UK Payments Changes after Brexit
For businesses operating globally, UK payments are some of the most challenging types of payments after the implementation of Brexit. While the vote that decided the UK’s departure from Europe took place in 2016, the changes brought forth by Brexit only came into existence in January 2021. Not just customers, but the impact of Brexit is going to be a challenge for international eCommerce businesses that also operate in the UK.
Online shopping was incredibly popular in the UK even before the Covid-19 pandemic. After the pandemic, the online shopping industry has become supercharged, and compared to their European counterparts, UK shoppers spend on average per capita (€3,344 compared to €2,184.24 spent by the average European).
As a matter of fact, the UK is the third-largest global eCommerce market, right behind the USA and China. eCommerce businesses selling to the UK have to make sure that they’re keeping up with the potential impact of Brexit on payments and shipping procedures.
How does Brexit Impact eCommerce Merchants?
If you sell products to the UK from Europe or any other country, you need to know about all the ways Brexit can impact your eCommerce business. Brexit can impact a business’s ability to accept payments from UK customers.
- Currency Fluctuations: The volatility in pound sterling exchange could impact the profits you make from your sales. If you charge in your native currency, while the pound is performing low, the UK customers will feel the prices are expensive and they’ll search somewhere else. Another option is to charge customers in Pound sterling, after looking at whether you need to adjust prices to consider the price fluctuations. Generally, charging in native currencies is a great practice for cross-border eCommerce that can improve sales and profit margins while reducing the sale abandonment process.
- EU Passporting: Financial services businesses operating in the UK will no longer be entitled to provide in the EU without additional authority. The UK leaving the EU makes it a “third country” and thus businesses there lose the “EU Passport”, in turn limiting the international payments between the two countries.
- Changes in Local Payments: As the definition of European countries can differ between card schemes and other payment methods, local online payment methods are sure to be affected. Using a payment method that provides you access to local payment methods can help with local currency settlements and cross-border fees acceptance makes the process much better for merchants.
- No Freedom of Movement: Now that the UK has removed itself from the EU, there are stricter customs regulations, and goods from global merchants are taking longer to arrive. To mitigate this challenge, if your business has lots of customers from the UK, it’s worth keeping a percentage of it at a local warehouse to reduce shipping time to customers. Using a third-party fulfillment service in the UK for storage to avoid future issues.
- Volatile Trade Rules: With the relationships between the EU and UK in jeopardy, merchants will stay up to date on new changes and all the situations surrounding them. The UK government website is a good start in terms of staying informed.
What to Consider While Accepting Payments in the UK?
- Keeping up-to-date on current situations and regulations around accepting payments from the UK.
- Make sure that the price you offer to consumers considers potential changes – or do you need to adjust prices for UK consumers?
- Offer preferred local payment methods to encourage UK consumers to stay loyal.
- Check new VAT rules for the EU and other countries selling products and services to the UK.
- 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 EU EORI.
Brexit and New Payments: Keeping Your Business Ready
The complete impact of Brexit on accepting UK payments may not be clear, but it’s also worth being ready in advance to avoid making crucial mistakes. Many UK consumers will be experiencing a variety of challenges because of the changes, and if you can make their eCommerce experience as smooth as possible, they won’t leave your business for other customers.