In what is seen as one of the developments following Brexit, Paypal has increased merchant fees for transactions that are done between the merchants in the UK and those that are in the other regions of Europe.
So far, the UK and the rest of Europe were together in a single bloc and so the taxes and the fees for several businesses were strictly bound by the laws in Europe. Following Brexit, those laws and fees no longer apply and the UK would be treated as a country separate from the European bloc and this has resulted in the hike of fees from several merchants. Paypal has also followed suit by hiking its merchant fees to 1.29% from its current fee of around 0.5%. Thus huge jump is due to the interconnect fees that the company has to pay as the payments network switches for transactions between the UK and the rest of Europe after Brexit.
Post-Brexit, the UK is considered as a separate country from the European Union and so all the charges that are applicable for fund transfer between different countries and so the new charges have become applicable since Brexit. Paypal has followed in the footsteps of Visa and Mastercard who have also hiked the fees for transfers and payments since the Brexit. This is one of the many impacts on the financial and payments industry due to Brexit and we will have to wait and see the full impact of these hikes and also note whether this leads to a decrease in the transaction volumes with these card and payment platforms and whether merchants and businesses would now start looking for other payment methods to avoid this hike in fees.
This is quite likely to happen as most of the small businesses and merchants work on tight margins and this sudden increase in the fees by almost 1% is certain to affect their bottom line. This also provides an opportunity for other companies and startups to try and disrupt the space and bring down the fees using innovative solutions that are likely to be welcomed by the merchants but the regulators would also be keeping a close eye on such solutions to make sure that all the necessary laws are in conformance and no one can gain an unfair advantage over the rest of the market.