It’s been nearly three years since the Brexit vote narrowly triggered the UK’s exit from the European Union. Despite the time passed, each new bit of Brexit news still dominates international headlines.
It sometimes seems lawmakers are no closer to striking a deal in Brexit negotiations today than they were the day after the vote took place. And, with so much still up in the air, everyone seems to have a different take on the ramifications.
Much of what we hear focuses on how Brexit will impact the movement of people and international trade. It’s hard to process a lot of that information on an individualized, macro scale, though. As a result, most businesses in the UK are still unsure what the country’s departure could mean. Businesses outside the UK have even less insight on how the talks will ultimately impact their revenue.
It’s worth taking a closer look at individual sectors of the larger economy, such as retail, and gaming out the long-term prospects. The problem is in defining the rules of the game.
Hard to Predict Brexit’s Impact
It’s almost certain Brexit will have a big impact on the retail and payments industries. The problem is we don’t know what it will be yet.
One of the main challenges facing retailers, the vendors who serve them, and the customers who buy from them, is the degree of uncertainty surrounding Brexit negotiations. We don’t know if we’re close to a deal, what a proposed deal would look like, or if one will even happen at all. At this point, bookies in the UK are taking bets on all different potential outcomes.
The closest we’ve seen to a workable Brexit plan was Prime Minister Theresa May’s proposal. However, this deal was voted down multiple times by members of both parties in Parliament. Of course, even if we did have a deal on the table, it would still be a massive body of legislation and international agreements. It’s impossible to account for every variable and contingency, especially in a macroeconomic framework, so retailers could only glean so much from it beforehand.
That’s not even accounting for additional changes that will come after the UK and EU finally reach a deal. We’re not certain whether the UK will draft legislation identical to EU policy, or go in a completely different direction.
Speculating About Industry Impact
As mentioned above, it’s hard to speculate on what the UK’s divorce from the EU will ultimately look like or what kind of impact it will have. However, there are a few probable results with which merchants here in the US and other regions will need to contend.
For example, Dublin-based Bankhawk projects that Visa and Mastercard interchange costs could increase substantially post-Brexit. The card schemes are now subject to strict EU oversight in terms of fees. After the UK leaves the group, though, card schemes would no longer be subject to EU rates for UK transactions involving sellers outside the UK and the European Economic Area (EEA). Even a small increase to payment card interchange fees could translate to tens of millions of dollars a year in added costs for merchants outside that region.
Interchange fees are just one of numerous potential problems, though. The imposition of customs checks between the UK and EU member states will cause delays and added costs for shipping. A weaker Great British Pound could make goods from US sellers prohibitively expensive for UK consumers. New UK regulations may cause merchants’ compliance costs to rise.
Again, this is all just speculation. The point, though, is that the Brexit vote’s impact will resonate far beyond British shores.
Brexit’s “Domino Effect”
The prospect of Britain leaving the EU threatens business interests in North America and abroad, and it’s not limited only to retail merchants who deal directly with UK consumers.
As mentioned above, new customs checks imposed between the UK and their EU neighbors will be a logistical nightmare. The companies who contract with merchants based in the US and other countries for fulfillment and other logistical work will bear the brunt of added complexity and delays.
Acquiring banks working on behalf of US merchants could face difficulties attempting to navigate UK payments industry regulations that may be imposed further down the road. Take chargeback management, for example; Brexit won’t immediately affect UK chargeback practices, which are guaranteed under Section 75 of the UK’s Consumer Credit Act. However, we don’t yet know how Brexit will impact data transmission, especially as the EU’s General Data Protection Regulation (GDPR) would no longer apply. Thus, getting necessary data for dispute cases across borders could be challenging.
Trying to predict the global impact of Brexit ten years down the road—or even ten months, for that matter—is a game of crude speculation, at best. Generally, merchants will need to serve as their own best insulation against the impacts of Brexit-related upheaval. This entails two key responses.
The first step is ensuring that all technology and strategies are up-to-date and responsive to rapid change. Sellers can’t rely on static, slow-moving responses when we’re dealing with an environment of constant and unpredictable change.
Second, retailers should make it a goal to eliminate preventable loss. Bad actors are primed to take advantage of confusion and slow responses, and leverage those opportunities to commit fraud. By being proactive about fraud management, though, retailers can minimize the threat posed by opportunistic fraudsters.
Of course, responsiveness and eliminating loss are both ideas that should be no-brainers, even independent of Brexit negotiations. Merchants should constantly be on the lookout for new ways to optimize processes and defend their revenue. We may not know exactly what’s in store with ongoing Brexit negotiations, but one thing is certain: adaptability is always the right answer.
Monica Eaton-Cardone is an entrepreneur and business leader with expertise in technology, e-Commerce, risk relativity and payment-processing solutions. She is COO of Chargebacks911 and CIO of its parent company Global Risk Technologies.
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