A little after noon in Brussels March 29, a British ambassador delivered a letter to EU Council President Donald Tusk that set the wheels into motion for the U.K.’s exit from the EU. Today’s announcement makes official the results of the historic vote June 23, when 52 percent of voters in the U.K. stunned many around the world when they opted to leave, or “Brexit,” as it’s commonly called.
The letter triggers Article 50, the legislation enabling a country to leave the union, of which the U.K. has been a member since 1973. The article provides a two-year period of negotiations to reach an agreement on the terms of the U.K.’s exit—and there’s much to be discussed. In addition to such topics as trade, financial regulations and immigration, a huge issue for the payments industry is how passporting will work because a large majority of European e-money issuers have licenses in the U.K. that they passport elsewhere.
The Prepaid International Forum (PIF), a trade association for the prepaid financial services sector, urged Prime Minister Theresa May and the U.K.’s Brexit negotiators to avoid any scenarios involving trade barriers to the financial markets, especially in the fintech sector, according to an announcement.
“Removing financial passporting to the EU, that currently allows U.K.-based businesses to access Europe and vice versa, will harm both parties,” said Alastair Graham, a PIF spokesperson. “We call on the U.K. government to address passporting matters early on in the process to bring about clarity and safeguard business continuity.”
PIF highlighted the role the U.K. plays in the EU’s fintech sector, especially the prepaid financial services sector, which it said is estimated to be worth £65 billion (US$80.7 billion) annually across the EU and U.K. PIF added that the U.K. is considered a gateway to Europe for U.S. and other international fintech businesses.
“A pragmatic approach from both parties in the Brexit negotiation would not only protect jobs and the wider economy, but also ensure that the EU continues to benefit from the advances in innovative financial services and greater financial inclusion being driven by fintech and prepaid sector businesses,” Graham said.
Addressing the passporting issue could include rejoining the European Economic Area as a member of the European Free Trade Area, which would keep passporting policies status quo, according to Martin Koderisch, manager at the London office of Edgar, Dunn & Co., who outlined possible scenarios days before the U.K. voted to leave the EU. Another option is a free trade agreement between the U.K. and the EU, which Koderisch said “probably offers both sides the best chance for a mutually desirable outcome” because it could be a single deal instead of piecemeal agreements.
In the letter delivered today from Prime Minister May, she outlines issues that need to be addressed during upcoming discussions. Among them is a “bold and ambitious” Free Trade Agreement between the U.K. and the EU that “covers sectors crucial to our linked economies, such as financial services and network industries,” she wrote. May added that both sides need to “prioritize how we manage the evolution of our regulatory frameworks to maintain a fair and open trading environment, and how we resolve disputes.”
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