In it’s final report for its market review into card scheme and processing fees, the UK’s Payment Systems Regulator (PSR) today finds that Mastercard and Visa increased their core scheme and processing fees to acquirers by at least 25% since 2017, costing businesses at least £170million extra per year. In addition, a lack of easy-to-understand fee information has led to costs for acquirers and merchants, including small retailers.
Cards are critical to the smooth running of the UK economy, enabling people to pay for goods and services and businesses to accept payments. As a well-established and popular payment method for consumers, cards play a big role in everyday transactions. This means that it is particularly important for people and business – and for the UK economy – that this market works well. Supporting this is at the heart of the PSR’s Strategy.
However, the regulator’s market review found that between 2017 and 2023, Mastercard and Visa raised their core scheme and processing fees by more than 25% in real terms. The PSR also found that the schemes do not provide sufficiently clear and detailed information to acquirers or merchants, resulting in them receiving complex or incomplete information on scheme and processing services and fees, raising both acquirers’ and merchants’ costs and preventing them from negotiating a better deal. As a result of its findings, the PSR will shortly consult on potential remedies to address the issues.
David Geale, the PSR’s Managing Director, said:
“Cards are a popular and convenient way to make payments in the UK, so any issues in the card market can have a negative impact on both businesses, and ultimately consumers.
“We have found that there is a lack of competition in the market, and evidence that Mastercard and Visa might have been able to charge UK businesses millions of pounds more than they would in a properly competitive market, impacting on their ability to invest and grow. The confusing information Mastercard and Visa make available to acquirers and merchants contributes to poorer market outcomes through raising their costs of dealing with this overly complex information.
“We will shortly consult on potential remedies to address the issues we have identified in our final report before we take any corrective action. We look forward to engaging with parties as part of this process.”
Following the regulator’s interim report, the PSR has engaged closely with a range of parties, carefully considering the consultation responses they have provided to reach the regulator’s final conclusions, as well as adding to the PSR’s evidence base.
Mastercard and Visa are subject to ineffective competitive constraints in the supply of scheme and processing services to acquirers and merchants in the UK.
Fees have risen substantially in the recent years, with no clear evidence that new fees are set on the basis of detailed cost analysis, competition or innovation. While the PSR has not been able to reach a firm view on the level of the schemes’ profits, the regulator found evidence in Mastercard and Visa’s UK profits that is consistent with a finding that their margins are higher than would be expected in a well-functioning market.
Mastercard and Visa’s failure to provide sufficiently clear and detailed information on fees creates poor outcomes for acquirers and merchants, in particular by raising their costs and distorting their ability to respond to the schemes’ price signals. They then have little choice but to either pass these increased costs onto consumers or incur the costs themselves, impacting their ability to invest.
Banking 4.0 – „how was the experience for you”
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