The Impact of Brexit on UK Payments – Is Your Business Prepared?

Understand the impact of Brexit on selling and accepting payments in the UK.

If you have a global ecommerce business, UK payments will probably be impacted by Brexit. Although the vote that decided the UK’s departure from Europe took place back in 2016, the changes brought about by Brexit only came into full force on 1 January 2021. As well as affecting UK citizens, Brexit is likely to impact international ecommerce businesses that sell to the UK.

Shopping online was incredibly popular in the UK even before the COVID-19 pandemic turned even more consumers to ecommerce, and compared to their European cousins, UK shoppers spend on average more per capita (€3,344 compared to €2,184.24 spent by the average European).

In fact, the UK is the third largest global ecommerce market, behind the US and China. eCommerce merchants selling to the UK must make sure they’re up-to-date with the potential impact of Brexit on payments and shipping. The consequences, and possible losses, of not doing so could be devastating to online businesses.

How might Brexit impact international ecommerce merchants?

If you sell to the UK from Europe or the rest of the world, there are a number of ways Brexit could impact your ability to accept payments from UK customers.

• Currency fluctuations: The volatility in pound sterling exchange rates thanks to the situation in the UK could put a dent in your profit margins if you’re not careful. If you charge in your native currency while the pound is weak, your UK customers will feel the hit and may look elsewhere. One option is to charge in pound sterling – after looking at whether you need to adjust prices to factor in fluctuations. In fact, charging in native currencies is a general best practice for corss-border ecommerce that can dramatically improve sales and reduce cart abandonment.
• EU Passporting: Financial services companies within the UK will no longer be entitled to provide services in the EU without additional authorization. The UK leaving the EU renders it a ‘third country’ and therefore businesses there lose what’s known as the ‘EU Passport’, putting limitations on cross-border payments.
• Local payment changes: As the definition of European countries can differ between card schemes and other payment methods, local payment methods are likely to be affected, with ecommerce merchants seeing restrictions on local payments that weren’t there pre-Brexit. Using a payment solution that gives you access to local payment methods and helps with local currency settlement and cross-border fees will make accepting payments in the UK a much easier process for merchants.
• No more freedom of movement: Now the EU no longer has open borders with the UK, there are stricter customs regulations and goods from global merchants are taking longer to arrive. As well as causing headaches for sellers, these factors could deter UK customers from buying internationally. To mitigate this problem, especially if you sell a lot to the UK, it’s worth keeping a percentage of your at a local warehouse to reduce shipping time to your customers. Using a third-party fulfillment service in the UK for storage and distribution will also help avoid issues.
• Changing trade rules: With the relationship between the UK and EU still in flux, merchants will need to stay up-to-date on new changes and a rapidly evolving situation. The UK government website is a good start in terms of staying informed.

Things to Consider When Accepting Payments in the UK

• Stay up-to-date on the current situation and any policies and regulations surrounding accepting payments.
• Make sure your pricing takes into account potential changes – do you need to adjust prices for UK customers?
• Offer preferred local payment methods to encourage UK consumers to remain loyal.
• Check new VAT rules for EU and other countries selling to the UK – for example, if you make sales below £135, you need to register for a VAT (Value Added Tax) number with HMRC as you’ll be responsible for charging and reporting the VAT.
• If you already sell to both the UK and EU, you’ll now need a UK EORI (Economic Operator Registration and Identification Number) as well as an EU EORI.

Brexit and Payments – Are You Prepared?

The full impact of Brexit on accepting UK payments may not yet be clear, but it’s worth being proactive to avoid making mistakes early on.

Many UK consumers will already be experiencing a variety of challenges because of the change, and if you can make their ecommerce experience as smooth as possible, they’re more likely to be loyal to you.

Rapyd’s All-in-One UK Payments Solution: Accept Payments in the UK Using the Most Popular Payment Methods