EPA’s Craddock: Payments industry hopes for Brexit deal

A no-deal Brexit would be like heading down a dark tunnel not knowing what’s at the end for the UK’s payments, according to Tony Craddock, director general of the Emerging Payments Association (EPA).

“In our sector, there is a genuine hope that a no-deal Brexit won’t happen,” he says. “Firms could lose their regulatory permissions to conduct cross-border business. If we only end up having third country access to the EU there’s a good chance that local authorities will come down hard on companies that are trying to issue and operate cards outside of their home state.

“It’s not just passporting, it’s data as well. If you become a third country, then your ability to deal with data will be affected – in terms of what data we can and cannot import – as well as how we give permissions and how applicable GDPR might be. I feel that if we end up with a no-deal Brexit we are heading down a dark tunnel while not quite knowing what’s at the end.

“I believe that a no deal Brexit is very unlikely, though its likelihood reduces and increases by the day based on how you interpret the news. If we do end up leaving without a deal, there will be all sorts of questions that need to be asked.”

A January 2019 report from EY found that 56% of banks, investment banks and brokerages are relocating operations to Europe in the wake of Brexit, while around £800bn of assets will be shifted from the UK due to uncertainty around the country’s status. An ongoing Reuters survey of banks, asset managers and insurers, financial services firms reads that 2,000 jobs will be moved away from the UK in the lead up to Brexit, with a further 5,800 expected following departure from the EU.

Despite concerns about the UK leaving without a deal, Craddock indicates that most of the members in the EPA are ready for departure. “While they may not be delighted, they’re pragmatic. They have made decisions around pulling back on their trade in Europe, while others are choosing to hold off on investment in Europe and instead keep within the UK. They might set up a satellite office with a suitably responsible director in Holland, Cyprus, Lithuania or Luxembourg. There’s a third type of organisation, too, one which is located outside of the UK, perhaps in Dublin, and is saying, ‘Okay, let me open up a non-licensed firm in the UK and set up a team at home.”

There are a few firms that have left things a little bit late, says Craddock, but most of them are heading towards full preparedness. “Some I have spoken to have told me, ‘look, we’ll miss the deadline, but three months down the line we’ll have hit our targets’.”

Craddock says the EPA has been in discussions with the Confederation of British Industry (CBI) to ensure the payments sector’s voice has been heard. “We are very actively involved with the CBI and its financial services group, making sure it’s aware of our needs. We have communicated very clearly to people about our desire for a temporary permissions regime to be reciprocated,” he says. “We’ve currently given every company in the EU the opportunity to have temporary permission to continue to operate in the UK for the next 18 months or so until we know what’s going on.”

The EPA would ideally like to have those permissions given to UK firms operating in the EU, but according to Craddock, “the EU isn’t willing to do that because it doesn’t know what kind of deal we’re going to be coming out with.

“We generally don’t get involved with talking to Brussels very much because it’s what I call a political quagmire. It’s really hard to go there and actually come out alive. Our scope is that we focus on the UK institutions and not the EU ones.”

The FCA, adds Craddock, has been a “massively supportive regulator” during the entire process. “The FCA has said that the UK will be mirroring EU regulations as they evolve. Why wouldn’t they? PSD2 is good regulation, GDPR is good regulation. They have both been adopted effectively by the FCA, which is the most supportive regulator in the world for financial services. The Europeans have done a good job [with regulation] and there’s no reason we would want to try and vary from what has been a successful formula.”

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