Sales in and out of the UK include new restrictions and additional intra-regional fees as a result of Brexit. Read on for insights into what this means for merchants in the UK and the EU, and five approaches merchants can take to deal with the new measures.
We’re post-Brexit, mid-pandemic, and ‘pre’ many things. There are plenty of changes on the horizon for online, international merchants. But we have also seen a boom in ecommerce triggered by the pandemic. At Worldline we are here to help merchants capitalise on the opportunities ahead for ecommerce and help them with their cross-border growth.
To find out the impact of Brexit on merchants we asked Grégoire Hivert de Termont, Country Head, France, and Ahron Van Drunen, Pricing Performance and Optimization Manager, Merchant Services to explain the key things online merchants need to know post-Brexit.
“As of 1st January, EU merchants selling to the UK have to add a further 20% charge to goods up to £135 (≈ €156) to account for VAT charged at the point of sale.
Meanwhile, businesses located in Great Britain that import or export goods from the EU will need to have an Economic Operator Registration and Identification (EORI) number. They can source this by working closely with their government.”
In addition to the various customs and VAT costs to take into account, existing interchange fees will be revised, specifically for transactions originating from the UK and processed in the EEA.
“Mastercard has announced that it will be increasing the intra-regional interchange fees more than fivefold for online EU purchases made by British cardholders. From October 2021, fees will rise from 0.2% for debit cards and 0.3% for credit cards to 1.15% and 1.5%, respectively. These fees will align with the already existing inter-regional interchange fee caps for EU merchants.
While this could dampen spirits of those targeting the UK, it’s important to remember the market opportunity here. British consumers have a clear appetite for buying internationally – something which is only growing as ecommerce adoption increases.”
Ahron continued: "This receptiveness and viability of the market means that EU merchants should not write-off UK operations due to increased costs of transaction processing and logistics. At the same time, it is recommended to evaluate the impact of these fee changes on your transaction mix, and review whether alternative strategies, such as localization tactics and like-for-like proceedings, could mitigate the impact of these cost increases.”
1. Use localisation tactics
One out of every five transactions never reach completion, often because the payment options customers would rather use aren’t offered. Bearing in mind that payment preferences vary by region, merchants should be continually reviewing the payment methods and currencies they provide to ensure they’re effectively targeting international consumers.
In the UK, for example, card payments and PayPal are preferred, but Buy Now, Pay Later options are also on the rise. Meanwhile, in the EU, Dutch consumers value iDEAL bank transfers when making their online purchases. In Belgium and France, shoppers opt for local card schemes, such as Bancontact and Cartes Bancaires.
To cater to a wide customer base, merchants should therefore take stock of where their customers are primarily located and the payment methods most popular in those locations. Working with an international payments provider, they can then introduce these options to their checkout and expect to see a positive increase in conversation rates.
2. Implement a robust chargeback mitigation process
With chargebacks costing the average merchant 1.47% of their overall revenue. Therefore, it is vital to put measures in place that will prevent unnecessary claims during this Brexit teething period. In fact, we’ve already received reports that merchants are seeing an increase in chargebacks due to longer delivery times while their products are getting stuck at the UK border.
To avoid this, merchants should:
☑ Openly communicate how Brexit is expected to impact cross-border online shopping
☑ Provide tracking information to keep customers up to date with delivery updates
☑ Respond quickly to purchase queries
☑ List terms and conditions clearly on their website, including details about the refund process.
By taking this proactive approach, merchants will keep their customers happy and lower their chargeback claims.
3. Take advantage of the one-way charge system
If they haven’t already, larger merchants can also consider capitalising on the fact that the fees only occur in one direction by setting up an entity within the UK. By doing this, businesses can avoid the fees altogether. But, of course, this would require a large upfront investment.
In addition, card-present rates remain the same. So, if shoppers decide to pick up the item and pay in-store, lower fees will apply, namely 0.30% for credit cards and 0.20% for debit cards. This will only apply to large merchants with physical stores in the UK.
4. Get regulation ready
With all these changes coming into play, it’s important that merchants never lose sight of other looming regulations which could sneak up on them if they’re not careful. The most immediate of these being PSD2, which progressively came into force since January 2018, bringing the additional security measure, Strong Customer Authentication (SCA), with it. The enforcement deadline for EU merchants passed on 31st December 2020, and the deadline for UK merchants will be fully enacted on 14th September 2021.
“SCA is essentially a balancing act between creating friction that minimises fraud risk, but not enough to lose customers. SCA is an opportunity for growing businesses to innovate and have more control over their data, and working with a partner like Worldline can keep approval rates high during this transition.
Whether a merchant is UK-based or yet to comply in the EU, it’s important to seek SCA compliance sooner rather than later. Otherwise, they could see increased declines from European issuers, and it will eventually result in large fines due to non-compliance.”
For more about Strong Customer Authentication requirements, please consult our dedicated guide on PSD2/3DSv2, or get in contact with us to find out how we can provide compliance support.
5. Remember: You’re not alone
We understand that the ongoing changes caused by Brexit can be confusing. That’s why we act as more than a payments provider; we’re a partner – someone to provide a port of call for questions and explanations of payment rules, regulations, and fees as they unfold behind the scenes.
For further help with customs fees, we’d also recommend working with a lawyer or a dedicated company that specialises in this area. This will help minimise the headache of Brexit for merchants and ensure they can keep operating in and out of the UK.
At Worldline, our vision is firmly rooted in optimising a merchant’s online payment performance. We achieve this by continuously investing in our technology platform to secure the highest conversion rates, enable new sales channels, and provide multiple payment methods and currencies. For fraud management, our industry-leading detection tools and experts with years of industry and regional expertise can help develop, implement and manage a bespoke strategy for your business.
Not only this, but we’re on hand to support merchants who are looking for extra clarity regarding the increased transaction fees, local payment methods, chargebacks, fraud, authorisation rates, and other potential complications caused by the UK’s exit from the EU.
Each merchant will have specific requirements depending on their individual circumstances. If you require more in-depth support with your cross-border processes for the months ahead, get in touch today.
Worldline [Euronext: WLN] is the European leader in the payments and transactional services industry and #4 player worldwide. With its global reach and its commitment to innovation, Worldline is the technology partner of choice for merchants, banks and third-party acquirers as well as public transport operators, government agencies and industrial companies in all sectors.
Powered by over 20,000 employees in more than 50 countries, Worldline provides its clients with sustainable, trusted and secure solutions across the payment value chain, fostering their business growth wherever they are. Services offered by Worldline in the areas of Merchant Services; Terminals, Solutions & Services; Financial Services and Mobility & e-Transactional Services include domestic and cross-border commercial acquiring, both in-store and online, highly-secure payment transaction processing, a broad portfolio of payment terminals as well as e-ticketing and digital services in the industrial environment. In 2019 Worldline generated a proforma revenue of 5.3 billion euros.