PSR Finds Card Payments Market Failing Businesses & Consumers

The Payment Systems Regulator (PSR) has released its final report on the card scheme and processing fees market review, finding that the market is not working effectively. The regulator highlights that Mastercard and Visa have increased core scheme and processing fees by over 25% since 2017, adding at least £170 million in costs for UK businesses annually.

The PSR also found that a lack of transparent and accessible fee information has resulted in increased costs for acquirers and merchants, particularly impacting small retailers. Given the critical role that card payments play in the UK economy, ensuring a fair and competitive market is essential for businesses and consumers alike.

Between 2017 and 2023, Mastercard and Visa significantly raised their fees without clear cost justification. The regulator found that both schemes fail to provide sufficiently detailed and transparent information, making it difficult for merchants and acquirers to understand and negotiate fees effectively. This complexity raises costs and limits competition, potentially allowing the card schemes to charge UK businesses far more than in a properly competitive market.

David Geale, Managing Director at the PSR, stated:

Cards are a popular and convenient way to make payments in the UK, so any issues in the card market can have a negative impact on both businesses, and ultimately consumers. We have found that there is a lack of competition in the market, and evidence that Mastercard and Visa might have been able to charge UK businesses millions of pounds more than they would in a properly competitive market, impacting on their ability to invest and grow. The confusing information Mastercard and Visa make available to acquirers and merchants contributes to poorer market outcomes through raising their costs of dealing with this overly complex information. We will shortly consult on potential remedies to address the issues we have identified in our final report before we take any corrective action. We look forward to engaging with parties as part of this process.”

Key Findings of the PSR’s Market Review

• Limited competition: Mastercard and Visa face weak competitive constraints in the UK’s card scheme and processing services market.

• Rising fees: Fees have increased significantly in recent years, with no clear evidence that they are driven by cost analysis, innovation, or competitive pressures.

• Lack of transparency: The complex and unclear fee structures imposed by Mastercard and Visa create inefficiencies, raising costs for acquirers and merchants.

• Higher margins: The PSR found indications that Mastercard and Visa’s UK profit margins exceed what would be expected in a well-functioning market.

• Impact on businesses and consumers: Merchants have little choice but to absorb these rising costs or pass them on to consumers, limiting their ability to invest and grow.

Next Steps for Payments

Following this review, the PSR will soon consult on potential remedies to improve transparency and competition in the market before implementing corrective measures. The regulator remains committed to ensuring a fair and competitive payments ecosystem that benefits businesses and consumers alike.

Read the report here.