Many UK service providers bill their European clients out of London and take payment in euros. These payments were traditionally billed under Single Euro Payments Area (SEPA) rules. And the fees were standardized and low across the EU region. Brexit changed this almost in an overnight for UK businesses. Euro payments were no longer considered by the mainland European banks to the UK. This is as bound by SEPA rules and instead they are now charged under international cross-border tariffs. Hence, this drives up the costs of each payment significantly.
As businesses try to re-negotiate with their banking partners, the inflexibility of traditional banks has led many UK businesses to look to the fintech community for answers. The new rules were not clear for the banks. And the public debate was focused more on complex parts of financial services. When it came to increase their rate for euro payments to London, the European banks reaction and effectiveness were interesting.
The change in billing means European banks now have freedom of pricing. The cost is now decided by each issuing bank. UK firms are suffering, because their services are more expensive, and they are losing competitiveness against EU rivals. This potentially affects any euro payment to a UK euro account. Some EU companies are also affected by this. It could cost billions, if EU and UK businesses ignore this issue. The banks have not changed the terms and conditions. Many never actively negotiated their euro cross-border costs, as it was not a service they often used. And this caused a dramatic increase in bank fees. This results in moving their accounts of UK businesses back into the EU. A different option is to try and find a new bank. Or else they can negotiate with the current bank. The inflexibility from this has led UK businesses to look to the fintech community. The passive banking relationships are to be replaced by a more proactive approach.
