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In correspondence with the Treasury Select Committee, the Payment Systems Regulator (PSR) has said that it is in the "early stage" of its thinking with the Interchange Fee Regulation (IFR) reform as it focuses on identifying harms caused by scheme and cross-border interchange fees.
The PSR has responded to a letter from the Treasury Select Committee that was sent earlier this month, probing the regulator on how it intends to tackle card acquiring fees.
In previous correspondence, the PSR had said that it is considering how the current IFR could be adapted to best serve the UK economy, including to reflect the UK’s new position outside the EU, and what powers the PSR needs to achieve this.
This spurred a cross-party group of lawmakers to pile the pressure on as to when a timeline would be established.
“We are at an early stage in our thinking on potential changes to the IFR and have no plans to publish anything at this time,” said Chris Hemsley, chair of the PSR.
Hemsley noted that, instead, the regulator’s focus was on “card scheme fees and cross-border interchange fees and addressing any harms we identify”, rather than domestic interchange.
Hemsley said that the regulator, which was established in 2015, will continue to work closely with the Treasury on a wide range of issues relating to card payments and card fees, including ongoing work on cross-border interchange fees.
This is an issue that has caught the attention of the regulator, and the Treasury Select Committee, since the UK’s departure from the EU’s internal market and the subsequent increase in inter-regional card fees instigated by Visa and Mastercard.
The challenge for the regulator is that the cost of accepting cards from the EU is outside the scope of the UK’s IFR, considering that it is not in the European Economic Area and thus no longer aligned with EU law.
The PSR’s letter also stated that the payment systems watchdog is keeping an eye on scheme fees in the UK, as well as its work on the cross-border interchange.
Regulatory tools
“We continue to collect and analyse information, which will help us decide whether further action is necessary and, if so, which of our regulatory tools is most appropriate,” said Hemsley. “Once we have determined our course of action, we will be in a position to set out in more detail our planned programme of work, including timings.”
The PSR has also been pressed by parliamentarians on what would be needed to trigger it to take action in introducing so-called “shorter-term measures”.
“We have sought to distinguish between longer-term structural reforms and shorter-term measures. The former involves changes to infrastructure, industry rules and governance that would facilitate greater use of account-to-account and open banking payments,” said Hemsley.
Such reforms seek to address issues of a lack of rivalry at a structural level but will take time to deliver tangible outcomes to the benefit of people and businesses throughout the UK, he suggested.
“Against this background, we refer to ‘shorter-term measures’ to encompass action that takes effect more quickly, using the regulatory and concurrent competition law powers available to us,” he said. “Regardless of which legal route we use, any intervention would need to be justified by the evidence of harm to payment service users, and in terms of the appropriate remedy.”
Earlier this week, the PSR’s annual plan was announced, with seven projects being targeted throughout the year.
The focus is on crypto regulations, card-acquiring, authorised push payment (APP) fraud, confirmation of payee (CoP), account-to-account (A2A) retail payments, card fees, access to cash and the New Payments Architecture.
