REG - Payment Systems Reg - PSR announces two market reviews

MasterCardAnnouncement

21/06/2022 08:15

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RNS Number : 6061P  Payment Systems Regulator  21 June 2022

PSR sets out the details for its work on card fees

·     Details of two market reviews are set out

·     PSR focuses on scheme and processing fees and cross-border
interchange fees

Today, the Payment Systems Regulator (PSR) sets out its plans showing how it
proposes to carry out two market reviews focusing on card fees. One looks at
scheme and processing fees
(https://www.psr.org.uk/publications/market-reviews/mr22-1-1-card-scheme-and-processing-fees)
, and the other at cross-border interchange fees
(https://www.psr.org.uk/publications/market-reviews/mr22-2-1-UK-EEA-cross-border-interchange-fees)
.

The reviews focus on Mastercard and Visa as these two card payment system
operators account for 99% of debit and credit card payments in the UK. 1 
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On scheme and processing fees, the PSR is carrying out this review because its
card-acquiring market review
(https://www.psr.org.uk/our-work/market-reviews/market-review-into-the-supply-of-card-acquiring-services/)
(CAMR) found that the fees paid by acquirers had increased significantly from
2014 to 2018. Further feedback from stakeholders also highlights that scheme
fees have continued to increase since then. The PSR wants to understand
whether the markets in connection with scheme and processing fees are working
well. This market review will examine the levels, structure and types of
scheme and processing fees, and builds on the PSR's CAMR findings.

In addition, cross-border interchange fees have also increased significantly
in the last year. This affects fees for certain card transactions between the
UK and the EEA, where the cardholder is not present (such as payments made by
phone or online). Since the UK left the EU, Visa and Mastercard have increased
these fees five-fold. The PSR wants to understand the rationale behind these
increases and whether they are an indication that the market is not working
well.

Natalie Timan, Head of Strategy at PSR, said:

"Cards are the most popular way for consumers to make a payment. To accept
card payments, merchants must pay certain fees which can ultimately impact the
cost we all pay for goods and services. We want to understand whether card
payments are working well and to make sure that merchants, and ultimately
consumers, get a good deal.

"We've been gathering information since the start of this year and have
identified that a detailed review of the market is needed. We have set out
what we will assess in these reviews, which will then inform any decisions on
the steps we might need to take to promote effective competition or to address
any harm."

The draft terms of reference for the market reviews are open for
consultation until Tuesday 2 August. The PSR is interested to receive feedback
on the draft terms of reference, in particular the consultation questions and
welcomes any evidence in support of submitted views. During the consultation
period the PSR will also be running series of engagement events and will be
encouraging stakeholders to take part to help shape the scope of the reviews.

ENDS

Notes:

1.   Around 99% of all UK debit and credit card payments in 2021, both by
volume and value.

2.   The market reviews are being carried out under part five of the
Financial Services (Banking Reform) Act 2013 (FSBRA).

3.   Card payments are critical to the smooth running of the UK economy as
they enable people to pay for their purchases and merchants to accept payments
for goods and services. They represent a well-established method for consumers
to make payments and their use is growing. In 2021, there were 21 billion UK
issued debit card payments totalling £702 billion. UK issued credit card
payments in the same year numbered 3.5 billion and amounted to £182 billion
(source: UK Finance).

4.   Scheme and processing fees: Card payment system operators charge card
issuers and acquirers for using the system, and processing entities charge
them for each transaction. Card issuers are institutions like banks issuing
customers with debit or credit cards. Card acquirers provide the services that
allow merchants to accept card payments.

5.    Cross-border interchange fees: In a four-party card payment model
used, for example, by Visa and Mastercard, the acquirer pays an interchange
fee to the issuer for each transaction. When someone makes a card payment,
their card issuer takes the money from their account and passes it on to the
acquirer - minus the interchange fee. We're prioritising interchange fees paid
on transactions using cards issued by EEA banks to buy from UK merchants, also
referred to as "outbound" interchange fees.

 

Enquiries:

psrpressoffice@psr.org.uk (mailto:psrpressoffice@psr.org.uk)

 

 

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