Card fees: UK Payment Systems Regulator publishes final terms of reference for two market reviews

The UK Payment Systems Regulator (PSR) has finalised its plans for two market reviews focusing on card fees. One review will look at card scheme and processing fees, and the second at UK-EEA interchange fees. Findings from the reviews, which are expected to be published around Q4 2023, will be of particular interest to acquirers.


In November 2021, the PSR published a final report on its card-acquiring services market review. See these Engage articles on the final report and remedies for more detail. The PSR had carried out the review based on concerns that card-acquiring services were not offering value for money for merchants

As part of the market review, the PSR had analysed the fees that acquirers paid to card payment systems. It found that scheme and processing fees paid by acquirers to Mastercard and Visa increased significantly over the period 2014 to 2018. A substantial proportion of these increases were not explained by changes in the volume, value or mix of transactions. The review had also considered the impact of the EU Interchange Fee Regulation (IFR).

The PSR subsequently decided to launch two market reviews into card fees – one on scheme and processing fees, and one on UK-EEA consumer cross-border interchange fees. Following consultations on the draft terms of reference in June this year, the PSR has now published the final terms of reference for the reviews.

Review 1: Card scheme and processing fees

In a press release, the PSR points out that cards are the most popular payment method in the UK, with Visa and Mastercard accounting for 99% of debit and credit card payments. To accept these card payments, businesses have to pay card scheme and processing fees, which are often passed on to consumers by hiking prices. This is particularly concerning given the rapidly increasing cost of living.

In the final terms of reference, the PSR has confirmed that the review will focus on the Mastercard and Visa schemes. The PSR has decided to review Mastercard and Visa to understand if the supply of scheme and processing services is working sufficiently well, having regard to competition, innovation and protection of service-users’ objectives. As the PSR already has several programmes exploring the impact of other payment methods (e.g. the development of the New Payments Architecture), this particular review will not extend beyond card scheme and processing fees.

Data will be collected for the period 2017 to 2022, but the PSR will also draw input from its wider card-acquiring market review for the period 2014 to 2018.

Review 2: Cross-border interchange fees

The PSR wants to understand the rationale behind the increases in interchange fees for Mastercard and Visa’s consumer debit and credit UK-EEA card transactions since Brexit, and the effect this has had on UK businesses and consumers.

The increase in consumer cross-border interchange fees covers certain card transactions between the UK and the EEA where the cardholder is not present (such as payments made by phone or online). Prior to Brexit, these fees had been capped by the IFR. Since the UK left the EU, Visa and Mastercard have increased these fees as much as fivefold.

The PSR will focus its review on three main issues:

  • What are the potential drivers and justifications for increases in interchange fees since Brexit?
  • Is there any evidence that the increase in interchange fees resulted from an increase in other relevant costs following Brexit?
  • What is the impact of the increase in interchange fees on competition, innovation and service users in the UK?

What’s next?

The PSR plans to publish a report setting out its interim conclusions for the card scheme and processing fees review in Q4 2023, and a final report, including remedies, in Q2 2024. Requests for information from market participants are expected to go out in Q4 2022.

Interim conclusions for the cross-border interchange fees review will be published in Q2/3 2023 with a final report in Q4 2023. Market participants are invited to submit evidence and responses between Q3 2022 and Q1 2023.




Authored by Diana Suciu and Virginia Montgomery


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