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The UK's Payment Systems Regulator (PSR) has outlined the next stages of its two market reviews into card fees, but warns that it expects the process to continue for two years.
The PSR has published its final terms of reference for two market reviews — one on scheme and processing fees and the other looking at cross-border interchange fees.
The regulator has been monitoring increases to cross-border interchange, and scheme and processing fees. It says it has also been engaging with businesses and other stakeholders to better understand the impacts of these increases.
“Cards are the most popular way for people to make payments in the UK, but the concerns we have heard indicate that businesses could be paying over the odds by the fees imposed by Visa and Mastercard,” said Chris Hemsley, managing director at the PSR.
“We are moving as quickly as we can, but this is a complex issue to assess fully, and we want to make sure we take the right course of action — especially as it affects millions of businesses in the UK.”
The PSR recently concluded its market review of card-acquiring services, noting that scheme and processing fees had increased significantly between 2014 and 2018.
Having finalised its plans to improve card services and choice for businesses, the regulator has confirmed it is delving further by looking into detail at the levels, structure and types of scheme and processing fees.
To help identify whether there are any issues in the market, the PSR will be seeking further detailed information and insights, including from businesses, card giants Visa and Mastercard, and others.
The PSR said that it expects to publish a report setting out its interim conclusions on card scheme and processing fees in late 2023, as well as a final report which would include any proposed remedies in mid-2024.
The regulator’s second market review focuses on consumer cross-border interchange fees between the UK and the European Economic Area (EEA).
Since the UK left the EU, Visa and Mastercard have increased the fees associated with some UK-EEA payments fivefold. Both firms have said that this is due to increased fraud risk.
The PSR is concerned that this change affects UK businesses which accept EEA-issued credit or debit cards, including online.
The regulator has said that it wants to understand the reason for the increases, as well as engage with businesses to better understand how the increases are affecting them.
It expects to publish a report setting out its interim conclusions on UK-EEA consumer cross-border interchange fees by the third quarter of 2023 and its final report later on in the year.
The fee situation has got so contentious in recent months that it has reached Westminster, with the UK parliament’s Treasury Select Committee raising concerns.
Earlier this year, Treasury Select Committee chair Mel Stride wrote to the PSR expressing concern about the impact of high card fees on UK businesses. Stride has since left this position, and now serves as a minister in Rishi Sunak’s Conservative government.
In addition, retail trade associations came together earlier this month to launch the Axe the Card Tax campaign in the UK.
