The Payment Systems Regulator (PSR) has published its final report of its market review into card scheme and processing fees. The findings build on those identified in its interim report published last year. The PSR has announced its intention to publish a separate consultation on the proposed remedies in the near future.
The report’s key findings include:
• Rising scheme and processing fees have hampered the ability of business to invest and grow
The report notes: “Mastercard and Visa increased their core scheme and processing fees to acquirers by at least 25% since 2017, costing businesses at least £170 million extra per year. This increased cost of doing business in the UK impacts on UK businesses’ ability to invest and grow, and could lead to direct economic constraints, particularly for small merchants.”
• Complicated fee information is costing acquirers and merchants
The report notes: “In addition, a lack of easy-to-understand fee information has led to costs for acquirers and merchants, including small retailers.”
• There is a lack of competition in the UK payments market
The report notes: “Existing alternative payment methods to cards do not exert effective competitive constraints on the fees charged by Mastercard and Visa for scheme and processing services.”
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.
We will continue to actively engage with the PSR on this and keep you updated on developments. We will continue to make the case for a price intervention remedy, building on the arguments we set out in our response to the consultation on the interim report. We will discuss this at the next Finance Community call on 20th March. Please email me if you would like an invite.
Chris Owen, Payments Policy Advisor at the British Retail Consortium, said:
This report confirms the harms arising from the lack of competition in the card schemes market, with fees being introduced without justification or sufficient explanation. There has been a 25% increase in scheme fees since 2017 costing businesses an extra £170 million per year. It’s now time for meaningful action. Following the PSR’s findings, it is clear it must go further than the proposed remedies in its interim report. This means introducing interim pricing remedies to reduce fees which have been an unjust burden on merchants, and working towards the introduction of a price cap in the longer term.
