Cross-Border Payments Between the UK and the EEA After the Brexit Implementation Period

The UK left the EU on January 31, 2020 and has entered an 11-month implementation period under the terms of its withdrawal agreement with the EU. During the implementation period, EU law will generally continue to apply in the UK.

From January 1, 2021, subject to any free trade agreement entered into between the EU and the UK, the UK will be treated as a “third country” under the rules of the Single Euro Payments Area (SEPA)¹. The European Payments Council has approved the continued participation of the UK in the SEPA payment schemes in the event that the UK leaves the EU without a free trade agreement in place. However, this decision will be reviewed regularly to ensure continued compliance with the access conditions. SEPA enables payments in euro to be made between EEA member states and with certain non-EEA countries that meet its access conditions at relatively low costs. Such access conditions include having to apply certain provisions under the SEPA rules to cross-border payments in euro.

Under the SEPA rules, where a credit transfer or direct debit involves a third country participant, the full name and address of the payer must be included in the relevant payment instruction. The SEPA rules apply only to credit transfers and direct debits denominated in euro. They do not apply to card payments.

Currently UK payment service providers (PSPs), including banks, are not required under the SEPA rules to provide information such as the full name and address of the payer when making payments to an EEA member state. However, at the end of the implementation period, this information will be required for credit transfers and direct debits in euro between the UK and the EEA.

The UK Financial Conduct Authority (FCA) and UK Prudential Regulation Authority (PRA) have advised that PSPs should use the Brexit implementation period to take steps to fill information gaps that might affect cross-border payments. For existing direct debits or credit transfers, this includes contacting relevant originators to obtain missing information that PSPs will require. For new direct debits or credit transfers, PSPs will need to ensure that customers provide the full name and address of the payer when arranging the direct debit or credit transfer. If PSPs are unable to obtain the relevant information before the end of the Brexit implementation period, this could result in disruption to UK and EEA customers and businesses seeking to make and receive payments.

To the extent firms are subject to these rules, they should take steps to ensure they are able to provide the relevant customer information when making payments after the Brexit implementation period. Firms should also keep apprised of any updates from the FCA or PRA during and after the implementation period.