Today, the UK Payment Systems Regulator (PSR) has decided that cards do not face effective competition.
The PSR states that it has “provisionally” determined there is not enough competition in the supply of scheme and processing services to acquirers. Additionally, pricing is complicated, having risen significantly in the past five years. The PSR mentions the “two largest” providers – Mastercard and Visa.
The PSR states:
“UK businesses have little choice but to pay increased fees as Mastercard and Visa cards account for 95% of transactions using UK-issued cards, while non-card payment methods are often not effective competitive alternatives for businesses.
Over the course of its market review, the PSR also found evidence that:
- Mastercard and Visa provide complicated and unclear pricing statements to card acquirers (who enable merchants to take card payments).
- That acquirers cannot access information about fees in an easy way and that there were frequent delays and insufficient notice periods from Mastercard and Visa to implement fee changes.
- There was very little ability for acquirers to negotiate any fees.”
The PSR is planning potential remedies for this lack of competition.
The actions may include:
- improved transparency so that businesses and acquirers can make informed decisions and are more able to switch to alternative suppliers of optional services
- obligations on Mastercard and Visa to explain, consult on and/or document the reasons for price changes and the pricing of new services
- greater reporting of financial information to the PSR on an on-going basis to improve scrutiny of Mastercard and Visa’s UK operations going forward.
The PSR is seeking feedback on its report with particularly interest in hearing from businesses, issuers, acquirers, card scheme operators, and cardholders. The PSR is accepting feedback until 30 July 2024.
Chris Hemsley, Managing Director of the PSR, said:
“Every time someone uses a Mastercard or Visa card, UK businesses have to pay fees. These fees have significantly increased over recent years, and those increases cannot be explained by improvement in service quality. We have also identified concerns about the transparency and quality of information available to those providing card services to businesses. Competition does not appear to be protecting businesses effectively.”
Hemsly sais the market is “not working well.”
Stuart Barclay, VP Strategy at Volt – a payments provider, commented on the report:
“Interchange fees are among the primary pain points faced by UK merchants accepting card payments. Many tell us how frustrating they are, especially when they rise without warning. While we welcome the news that Visa and Mastercard will be required to share more information, it won’t make interchange fees’ inherent problems go away.
