Most individuals and businesses in the UK are still trying to get a clear understanding of how Brexit will impact them. The last minute nature of the deal has brought with it a lot of confusion and scrambling. What many people may not be aware of is how Brexit effects UK cardholders. Mastercard reportedly plans to increase fees for EU-based merchants when receiving orders from the UK. Stores are expected to pay fees as much as five times higher than the current amounts which could then have a knock on affect to the prices paid by consumers. Fees were capped but this is no longer applicable now that the United Kingdom has left the European Union. These changes won’t come into effect until 15 October 2021 so retailers have time to prepare but it’s difficult to see how they will be able to maintain the same levels of business with their UK customer base. 2020 saw a significant increase in eCommerce and for many small retailers, closing their brick-and-mortar stores and going exclusively online was a matter of survival, so seeing a large part of their market under threat isn’t ideal.
As mentioned in previous articles, open banking offers a solution to the problem of card fees and this latest news might be a key driver in the mass adoption of its products and services in the UK and the EU. Open banking-enabled payment solutions allow customers to make purchases by instant bank transfer instead of using a card. As well as drastically reducing the fees paid by merchants, it means immediate direct settlement of money, simple refunds and no chargebacks. Shops with no previous online experience might find setting up an eCommerce store expensive in part due to the set-up and transaction fees charged by card providers. Open banking is a cheaper option, although stores don’t need to choose between them. Open banking and card providers can both sit comfortably alongside each other at checkout letting the customer decide. Open banking isn’t just about instant payments. That’s just one use case. The secure data sharing at its core means a whole host of innovative products, provided by fintechs, are available. Consumers can manage all their finances and budgets from one app, get insights into their spending, find the best real-time utility deals on the internet and get instant access to localised loyalty schemes. Retailers can save money on fees, simplify their transaction management processes and work with third parties on analytics in order to offer personalised products. Let’s see how the first year post-Brexit plays out for this up-and-coming financial ecosystem.
Pay iO’s articles do not constitute financial advice and are for information only.