The Payment System Regulator (PSR) today published their
long-awaited consultation outlining their proposals to tackle the
harms in the card scheme and processing fees market.
Unfortunately, the proposals fall well short of what is needed to
fix the problems that exist.
The consultation sets out remedies to require the card scheme
operators to increase transparency on fees to merchants and
acquirers, and requirements on pricing governance and regulatory
reporting to the PSR.
While important, these proposed information-gathering and
transparency remedies alone cannot drive effective reform.
The harms from the dominance of the card schemes are clear. The
PSR's market review into card scheme and processing fees has
concluded that the card market is not working well, that card
scheme revenues from scheme and processing fees have risen
substantially in recent years, and that their margins are higher
than would be expected in competitive markets, with UK merchants
and their customers likely suffering harm as a result. Indeed, as
shown in the PSR's Final Report, between 2017 and 2023, Visa and
Mastercard raised their core scheme and processing fees without
justification or valuation by more than 25% in real terms,
representing an extra cost of at least £170 million per year for
UK businesses.
Despite these findings, the ‘must take' status of cards in the UK
market, and the proposal for a price cap to address similar harms
in the cross-border interchange fees market, the PSR's
indecisiveness will continue to harm UK merchants. Pricing
interventions must be introduced.
Chris Owen, Payments Policy Advisor at the British Retail
Consortium, said:
“Today's consultation represents a failure of vision by the PSR.
Their proposed remedies fall well short of the robust measures
needed to tackle the harms that have arisen from the dominance of
the card scheme operators. Retailers have long been weighed down
by the high cost of card payments, and the PSR has found enduring
competition problems and inefficiencies that cause serious harm
to the retail market. The PSR must act on its regulatory
responsibilities and use its powers to mandate pricing
interventions and a longer-term price cap to meaningfully lower
fees and bring lasting reform to the market. Otherwise, the card
schemes will continue to exploit their dominance, and retailers –
and their customers - will continue to pay the price.”
-ENDS-
The BRC Annual Payments Survey
showed that over 85% of spending is made using credit or debit
cards in the UK. This outlines the vital importance of card
payments to the UK economy.
PSR market review into card
scheme and processing fees.
- Definitions:
- Scheme Operators – Payment networks e.g. Visa and
Mastercard
- Scheme fees – Scheme fees are those charged by scheme
operators (e.g. Visa and Mastercard) to participate in the
scheme.
- Processing fees – Processing fees are those charged by
Scheme operators to businesses for the authorisation,
clearing and settlement of payments.
