Brexit and SEPA payment transactions

by 30 March, 2021Payments

As people increasingly live and work across borders, there is a greater need for money to move freely too. But what happens when the nature of one of those borders changes? Here at Clear Junction, we have noticed that since the UK departed from the European Union (EU), there has been a shift in the behaviour of some financial institutions within the EU. Some of these changes are related to the processing of Single Euro Payments Area (SEPA) transfers.

Given that it is still only three months since the UK exited the EU, it is hardly surprising that organisations within the UK are still learning the full impact of the recent Brexit deal. One particular aspect of the deal that has reared its head in recent weeks concerns corporations making SEPA payments from accounts in the UK to the EU. Many of these corporations have been experiencing unexpected fees and payment refusals.

Starling Bank recently noted that several companies across Europe have been refusing to accept direct debit payments from some Starling euro accounts because they contain the country code ‘GB’. Here it is worth highlighting that the UK is still a SEPA member and the exit from the EU has no bearing on this – this means that refusing these payments contravenes law.

The unexpected fees can vary from an €18 flat charge to a percentage of the amount shared or received, ranging from 0.3% – 0.5%. When there are large amounts being transferred to and from the UK and EU, these percentages can lead to significant charges – all of which should not be incurred.

The future of SEPA payments

While this situation has understandably caused some consternation, the UK’s continuing membership of SEPA means we believe these rejections are temporary issues that will be resolved before too long. Indeed, this is merely one of several hiccups due to the regulatory changes. However, in the coming months, we should see a more standardised approach emerge across EU financial institutions, with less disruption to providers and consumers – particularly as awareness of the new regulations increases.

We understand the challenges of building relationships and facilitating seamless transactions between institutions. We recently worked to successfully facilitate SEPA bank transfers from outside the EU, helping Monobank’s customers in Ukraine get virtual IBAN accounts. Monobank is now the first bank in Ukraine to benefit from faster SEPA payments to and from the EU.

We value our SEPA zone membership highly and recognise its vital role in simplifying payments across Europe. We want to see common sense prevail and hope that Brexit has no lasting impact on the future of SEPA payments. The smooth operation of these processes, established over the past several years, was hard-won, and we do not want to go back to how things were prior to the establishment of the SEPA network.

Currently, regulatory frameworks between the UK and the EU are aligned and there is no reason for any extra fees. With that in mind, we might ask what consumers and institutions should do if they do face any additional charges.

Unfortunately, there are currently no easy, off-the-shelf solutions. This means that people need to speak to their banks in the first instance and then the local regulator to add pressure and make local banks comply with the SEPA transfer rules. However, this process can often difficult and complex – it is not always easy to find the answers you require. Some banks, such as Starling and Revolut, have already taken action in this area, but more widespread initiatives are needed.

Benefit from our expertise and experience

We believe there should be no barriers to moving money and our goal has always been to remove the friction that complex regulation can create for financial institutions. As an experienced digital payments platform, we are passionate about making simple borderless transactions a reality.

Everything we do to empower financial institutions benefits their customers in the form of better, faster and more seamless payments. Financial institutions that work with us are able to access new markets faster, harness technology for a competitive advance, navigate risk and compliance, and improve their users’ experience.

For more information on how Clear Junction can power your payments, increase efficiencies and help you realise your growth ambitions, get in touch with a member of our team today.