Card schemes face additional scrutiny
The Financial Conduct Authority (FCA) has recently launched a Competition Act 1998 investigation into PayPal, Visa and Mastercard over concerns about potentially anti-competitive arrangements linked to PayPal’s digital wallet and its interaction with card payment networks. The case is ongoing, and no findings of wrongdoing have been made.
The FCA is focusing on whether commercial and technical arrangements involving PayPal’s wallet may restrict competition in parts of the payments market.
Key questions they are considering include:
- PayPal’s funding and usage arrangements influence how consumers choose between payment methods
- contractual or technical rules between PayPal and card networks limit competition in digital wallets or card payments
- the structure of these relationships could disadvantage rival payment providers
PayPal is central because it sits between consumers and card networks, with most transactions ultimately funded via Visa or Mastercard rails. The FCA is therefore examining whether these “multi-layer” arrangements could have competition effects beyond individual firms.
Visa and Mastercard are also under scrutiny given their role as the dominant card networks underpinning much of PayPal’s transaction flow.
The FCA is using powers under the Competition Act 1998, including rules on anti-competitive agreements (Chapter I) and abuse of dominance (Chapter II), with the ability to compel documents, conduct interviews, and escalate to formal findings if needed.
Alongside this, the Payment Systems Regulator (PSR) is reviewing Visa and Mastercard’s card scheme and processing fees, with concerns that:
- fees have risen significantly in recent years
- competition in card infrastructure is limited
- pricing structures lack transparency for merchants
The FCA investigation targets how PayPal interacts with dominant card networks, while the PSR is examining the cost and structure of those networks themselves. Together, they signal sustained regulatory pressure on the UK card payments ecosystem, with potential long-term implications for merchant costs and competition in digital payments.
We will engage with the FCA on the investigation and update you where we have further information .
