At Worldline, we support over one million merchants in more than 50 countries and our Digital Commerce division specialises in cross-border e-commerce and payments. As a trusted partner, we work closely with UK and EU e-retailers as they navigate Brexit challenges, helping them to deliver seamless services to their customers wherever they’re located. Find out our top tips to help mitigate Brexit impact from our expert Mike Goodenough.
When I left the UK many years ago to continue my career in payments in the Netherlands, I never expected to be writing a blog about how to mitigate cross-border fees between my home country and Europe. The UK is the world’s third most popular market for online cross-border shopping. With merchants on both sides of the channel relying on the e-commerce boom to help them ride out the pandemic, they can’t afford to lose out on overseas sales due to Brexit.
From the UK Brexit referendum in 2016 until the end of the transition period on 31 December 2020, UK and EU merchants have waited over four years to gauge the full ramifications of Brexit on supply chains, revenue and compliance.
We have already seen extensive VAT changes.
Now the UK is officially out of the European Economic Area (EEA) cross border sales are no longer VAT exempt and duty free. Since January 2021, e-retailers have faced new levies which vary depending on the value, nature and direction of goods supplied. From July 2021, all goods imported into the EU will be subject to VAT (at up to 20%), and the current exemption for small consignments up to €22 will be abolished.
Increased complexity has added to administrative burden and costs. Online stores located in the EU now must file a tax return in the UK and need an EORI number before they can ship products to UK customers. Incorrect customs data and paperwork can result in goods being rejected or held at the border and can incur unnecessary duty charges and even fines.
Changes in interchange fees yet to come.
And there’s still more disruption on the horizon. Now outside EU laws, the UK is no longer subject to the cap on intra-European interchange fees.
Card operators Mastercard and Visa have seized on this to raise fees in order to recover recent cross-border transaction losses. Come October 2021, both will quintuple cross-border charges to 1.5% for consumer credit card payments and 1.15% for debit cards. For Visa this is bidirectional, affecting both UK and EU merchants, and for Mastercard the new rate will only apply to UK online purchases from the EEA.
And if UK/EU payments follow the same trend as the US, it’s likely that these and other ‘foreign’ transaction costs will be passed on to the consumer. In which case, we may well see a significant increase in chargebacks as consumers cancel orders or refuse payment due to unexpected charges.
How can e-retailers help safeguard their business?
At Worldline, we support over one million merchants in more than 50 countries and our Digital Commerce division specialises in cross-border e-commerce and payments. As a trusted partner, we work closely with UK and EU e-retailers as they navigate Brexit challenges, helping them to deliver seamless services to their customers wherever they’re located.
Here are our top tips to help mitigate Brexit impact:
Get help to smooth your path
As COVID continues to drive retail growth online, there’s much at stake for cross-border merchants trying to find their way in the new UK/EU ecosystem. Many will need help to cut through the jungle of requirements and explore new options.
At Worldline Digital Commerce, we have an experienced team of cross-border specialists and local experts to help guide you. Please reach out to your contact at Worldline to know more.