In our latest blog, we discuss the changing legislation for Card Processing surrounding the UK’s Brexit Negotiations for 2019.
The word of card processing is one of many industries that may have their operating procedures altered, reconfigured or adapted as a result of Brexit. Some of these could come in the field of the way the payments card industry is legislated.
What is current legislation?
The Payment Services Directive (PSD), at present, outlines the things the payments industry must be aware of and how it should operate. Coming into force in 2007, the aim of PSD was to be a part of the creation of the Single Euro Payments Area (SEPA), hence creating a uniform and structured way to handle cross-border payments and set regulations and standards, across the countries of the EU.
The PSD was updated in 2016, and PSD2 was created, which dealt with new legislation around online and mobile payments, and the birth of a safe digital single market. As this update happened in 2016, it occurred before Brexit. It’s coming into effect in January 2018 came after the vote, but PSD2 is currently being taken on by the UK regardless.
Will this legislation continue?
At present, there is no indication that the measures specified in PSD2 won’t be adopted and adhered to. This is broadly in line with other industries that, for lack of any other option, are proceeding as they would normally.
Whether this will remain the case is hard to predict, however, and it would seem likely that PSD2 may need some sort of amendment in order to incorporate the UK card processing industry, post-Brexit. Industry experts predict that Brexit may delay some of the measures of PSD2 being fully incorporated, but will not derail it entirely. Access to the single market is a major part of the ongoing discussions and will have a large bearing on whether legislation will need to be changed.
The possibility that the UK has to create its own legislation is also there. If this becomes the case, it would seem likely that this legislation is remarkably similar, if not identical to PSD2.
What will the impact on those in the card processing industry be?
Despite the level of uncertainty surrounding Brexit and the world of card payments, experts are hopeful that the impact will be minimised. Those that have already changed their procedures to conform to the specifications of PSD2 will not have wasted their time; the updates are necessary for an industry looking to the future.
Major aspects of PSD2 focus on encouraging innovation around technology by making banks free up access to customer data, hence allowing new companies and providers to develop fresh financial products. The advantage for the customer is that they will be able to look wider and further for ways to handle their finances, while the industry embraces a new era.
Whether the UK eventually moves away from PSD2 or not, the fundamentals of the legislation will change the industry and have a large impact as more, and newer, companies enter a marketplace which was previously heavily guarded by the gatekeepers of the banks.
Other regulation that could be impacted
While PSD2 is the focus of the greatest amount of attention, other regulations could be impacted by Brexit. Interchange fees, managed by the card issuer for card payment services, are currently subject to maximum caps by European Interchange Fee Regulations.
This controls the charges made to Merchants who offer the ability to make card payments, and could, of course, be subject to change as the UK leaves Europe. Exchange fees, data protection and charges paid for accessing cash or buying goods abroad via card are also all potentially subject to alteration, due to their current status being controlled by various EU regulations.
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