An interim report, published today by the Payment Systems Regulator (PSR), has found “there is currently no effective competition” in the payments market, leading to higher processing and scheme fees. This follows representations from businesses organisations, including the British Retail Consortium, who have long called out the dysfunction in the payments market, which harms businesses and their customers.

Other key findings from the report include:

  • “The regulator’s interim report suggests the supply of scheme and processing services is not working well.”
    These are the fees paid by businesses to scheme operators to allow them to use the payment network to take card payments from customers.
  • “There is currently no effective competition preventing the two biggest schemes raising prices.”
    Businesses have little choice but to pay these scheme fees, as the two largest scheme operators account for 95% of the market in the UK.
  • “Pricing in the market is complicated and prices have risen substantially over the last five years.”
    According to the report, these fees have risen by over 30% in real terms in just five years, costing businesses an extra £250 million over that period.

As a result, the PSR has suggested a number of potential remedies to improve competition. These include improving transparency of costs; making it easier for businesses to switch between scheme operator; and a requirement for the large scheme operators to justify any price increases.

The BRC Annual Payments Survey showed that 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.

Chris Owen, Payments Policy Advisor at the British Retail Consortium, said:

This report highlights the lack of competition across card schemes, with fees being introduced without justification or sufficient explanation. The 30% increase in scheme fees since 2017 costs businesses an extra £250 million. It’s now time for action. The PSR must implement meaningful reforms to increase competition, increase transparency, and reduce costs in the payment market.