PSR call for evidence on competitive constraints in card payment systems closes

The Payment Systems Regulator (PSR) closed its call for evidence on the competitive constraints Mastercard and Visa face when setting scheme and processing fees at 5pm on Tuesday 11 April 2023¹. The call formed part of the regulator's card scheme and processing fees market review, and set out initial stakeholder feedback on how competition works in that market¹.

The PSR said the review is intended to establish whether the supply of scheme and processing services is working well, measured against its statutory objectives of competition, innovation and service-user interests¹. It said it is looking at how competition is working in the market and how this affects the fees the two card schemes set¹.

The call for evidence set out four themes the PSR said it had observed from initial views from stakeholders:

• the intensity of competition and innovation in the payments ecosystem
• differences in the competitive dynamics on the issuing and acquiring sides of the market
• the impact of transparency on competitive pressure at all levels of the value chain
• the must-take status of Mastercard- and Visa-branded cards in many retail environments¹

The PSR described the themes as intended to stimulate further discussion and debate, and said it wanted to hear from more stakeholders over the coming weeks to help with its ongoing analysis of the market¹. It said the document is relevant to individuals and organisations with an interest in making, receiving or processing card payments, in particular issuers, acquirers, schemes, merchants and cardholders¹.

The regulator also said it was planning opportunities for stakeholders to engage with it during the consultation, with further details of engagement events to be shared in due course¹. It said all views and evidence gathered would help inform the interim report of its scheme and processing fees market review¹.

Why it matters for households

Card scheme and processing fees are charged within the card payments chain rather than billed directly to shoppers, but they form part of the cost of accepting cards, which sits behind the prices retailers set. The PSR's review covers the fees Mastercard and Visa set, and the call for evidence was open to cardholders as well as issuers, acquirers, schemes and merchants¹. The four themes include the must-take status of Mastercard- and Visa-branded cards in many retail environments, meaning the question of whether merchants have a realistic alternative to accepting them¹. The outcome of the review has not been reported; the PSR has said only that the evidence gathered will inform its interim report¹. Background on how these charges work is set out in our guide to card interchange and scheme fees.

What happens next

The PSR said publication of the interim report of its scheme and processing fees market review is currently planned for the fourth quarter of 2023¹. It said further details of stakeholder engagement events would be shared in due course¹. The final terms of reference for the market review set out a timetable for the stages of the work¹. No date has been reported for publication of the final report.