September 1, 2016
By Mirko Hüllemann, Managing Director, Heidelberger Payment GmbH
On June 23, the British decided in their referendum that the United Kingdom should leave the European Union. Apart from its political implications and clear signal effect, the decision will also have consequences for the EU’s single market and e-commerce inside Europe. The U.K., as Europe’s biggest e-commerce market, not only offers great opportunities in terms of customers and turnover for retailers. It is also one of the most important countries in the EU in the field of financial services. Against this background, the question arises: what effects can the e-commerce industry as a whole, as well as individual retailers, now expect from the U.K’s departure from the EU?
The most obvious effect undoubtedly will be the disappearance of customs duty- and import sales tax-exempted trade between the U.K. and the EU. However, this probably will have very slight effects on the European market, since according to current studies, the British tend to shop more in the U.S., Australia and China rather than procuring their products over the Internet from their direct neighbors. What is of far more interest are any changes in the field of costs and fees for credit card payments—in the case of acquirers based in the United Kingdom or customers who buy from there. Here, the fees could rise substantially, which might cause considerable additional costs for many, but above all for retailers with British acceptance agreements.
However, the greatest effect is to be expected for service providers in the financial services industry. Many providers are based in the U.K. as limited companies, due to the more convenient options for founding companies and the less strict conditions of the British financial supervisory authority. It is to be expected in the event of Brexit that retailers will lose their status as limited and, as a result, the business foundation for their activities in the EU. This would not only have dramatic consequences for the payment service providers, but also for their customers.
All sectors need to be reorganized as part of the departure. Trade agreements like those with Switzerland or Norway are conceivable here—and would probably limit the effects. Brexit is, by any measure, a critical event for online retailers whose payment service provider is based in the U.K., especially given the provisions of PSD2. The payment service providers based in the United Kingdom could in future be subject to oversight by the supervisory authority of the country where they operate. In the case of Germany, for example, this would be the Federal Financial Supervisory Authority (BaFin).
Mirko Hüllemann is managing director for Heidelberger Payment GmbH ( www.heidelpay.de ), an e-commerce payment provider based in Heidelberg, Germany.