PSR Under Fire For Only Light-Touch Changes To Visa/Mastercard Processing Fees Scheme
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The Payment Systems Regulator (PSR) recently faced heavy criticism that accused it of “failure of vision.” The regulator got under fire after its attempts to address high processing fees that Visa and Mastercard imposed on merchants resulted in only “light-touch remedies.”
In other words, the regulator made very light changes, with the payment giants being instructed to increase transparency on fees to merchants and acquirers. The PSR also imposed a requirement on pricing governance and regulatory reporting.
PSR Wants Greater Transparency For Card Schemes
In its market review, the regulator concluded that Visa and Mastercard significantly raised their core scheme and processing fees between 2017 and 2023 — by over 25%. This became an additional cost for merchants of at least 170 million pounds per year.
The review also criticized the schemes for the lack of transparency, saying that they did not provide sufficiently clear and detailed information, which led to merchants and acquirers receiving incomplete or complex information regarding fees.
The regulator’s managing director, David Geale, stated that the proposed remedies set out recently are a way to address the findings in the final report, which suggest that the current situation is not working well for businesses, and ultimately, consumers. He noted that improving transparency will allow businesses in the UK to make informed choices when it comes to picking the card payment services they receive.
Furthermore, he believes that the proposed steps will ensure that the regulator can further scrutinize the performance of the card schemes, and react faster in the future if any further action is deemed necessary.
The Regulator’s Proposals Were Not Good Enough
However, the British Retail Consortium was not satisfied with the results, criticizing the proposals. It described them as “falling well short” of what is necessary to resolve the existing problems.
The merchant lobby group’s payments policy advisor, Chris Owen, stated that this is a failure of vision on PSR’s behalf, as everyone expected the regulator to come up with far more robust measures to tackle harms that have arisen from Visa’s and Mastercard’s dominance.
He added that the PSR needs to act on its regulatory responsibilities and use its powers to mandate pricing interventions and set up a price cap to meaningfully lower fees and ensure a lasting reform. Otherwise, card schemes will simply continue to exploit their dominance, while retailers and consumers will be the ones paying the price.
