framework. This, along with the following of new rules for the Single Euro Payments Area (SEPA) payments shows UK’s companies’ aim to retain a strong connection to the EU market.
The UK and EU managed to strike a deal before the deadline, however, some major issues still remain unresolved. That said, a great deal of uncertainty has been looming throughout the entire transitional period, raising questions on how to navigate through newly-set barriers and continue business with partners based in the EU.
M. Galdikas shared that, before the Brexit deadline, he has witnessed several partners establish entities in Ireland and continental Europe.
“I think the biggest driver has been the opportunity to uphold licenses within the EU as well as to mitigate uncertainty over regulatory and AML requirements if they start to diverge,”
explained Galdikas. “Also, there are still quite a few question marks hanging over the trade agreements, which is likely to result in additional costs for the businesses. That’s why setting up and signing deals with EU-entities brings more reassurance that we all can continue business as usual,” he added.
The departure has raised talks about the future of Single Euro Payments Area—SEPA—payments. Businesses have grown fond of the swiftness SEPA has brought to all cross-border transactions, and it seems they may continue using SEPA services offered by the EU financial institutions (FIs) as long as the latter apply the current rules for non-EEA transactions to SEPA Credit Transfer (SCT) and SEPA Direct Debit (SDD) payments within the UK.
Slight disorder concerning SEPA payments processing is inevitable, hence the Bank of England’s previously issued warning to UK’s financial institutions to “continue taking measures to minimise disruption”. Galdikas seconded this, noting that non-UK FIs, including themselves, have already taken the appropriate measures in regard to the matter to ensure the transition is as seamless as possible.
“From a technical perspective, we already have a setup for non-EEA SEPA members—like Switzerland—where we require debtor address details, thus we will just flick a switch to turn on the same requirements for payments to/from the UK,” he added.
“Without a doubt, it is quite a stressful time for all,” Galdikas continued. “That said, fintechs are no strangers to sudden changes in the market, thus we look forward to continuing to work with UK-based businesses and aim to help them ease into the post-Brexit framework any way we can.”
ConnectPay is an online banking service provider for internet-based companies, offering a wide range of payment solutions, including SEPA and SWIFT payments, IBAN multi-currency accounts, Mastercard online card payments, and merchant accounts. All processes are operated via a fully automated fraud prevention and compliance management ecosystem. Smooth onboarding process and customized client solutions enable businesses to utilize innovative payment solutions to meet the needs of their digital customers. ConnectPay holds an EMI license, issued by the bank of Lithuania, and is a member of the monetary authority of the Eurozone.
Photo credits: Unsplash