Payments Industry Braces for ‘Brexit’ Results
As voters head to polling places today to decide whether the U.K. should split from the European Union, the referendum is top of mind for members of the payments industry around the world. Several issues for the industry would be in flux should the U.K. decide to bow out, or “Brexit,” as it’s commonly called. Among those concerns is how passporting would work if the U.K. is not part of the EU since the majority of European e-money issuers have licenses in the U.K. that they passport elsewhere.
“No one has ever left the EU before, so naturally there are concerns, in particular, on whether the passporting regime will continue to exist if the U.K. decides to leave the EU,” Diane Brocklebank, commercial director at the Prepaid International Forum, tells Paybefore.
The U.K. Electoral Commission said it will announce the results Friday, and various pollsters indicate the final tally could be close. Prior to voting, an Ipsos Mori poll indicated that 52 percent of voters wanted the U.K. to remain in the EU and 48 percent did not. A poll by Populus had a slightly wider margin, 55 percent to 45 percent, in favor of remaining part of the EU.
Martin Koderisch, manager at the London office of Edgar, Dunn & Co., outlines five scenarios in the event the U.K. leaves the EU and how it would affect passporting. Some of those scenarios include rejoining the European Economic Area as a member of the European Free Trade Area (EFTA), and passporting would remain status quo. “However, there is a gulf between the EFTA and the EU in terms of financial services regulation and this is likely to widen over time,” he said. Another option is a free trade agreement between the U.K. and the EU, which Koderisch says “probably offers both sides the best chance for a mutually desirable outcome” because it could be a single deal instead of piecemeal agreements.
“Brexit” could take on a new meaning if the U.K. leaves the EU—businesses might pull up stakes to relocate to a country within the EU to continue to use its passporting rules—although it would require applying for a license in that country.
“Another country, say Ireland or Netherlands, may become the place for payment companies to cluster and access the EU,” Koderisch suggests. “Prudent companies probably need to review their strategies and consider alternative plans soon [if the] vote [is] to leave.”
Should U.K. voters decide to exit the EU, from a legal perspective it will be several years before a Brexit takes effect, according to Brocklebank. “There will likely be two years of legislative planning followed by a two-year implementation period. There may be further transitional provisions after that,” she noted.