UK’s PSR says Visa and Mastercard face “no effective competition” for core scheme and processing services
Visa and Mastercard are currently facing “no effective competition” in the UK market for core scheme and processing services for merchants and acquirers, according to the country’s Payment Systems Regulator (PSR).
PSR publishes report on card scheme and processing fees
The findings form the basis of the regulator’s newly published interim report on scheme and processing fees for cards.
It found that Mastercard and Visa, the two biggest card schemes in the market, do not face effective competition in the area of core scheme and processing services, with alternative providers unable to match their “one-stop shop solution”.
The PSR suggests in its report that the supply of scheme and processing services in the UK is “not working well”, adding that there “is currently no effective competition preventing the two biggest schemes raising prices”.
The PSR claims that Visa and Mastercard have increased their scheme and processing fees by “more than 30% in real terms” since 2019, with “little evidence” of an improvement in service quality to justify the action.
This increase forms a key point of focus for the regulator, given that 95% of cards issued in the UK transact through Mastercard and Visa.
It claims that pricing statements are “complicated and unclear” for the card acquirers enabling merchants to accept card payments. The PSR also says it found evidence suggesting that acquirers “cannot access information about fees in an easy way” and have a “very limited ability” in negotiating fees.
With its findings in view, the PSR says it is considering a number of “potential remedies to make sure more is done by Mastercard and Visa to improve transparency around these costs and ensure acquirers and business are given clearer information about the services provided”.
These include “improved transparency” for acquirers, obligations for Mastercard and Visa to “explain, consult on and/or document” price changes, and the “greater reporting of financial information” directly to the PSR to “improve scrutiny of Mastercard and Visa’s UK operations going forward”.
Call to action
Chris Hemsley, managing director of the PSR, says the report came to the conclusion that “competition does not appear to be protecting businesses effectively” and that, provisionally, “the market is not working well”.
“We are consulting on these provisional findings,” he continues. “Should we conclude the market isn’t working well, we are considering remedies aimed at providing businesses and acquirers with more accurate and relevant information about the card services they use.”
“The remedies would also increase transparency around Mastercard and Visa’s UK operations, allowing the PSR to better hold them to account.”
As for next steps, the PSR is currently seeking feedback from the public regarding the findings of its interim report until 30 July, with “anyone with an interest in card payments in the UK” being asked to provide comments.
The PSR says that it will “carefully consider all feedback” ahead of the final report’s publication in Q4 2024.
