The UK’s Payment Systems Regulator (PSR) on Tuesday (June 21) published details of two market reviews of processing and cross-border interchange fees planned for Visa and Mastercard later this year.
Preliminary market research on system and processing fees follows PSR’s previous market research on the card acquisition market. In this market analysis, the regulator found that fees paid by acquirers increased from 2014 to 2018. In January 2022, the regulator released the first set of remedies on the market to make it more transparent and allow acquirers to negotiate better terms with card networks. However, regulators still want to examine the amount, structure and type of system and processing fees. The regulator said this new market review would build on a market review of card purchases.
“Cards are the most popular payment method for consumers. In order to accept credit card payments, merchants have to pay certain fees that ultimately affect the cost of what we all pay for goods and services. We want to understand whether credit card payments work well and make sure that merchants pay and the end consumer,” said Natalie Timan, head of strategy at PSR.
A second market analysis of Visa and Mastercard cross-border interchange fees may not surprise many given the recent fivefold increase in such fees since the UK left the EU, according to the regulator, while the PSR raises some flags . In an interview with PYMNTS in March, PSR senior policy manager Andrew Self mentioned that a review of the card acquisition market has found that cross-border interchange fees have increased over the years, raising important questions for PSR about whether there are enough credit card programs. competitive pressure. ”
Before the UK left the EU, both domestic transactions in the UK and transactions between the UK and the EU were subject to EU interchange fee regulations. These limits are 0.2% of the debit card transaction value and 0.3% of the credit card transaction value. In January 2021, the rule was lifted in the UK, with Visa and Mastercard changing some fees. According to the regulator, the purpose of this review of the cross-border interchange fee market is to “understand the reasons for the increase and determine whether the ability of card scheme operators to increase these fees indicates that the market(s). or that certain aspects of the market are not functioning properly. good.”
PSR chose to focus market reviews on Visa and Mastercard as they account for 99% of UK debit and credit card payments. Regulators are concerned that rising fees for these companies could hurt competition, innovation and service users.
The PSR can only take light remedies for possible outcomes of market scrutiny, unlike other regulators that can impose hefty fines or structural remedies. For example, regulators may take some measures to promote effective competition, such as issuing general or specific directives requiring operators to change operating rules, making recommendations, and if the case needs to be escalated, the PSR may submit market investigations to competition- and market authorities Institutions investigate the market.
Until further notice, PSR has just released a draft market analysis and has until August 2 for comment on these ToRs. Once the regulator has received stakeholder input, it will issue a final ToR for market review in fall 2022.
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