UK Regulator Delays Cross-Border Fees Review

October 5, 2023
The Payment Systems Regulator has confirmed that it will not publish its card fee review by the end of Q3 2023, and announced a new consultation on its governance.

The Payment Systems Regulator (PSR) has confirmed that it will not publish its card fee review by the end of Q3 2023, and announced a new consultation on its governance. 

The PSR is currently carrying out a market review looking at cross-border interchange fees, which are paid by acquirers to issuers every time consumers use debit or credit cards for online transactions between the UK and the European Economic Area (EEA).

“We now plan to publish by the end of this year,” the PSR confirmed in a statement on October 2. 

“Market reviews are complicated and detailed pieces of work,” the regulator said, suggesting that this change will ensure that the regulator can “satisfactorily explore all avenues towards a positive conclusion of this market review".

These fees have garnered the attention of senior parliamentarians in the UK, including Mel Stride, former chair of the Treasury Select Committee. 

Stride, who now serves as work and pensions minister, warned last year that card charges “are adding to costs for hard pressed businesses”.

The PSR’s review focuses on the charges set by Mastercard and Visa because they account for 99 percent of debit and credit card payments in the UK.

In a paper published last year on cross-border interchange fees, the PSR found that between 2019 and the first half of 2022, EEA card-not-present transactions at UK merchants from cards issued in the EEA experienced a “relatively stable decline in both volumes and values”. 

During the same period, however, data submitted by Visa and Mastercard to the PSR shows that issuers increased their total revenue from UK-EEA interchange fees from £75m to £100m.

Mastercard and Visa explained that the decision to hike interchange fees between the UK and EEA was due to a higher risk of fraud, in letters to the Treasury Select Committee. 

New consultation on governance 

Separately, the PSR announced a new consultation this week (October 3) on its governance. 

The consultation looks set to strengthen the PSR’s Powers and Procedures Guidance (PPG), which outlines its approach to using its powers, and how it works in practice. 

The PSR published its original PPG in 2015, and a revised version in 2020. Since then, however, the management structure of the regulator has evolved, with the recent announcement of an overhauled executive team and a new Supervision and Compliance Monitoring Division. 

The two main updates proposed are to change who can decide to open an enforcement case and to remove restrictions around who can join enforcement case teams. 

As it stands, the decision to open an enforcement case must be made by two staff members at the manager level or above, appointed by the PSR’s managing director. “This doesn’t reflect our current management structure and practices, or account for the new Supervision and Compliance Monitoring Division,” the PSR said.

“We are proposing alternative decision makers, aiming to streamline the process and provide executive oversight at the start of an investigation.

In addition, the PSR says that the removal of restrictions would allow staff who have been involved in the monitoring stage of a suspected compliance failure to become part of the enforcement team investigating.  

“This would allow us to allocate resources more efficiently to support operational objectives, react swiftly to emerging issues, and deliver outcomes quicker,” the PSR said. 

This consultation is open until October 23, and the PSR says that it expects to publish its final PPG early next year. 

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