Brexit: the major change will be in the areas of licensing and passporting

Brexit took many by surprise. Whilst we all knew the referendum was taking place, not many that I spoke to in the payments industry actually believed the UK would vote out. But they did. And here we are a couple of weeks on. The initial shock has passed and we are now left looking to politicians, business and financial leaders for some direction on what the fall out could be.

Whilst, the biggest risk of the Brexit result appears to be to London’s role as a global financial centre, it also presents challenges to international businesses and trading as a result. It seems the UK will go from a rule maker to a rule taker in relation to Europe. It will have to comply with EU regulations like the rest of the world, with no say in how those regulations are developed. Whether the UK financial sector can withstand such a big change without serious consequences will depend on the deal that the UK government negotiate and the speed and agility with which the UK’s financial institutions are able to adapt. 

Then there is The European Banking Authority (EBA). It’s likely that it will move its head office out of London and to either Paris, Frankfurt, Milan or Dublin.

Within the UK, The Financial Conduct Authority (FCA), which has worked hard within the EU to establish a good reputation within the European payments scene for its understanding and regulatory regime, is likely to suffer too. European eMoney and Payment Institutions are now much more likely to move their headquarters to other European markets taking innovation and the bulk of the smartest workforce with them. The UK Government will need to be creative and quick in their negotiations to keep skills and jobs based in the UK.

For payment specifically, I believe that the major change will be in the areas of licensing and passporting. This will affect the UK’s cross border acquirers the most. Numerous UK acquirers rely on the FCA passporting regulatory license to support their local acquiring offers across the EU. Unless they already have licenses in other EU markets, acquirers will need to apply for new EU regulatory licenses to operate across the continent. This will increase both administration work and cost. They will need to hand out and sign new merchant contracts with new and existing merchants. It could go so far that the UK will be treated as an off-shore location for card and payment processing, inheriting the related fees.

However, until the dust settles, Article 50 is issued and negotiations begin, no one can be sure what arrangements will be made between the UK and its European counterparts.

Chancellor George Osbourne, a staunch ‘remain’ campaigner, is looking at ways of maintaining the UK’s position as a major player in business and financial markets. In a speech just a few days ago, he laid out plans to build a “super competitive economy” including cutting corporation tax below 15% to show the rest of the world that the UK is still open for business and help maintain fiscal credibility. Who knows what else he has up his sleeve? What is sure though is that it’s going to be an interesting few months ahead.

Andre Malinowski

André Malinowski is head of international business at Computop, responsible for driving and growing Computop’s international business in the US, UK and China. André has many years’ experience helping to shape the payments industry, holding posts previously with WorldPay, Innopay and, most recently, ModusLink.

About Computop

Computop is a global Payment Service Provider (PSP) that provides compliant and secure solutions in the fields of ecommerce, POS, m-commerce and Mail Order and Telephone Order (MOTO). The company, founded in 1997, is headquartered in Bamberg, Germany, with additional independent offices in China, Hong Kong, the UK and the US. Computop processes transactions totalling USD 17 billion per year for its client network of over 10,000 large international merchants and global marketplace partners.