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The UK’s Payment Systems Regulator (PSR) has published its final decision on card-acquiring services, with the prerogative of enabling more awareness among businesses to shop around.
The PSR has set out its final rules for the card acquiring market following a consultation period.
The 14 directed firms, including the likes of Worldpay, Barclays and PayPal, are required to implement a remedy around point of sale (POS) terminal contracts from January 2023, as well as enable trigger messages and summary boxes from July 2023.
POS terminal leases and rental contracts will be set to a maximum duration of 18 months. Thereafter, a rolling monthly contract will be necessary, with the PSR stating that this is to prevent businesses from being locked into lengthy contracts over several years.
Summary boxes will be introduced that contain key price and non-price information bespoke to the merchant. These will need to be sent individually to each business and shown prominently in their online account.
These summary boxes can also be used alongside new online quotation tools to help businesses compare prices and other service features more efficiently.
For example, it will take advantage of the information provided in the summary boxes to make comparisons with different providers online.
Acquirers will also be required to send trigger messages to prompt businesses to shop around and/or switch. These messages will be shown prominently in their online accounts.
“Card-acquiring services play a crucial role in the payments sector, from the businesses that use them to accept payments, to the consumers using them to pay, so it’s important they work well for everyone,” said Kate Fitzgerald, interim head of policy at the PSR, in a statement.
The PSR believes that businesses could be saving up to thousands of pounds a year if it was simpler for them to compare prices and switch providers, she continued. “The steps we’re taking today will make it easier for the 1.5 million small and medium-sized businesses in the UK to do this, benefiting both them and their customers.”
In its cost analysis, the regulator said that it expects that indirect costs, such as needing to employ more sales representatives to deal with higher levels of customer switching and renegotiating, or due to distortions in competition, will be relatively limited.
Meanwhile, the PSR acknowledges that to the extent that merchants receive lower prices (or equivalent improvements in service quality), providers may earn lower profits in aggregate.
“However, the interventions are intended to result in merchants getting better deals on card acquiring services so we have not treated lower provider profits as a relevant cost for the purposes of our assessment,” the PSR pointed out. “Indeed, we consider that reducing provider profits in aggregate will likely promote broader economic efficiency.”
Meanwhile, the PSR said that the greatest gains are likely to accrue to merchants who switch to alternative providers or negotiate better deals with their existing providers, as a direct consequence of the remedies.
According to the PSR, most providers agreed that the major cost of implementing the online quotation tool will relate to updating their website with the generic summary information.
Various other costs were identified as also being significant. For example, some highlighted the indirect cost of having to change their pricing strategies.
Specifically, one acquirer informed the PSR that this tool had an estimated upfront cost of £45,000, with recurring costs of £25,000 to implement a solution allowing merchants to enter a wide range of parameters to generate tailored pricing based on their specific requirements.
The PSR first suggested its plan to overhaul the acquiring market in January this year, consulting on a package of possible policies. A provisional set of remedies was then published in June.
Part of what triggered the PSR’s concerns revolved around the fact that, as things stand, acquirers and independent sales organisations (ISOs) do not typically publish their prices for card-acquiring services.
Prior to the implementation of these new compliance requirements, pricing structures and approaches to headline rates can vary significantly, making it difficult for merchants to compare prices for ISOs, acquirers and payment facilitators.
