At the time of writing, Brexit negotiations are still very much up in the air. One arm of the political throng is poised to steer the UK down a path that will see us maintain a close relationship with the EU, whilst the other is adamant that Britain will leave without such an agreement.

At DFC we’re impartial to politics, but whatever the outcome, it’s important to consider the cross-border impact this could have on payment processing and collection with the UK’s European neighbours, particularly in relation to the SEPA scheme.

The SEPA scenarios

SEPA (the Single Euro Payments Area), a European initiative that enables merchants to transfer payments across borders, is comprised of the EU member states. But with 7 non-EU member states already forming part of the scheme, is Brexit likely to be the nail in the coffin for the UK’s SEPA alliance?

The European Payments Council (EPC), who are directly responsible for upholding SEPA, paints three scenarios for Britain’s SEPA fellowship in the wake of Brexit:

1. Britain leaves the EU but remains in the European Economic Area (EEA) – if Theresa May has her way then the UK will preserve a close trading relationship with the EU. This would keep the UK aligned with the EU legal framework, enabling us to uphold our participation in SEPA.
2. Britain leaves the EU and EEA but activates a free trade agreement – in order to conserve a relationship with the EU, any kind of free trade agreement would have the ‘functionalequivalencee’ of the EU legal framework. Again, this should put the UK in a position to continue its participation in SEPA.
3. Britain leaves the EU and EEA or does not agree on an alignment of its relevant legal framework with that of the EU – in the event of a ‘no-deal Brexit’, the EPC will have to assess the admissibility of the UK against the geographical scope of SEPA and its eligibility criteria. With territories outside the EU already in SEPA, geography shouldn’t be a barrier. Whether it passes all the checks falls more on the UK maintaining an EU-equivalent regulatory framework.

The outcome?

All things considered, it’s unlikely that the UK would be forced to cut ties with SEPA, even in the event of a no-deal Brexit. And if we do? It probably won’t be the end of the road for cross-border transactions between Britain and the EU.

Instead, the UK will have to determine new policies that ally with transactional processes across Europe. Who knows? This may even open up room for new opportunities. We’ll just have to wait and see!

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