REG - Payment Systems Reg - PSR for card scheme & processing services

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06/03/2025 08:15

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RNS Number : 6181Z  Payment Systems Regulator  06 March 2025

PSR finds market isn't working well for card scheme and processing services

In its final report of its card scheme and processing fees market review, the
PSR finds

·      Mastercard and Visa increased their core scheme and processing
fees to acquirers by at least 25% since 2017, costing businesses at least
£170million extra per year.

·      In addition, a lack of easy-to-understand fee information has led
to costs for acquirers and merchants, including small retailers.

Cards are critical to the smooth running of the UK economy, enabling people to
pay for goods and services and businesses to accept payments. As a
well-established and popular payment method for consumers, cards play a big
role in everyday transactions. This means that it is particularly important
for people and business - and for the UK economy - that this market works
well. Supporting this is at the heart of the PSR's Strategy.

However, the PSR's
(https://psr.org.uk/mr22-1-10-scheme-and-processing-fees-final-report/) market
review (https://psr.org.uk/mr22-1-10-scheme-and-processing-fees-final-report/)
found that between 2017 and 2023, Mastercard and Visa raised their core scheme
and processing fees by more than 25% in real terms. The regulator also found
that the schemes do not provide sufficiently clear and detailed information to
acquirers or merchants, resulting in them receiving complex or incomplete
information on scheme and processing services and fees, raising both
acquirers' and merchants' costs and preventing them from negotiating a better
deal. As a result of its findings, the PSR will shortly consult on potential
remedies to address the issues.

David Geale, the PSR's Managing Director, said:

"Cards are a popular and convenient way to make payments in the UK, so any
issues in the card market can have a negative impact on both businesses, and
ultimately consumers.

"We have found that there is a lack of competition in the market, and evidence
that Mastercard and Visa might have been able to charge UK businesses millions
of pounds more than they would in a properly competitive market, impacting on
their ability to invest and grow. The confusing information Mastercard and
Visa make available to acquirers and merchants contributes to poorer market
outcomes through raising their costs of dealing with this overly complex
information.

"We will shortly consult on potential remedies to address the issues we have
identified in our final report before we take any corrective action. We look
forward to engaging with parties as part of this process"

What has the PSR found?

Following the regulator's interim report
(https://psr.org.uk/publications/market-reviews/mr2219-market-review-of-card-scheme-and-processing-fees-interim-report/)
, the PSR has engaged closely with a range of parties, carefully considering
the consultation responses they have provided to reach the regulator's final
conclusions, as well as adding to the PSR's evidence base.

The PSR's key findings include:

·   Mastercard and Visa are subject to ineffective competitive constraints
in the supply of scheme and processing services to acquirers and merchants in
the UK.

·   Fees have risen substantially in the recent years, with no clear
evidence that new fees are set on the basis of detailed cost analysis,
competition or innovation. While the PSR has not been able to reach a firm
view on the level of the schemes' profits, the regulator found evidence in
Mastercard and Visa's UK profits that is consistent with a finding that their
margins are higher than would be expected in a well-functioning market.

·   Mastercard and Visa's failure to provide sufficiently clear and
detailed information on fees creates poor outcomes for acquirers and
merchants, in particular by raising their costs and distorting their ability
to respond to the schemes' price signals. They then have little choice but to
either pass these increased costs onto consumers or incur the costs
themselves, impacting their ability to invest.

 

ENDS

Notes to editors:

·   The fees referred to throughout this release are scheme and processing
fees paid by acquirers - the firms that process card payments for merchants -
and ultimately merchants. Scheme fees are fees charged by a card payment
system operator in return for services relating to participation in the card
system. These include any non-mandatory services provided by the card payment
system operator. Processing fees are fees charged by processing entities to
their customers (issuers and acquirers) for authorisation, clearing and
settlement services for card payments. These include additional card payment
functions, such as anti-fraud reporting.

·   The PSR called out completing our work on card reviews as a key part of
our Strategy in its recent Strategy update
(https://www.psr.org.uk/media/saoofhsk/psr-strategy-review-jan-2025.pdf) . We
also highlighted in our letter to the Prime Minister
(https://www.psr.org.uk/media/wnfjwy3z/psr-letter-to-pm-20250116.pdf) that
taking action on card fees was an important part of our contribution to
economic growth, supporting smaller businesses ability to invest.

·   A full history of our market review on scheme and processing fees can
be found here
(https://www.psr.org.uk/our-work/market-reviews/market-review-into-cross-border-interchange-fees/)
.

Media enquiries:

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

0207 066 5874

 

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