Home Business Insights & Advice How Fintech helps UK businesses cope with post-Brexit payment challenges

How Fintech helps UK businesses cope with post-Brexit payment challenges

by Sarah Dunsby
29th Mar 23 1:03 pm

The aftermath of Brexit has brought significant challenges to the United Kingdom, both in terms of geopolitics and economics. The country has experienced an economic slowdown, the crash of the pound, the change of three prime ministers within a few months, and, of course, the negative impact of Brexit on British businesses. However, the UK’s fintech scene is full of innovative companies that combine finance and technology and are ready to tackle the various challenges.

One of the critical challenges UK businesses have been facing after Brexit is cross-border payment issues between the UK and the European Union. In particular, UK companies doing business in the EU and vice versa are experiencing payment processing challenges.

Londonlovesbusiness talked with representatives from Payrow, a fintech company based in the UK, about the payment challenges that have arisen between the UK and the European Union due to Brexit, as well as how fintech companies are utilising technology to help businesses overcome these issues.

Payment processing issues post-Brexit

The European Union spent the last decade harmonising the transfer of money to create a single competitive payments market for Europe. This was spearheaded by the Second Payment Services Directive (PSD2), which treated payments between the UK and the EEA as ‘domestic’ and resulted in less onerous payment data requirements. However, following Brexit, the UK no longer has access to this market. It has caused a lot of trouble in the interaction between UK and EU companies.

Businesses must ensure that customers’ diverse payment preferences are seamlessly and securely processed in their native currency while still adhering to new cross-border payment restrictions and maintaining customer satisfaction. But not all businesses have been able to keep up with these changes, as payment preferences vary by region. So companies need to use the appropriate technical tools and strategies to increase authorisation rates, customer satisfaction, and revenue. This leads to higher costs and slower transfers, making it difficult to pay international suppliers on time.

Challenges with cross-border transactions after brexit

At the onset of the departure process, the financial sector prepared for the reality of Brexit by anticipating the eventual position of the European Banking Authority. As a result, financial institutions located in the UK could not pass their regulatory licences and authorisations, which halted cross-border business with the European Economic Area. Treasury and payment professionals had to adapt to new legislation and a more complex European payments environment while still managing liquidity, ensuring business continuity, and optimising working capital.

According to Payrow, UK businesses are facing several challenges when it comes to cross-border transactions post-Brexit. For example, due to the UK’s departure from the EU and EEA, payments between the UK and EEA countries no longer fall under the PSD2 definition of intra-EEA payments. As a result, the principal amount on affected wire payments is no longer protected from deductions or claim backs.

Certain European banks now consider SEPA credit transfers and direct debit transactions between the UK and Europe as cross-border and impose additional bank charges. While opinions and interpretations on this issue vary within the industry, complaints have been made to industry bodies and national banking communities to highlight the increased costs.

How Fintech helps businesses cope

Fintech Payrow is sure these payment problems are solvable. For example, when making payments through FPS and SEPA using the Payrow service, there are no issues with extra commissions between the UK and EU countries. With these payment types, no intermediary banks or additional fees are involved. The customer pays only a commission fee according to their tariff plan.

Moreover, Payrow uses modern technologies and employs a professional team capable of quickly understanding the specific issues businesses are facing with cross-border payments after Brexit. This combination of technology and expertise allows the company to provide businesses with effective solutions to mitigate the impact of Brexit on their payment processing.

In addition to these solutions, Payrow is also equipped to handle IBAN discrimination, which has caused complications for cross-border payments after Brexit. Although the company has not yet encountered such a problem when processing customer payments, its customer support service is ready to promptly resolve the issue should it arise for any Payrow user.

The aftermath of Brexit has demonstrated that businesses must continue to innovate and turn to leading contractors to navigate difficulties in times of uncertainty and economic turmoil. Those with digital agility will be the ones able to compete and remain relevant in today’s digital marketplace. With its secure, fast, and cost-effective payment services, businesses can be confident in their ability to process cross-border payments between the UK and EU while minimising the impact of Brexit.

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