As the uncertainty around Brexit continues, SafeCharge is working on creating solutions to help our merchants weather the storm. Below you will find answers to all questions that may arise by merchants regarding Brexit.

At the end of this month the United Kingdom will officially leave the European Union with a withdrawal deal, a transition period until the end of 2020, leading up to a full exit from the Union. This long process, known as Brexit, started back in 2016 and will affect many aspects of the British and European economies – trade, security and regulation. Therefore, it raises many questions among merchants operating in both territories.

A high degree of uncertainty surrounds the Brexit process at this stage and many factors will affect its final execution in 2021. In these circumstances, it is important to plan for a variety of scenarios, including one in which the United Kingdom withdraws without any agreement. I’ve gathered some questions that may arise among merchants regarding Brexit and its implications on our industry. Below you will find their answers and how SafeCharge is preparing for it.

Brexit describes the United Kingdom’s withdrawal from the European Union. Gibraltar will also leave the EU. The withdrawal of the United Kingdom from the European Union will have repercussions for citizens, businesses and administrations in the United Kingdom, Gibraltar, the European Union and the European Economic Area (EEA).

The European Union is an economic and political partnership involving 28 European countries. It began after World War Two and was designed to promote economic co-operation between European countries.

It has developed into a single market that allows goods, money, services and people to move throughout the Union with minimal restrictions. The single market was created by removing regulatory, technical, legal, bureaucratic, cultural and protectionist barriers to trade.

A referendum was held on 23rd June 2016. The people of the UK voted to leave the EU by 51.9% to 48.1%.

The UK was originally due to leave the EU on 29th March 2019 but after three extensions and three and a half years after the referendum, there are strong signs it is actually going to happen. The UK will formally leave the EU on 31st  January with a withdrawal deal – and it will then go into a transition period that is scheduled to end on 31st December 2020.

Some of the changes that might result from Brexit include:

  • Changes to the validity of UK – issued licences, certificates and authorisations within the EU and the EEA;
  • New conditions for data transfers;
  • A potential devaluation in sterling;
  • Changes in taxes; and,
  • Changes in the regulation of financial services.

Of particular importance are the changes to the free movement of services. EU rules on ‘passporting’ allow financial services firms, such as SafeCharge that are authorised in the EU (Cyprus) to provide services in other EU states including the UK. This arrangement is almost certain to change. Changes to the rules related to the free movement of services may affect the way that some merchants offer services across borders. They may need to obtain a licence and conduct operations both in the UK and in the remaining 27 member states – to be known as the EU 27.

This is the period of time, between 1st February 2020 and 31st December 2021, designed to allow businesses and others to prepare for new post-Brexit rules.
During this period the UK will effectively remain in the EU’s customs union and single market – but will be outside of its political institutions and there will be no British members of the European Parliament. Free movement of people, goods, services and capital will continue through these months.

The first priority will be to negotiate a free trade deal with the EU. The UK wants as much access as possible for its goods and services to the EU.
But the British government has made clear that the UK must leave the customs union and single market and end the overall jurisdiction of the European Court of Justice. The government has ruled out any form of extension to the transition period.

Time is short. The EU could take weeks to agree a formal negotiating mandate – all the remaining 27 member states and the European Parliament have to be in agreement. That means formal talks might only begin in March.

It is impossible to say with any certainty at this point. While the agreement on the future relationship may be ratified, it will not be legally binding, and substantive negotiations will not commence until after the United Kingdom’s withdrawal.

If no trade deal has been agreed and ratified by the end of the year there would be customs checks and tariffs on goods entering and leaving the UK, long queues at border checks and substantial disruption to the UK’s economy, according to most analysts. Others suggest that the disruption would not be significant.

Ensuring continuity of services for our clients is at the very heart of what we do at SafeCharge. Ensuring that we can continue to offer our services in the United Kingdom, the EU 27 and the EEA after Brexit has been an area of particular focus for the leadership team. At present, EU rules on ‘passporting’ allow some financial services institutions, located in one-member state, to offer their services in the EU/EEA. This arrangement is almost certain to change. There may be an agreement that includes enhanced measures for mutual recognition, but it seems very unlikely that the EU will allow free movement of services without requiring acceptance of freedom of movement for people, capital and goods. If no trade deal has been agreed and approved by the end of the year, then the UK would probably face charges on exports to the EU.

There is a very real risk that the ability of acquirers to offer services across the United Kingdom’s borders will end upon the point of withdrawal, or at the end of any transition period that may come into effect. The European Banking Authority has in the past expressed concerns about the level of preparedness in some parts of the financial system.

To protect against this risk, SafeCharge now has the capability to offer services from within the EU and also from within the UK. This approach avoids the need to provide services across the UK’s borders and insulates our services from the risk of disruption. Our UK based, FCA licensed institution, SafeCharge Financial Services Limited is available to complement the services currently offered through our Cyprus based licensed institution, SafeCharge Limited.

To facilitate an orderly transition in the event of a ‘hard’ or ‘no-deal’ Brexit, SafeCharge has received Transitional Authorisation to participate in the FCA’s ‘Temporary Permissions Regime’. This means that SafeCharge Limited will be able to continue to operate in the UK in the absence of a withdrawal agreement.

It is anticipated that many of our clients will address Brexit in a similar manner and establish an additional presence in either the EU 27 or the UK as required. We are keen to support them in their preparations. We will continue to offer trusted, reliable and flexible payment solutions and meet the challenges and opportunities that arise in partnership with our clients.

There are a lot of uncertainties surrounding what could happen. SafeCharge is preparing for all scenarios to ensure we minimise the impact on our customers. The passporting rules are likely to change though. So if you are operating in the EU and or the UK, get in touch with us to find out how we can support your business post-Brexit.

About the Author

Phil Atherton, Chief Risk Officer
Phil Atherton is the Chief Risk Officer at SafeCharge. Prior to joining SafeCharge, he served in various senior managerial positions in the card and payments industry at leading payments companies, Worldpay and Barclaycard. Phil’s extensive experience in card payments, risk management and regulation compliance has enabled him to build and manage teams, deliver significant incremental value through effective contract negotiation, provide tight control of compliance frameworks, execute revenue building strategies and have an in-depth understanding of the regulatory environment. Connect with Phil on LinkedIn.

SafeCharge Limited is an Electronic Money Institution authorised and regulated by the Central Bank of Cyprus and is a principal member of Mastercard, Visa and Unionpay International (CUP). SafeCharge Financial Services Limited is authorised and regulated by the Financial Conduct Authority as a Payment Institution. Both SafeCharge companies are wholly owned by SafeCharge International Group Limited.