Cyprus Mail 30 June 2021 - by Andrew Rosenbaum
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| London City Banks |
Companies making payments from the UK to the EU are seeing sharply higher fees that add up quickly, a report in Finance Monthly shows.
Some European companies are also faced with higher fees when making payments to the UK, notes a study by Global Banking and Finance (GBF).
“This could cost millions,” the study adds.
Before Brexit, the UK was a full-fledged member of the Single Europe Payments Area (SEPA), a scheme set up by the European Commission to make very low-cost cross-border payments regardless of the amount of money involved – this is why we all today have IBANs on regular bank accounts.
Now, after Brexit, the UK is still technically a member of SEPA, and it is illegal for any bank to refuse to accept a SEPA-coded transfer.
“But banks, both in the UK and some in Europe, have introduced recent charges to payments coming from or going to the UK. These new fees can vary from an €18 flat charge to a percentage of the amount shared or received, ranging from 0.3-0.5 per cent, and these can add up to a significant figure,” notes the study from Finance Monthly.
“Mainland European banks no longer consider euro payments to the UK as bound by SEPA rules and instead they are now charged under international cross-border tariffs, driving up the costs of each payment significantly. A €200 payment that used to cost €0, now costs €10-15,” the GBF study shows.”
“This potentially affects any euro payment to a UK euro account, so everything from large corporates, SMEs and private individuals are paying these higher fees,” according to the study.
While their EU clients are footing the upfront bill, UK firms are suffering – their services are more expensive, and they are losing competitiveness against EU rivals, the study continues.
“It also adversely affects some EU companies. We have seen German companies, which are paid in euros into their global bank account in the UK, that have only just realised that their service costs to their own clients have increased indirectly because there is a new surcharge. This changes the dynamic of relationships with their customers,” it adds.
Another option is trying to find a new bank or renegotiate with the current partner. But it is difficult to find an alternative offer among banks, as these financial institutions do not see any reason to offer better rates.
“This inflexibility has led many UK businesses to look to the fintech community for answers. Many fintechs offer more aggressive and transparent cross-border payment pricing, and some offer EU accounts which resolves the issue,” the study concludes.
