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How Will Brexit Impact U.K. Banks?

By Steve Murphy
February 25, 2020
in Analysts Coverage, B2B Payments, Commercial Payments
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In this brief piece posted in PaymentsSource, the author  points out that a No Deal Brexit (which in effect has already happened, although there is a ‘transition period’ to work out trade deal specifics) will likely have quite a negative impact on UK businesses, including FIs, in terms of increased costs.  While this was sort of already baked into the Brexit cake, the actual final result will not be known for some time.

‘Without a deal in the making, the U.K. will lose its EU passporting rights, meaning banks and traditional financial institutions are likely to hit clients with international fees for every EU transaction. The U.K. government even predicts that credit card transaction fees will rise. Fintech companies, on the other hand, have essentially created a pseudo-open international market, enabling easy, quick cross-border financial transactions at a minimal cost. They will be key players in ensuring effortless trade between the U.K. and EU and will likely experience an upswing — particularly B2B payment companies.’

The author goes on to discuss the opportunities on the other side, which include fintech partnerships, new services, increased use of APIs (although this is basically what PSD2 is all about, and UK FIs have been a bit out ahead of the pack here anyway). 

The observation that U.S. fintechs have an opportunity to expand in the U.K. is interesting, although the most recent activity suggests EU (and UK) fintechs and challenger banks are attempting expansion into the U.S. (e.g.; Monzo, N26, Revolut, etc). In the end, it is expected that overall efforts will be a boon for B2B payments solutions, something that has been underway for a couple of years and shows no signs if expiring soon.

‘With any big change comes both opportunities and challenges and fintechs that view Brexit as opportunistic, particularly in the space of B2B payments, banking services and API technologies, are most likely to succeed.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

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Tags: B2BB2B PaymentsBrexitEnglandFinancial InstitutionUnited Kingdom

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