How will Brexit impact the payments industry in the UK? An Earthport insight
Valli Ardalan is the Vice President of Business Development and Marketing at Earthport. Here he shares with us the impact Brexit will have on the payments industry in the UK.
How will Brexit impact the payments industry in the UK?
As the post-Brexit outlook continues to remain uncertain, it is difficult to predict the precise impact on the UK financial sector. There’s no denying that the uncertainty in any form makes short term and long-term operations trickier. To that end, being prepared, agile and remaining positive is more important than ever in these unprecedented times.
The regulatory perspective
Post-Brexit, the UK most likely will no longer be in the single market, and this has the potential to have a dramatic impact on the payments and financial services industries here.
In May, the European Council approved the UK’s application to remain in the geographical scope of the SEPA scheme. Although this is good news as it will mean that FinTech companies that use banks will be able to maintain their level of access, it brings many regulatory issues to overcome. For example, in relation to PSD2.
Remaining part of the SEPA scheme without being an EU member will mean that, similarly to Switzerland, the UK will lose PSD2 protections. This results in us being treated differently from other EU members, who can enjoy the ability to move money, data and people freely, whereas the UK will potentially face increased friction in all these aspects. It is likely that some transactions between the UK and the EU will be caught by PSD2 regulations, in which case, we would still need to adhere to the directive, without being part of the EU.
The importance of passporting
Undoubtedly, a key concern in the post-Brexit scenario is the loss of ease with which both payment and financial institutions can operate all over Europe without barriers. The UK’s exit from the EU will likely see it lose this passporting right, and, consequently, payments businesses have been preparing to mitigate this risk for some time.
Companies looking for other EU-based jurisdictions through which to be licensed are commonly approaching European countries close by, particularly Ireland and the Netherlands, as well as other FinTech hubs - notably, Belgium, Sweden and Lithuania.
Bridging the talent gap
With London being one of the world’s top FinTech hubs and financial centres, the prospect of a hard Brexit brings concerns around reduced access to a broad talent pool. EU citizens could potentially require sponsored immigration status and may face uncertainty around their status when in the UK and access to government benefits such as the National Healthcare Service. This brings the risk of UK businesses losing out on the opportunity to recruit talented professionals, from diverse backgrounds, skill sets and cultures. If this happens, no doubt it will be to the detriment of both job seekers from within Europe and to UK businesses hoping to innovate and grow.
Seize the opportunity
Despite this, it is essential that throughout these times, the payments industry remains positive and continues to innovate in order to make the best of a challenging situation. Brexit will certainly be a test for UK businesses, and those who can adapt smoothly will be more likely to survive, and they should recognise that, as with all change, the door is open for innovation. Regardless of Brexit, we must remember the UK is still well placed to develop international relationships with other key players and continue to build our thriving FinTech industry in the face of potential adversity.
Tink partners with Novalnet AG for open banking payments
The Munich-based fintech Novalnet AG, which was founded in 2007 and is one of Europe’s leadingfintech companies, has announced a new partnership with Tink, the Swedish open banking platform currently connected to more than 3,400 European banks.
Novalnet AG delivers payment solutions and fully automated services, from checkout to debt collection. Its solutions are also available worldwide.
According to reports, the fintech company plans to launch a real-time payments feature for merchants across Europe, to expand its current services and enhance the transaction experience it operates through its platform.
The new feature, says Novalnet, will revolutionise payments for ecommerce with transactions being credited to merchant’s accounts almost instantly.
Novalnet partnership with Tink
By partnering with Tink for payment initiation services (PIS) technology, Novalnet will take previous region-specific payment methods and offer a new unified digital payments service to its merchants across Europe.
The fintech’s real-time merchant payments feature, which will be launched initially in Germany and the United Kingdom, will then be integrated across other European markets during 2021.
Speaking about the new collaboration, Emmanuel Kirse, COO of Novalnet, explained, "We expect great things from our strategic partnership with Tink, which is a significant development for both parties.
“With Tink, Novalnet can offer a new set of open banking-related solutions in Europe. The new opportunities offered by this partnership will help both Tink and Novalnet grow together, along with our merchants."
Cyrosch Kalateh, Regional Director for the DACH region at Tink said, “Our partnership with Novalnet is a big step for Tink in the German market, and we are excited to work together to bring new, innovative payments services to merchants across Europe.”
He added, “At the end of 2020 Tink committed to expanding its payment initiation services from five to 10 markets, fuelled by an €85mn investment round. We are proud to add Germany to this list by announcing we have now fully launched Tink’s PIS services in this market.”
Image credit: Novalnet AG