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The PSR UK market review into the supply of card acquiring services

The PSR UK market review into the supply of card acquiring services
  • United Kingdom
  • Competition, EU and Trade
  • Financial services
  • Financial services - Payment services
  • Financial services - Retail finance


On 24 January 2019, the Payment Systems Regulator (“PSR”) published its final Terms of Reference (“ToR”) for a market review into the supply of card-acquiring services (services which enable merchants to accept debit or credit card payments from customers) following concerns that the market may not be working well for merchants, and ultimately consumers.

Scope of the Review

Following the publication of its draft ToR in July 2018, the PSR has announced that the review will focus on how competition in the supply of card-acquiring services is working. Specifically, the PSR will examine the supply of card-acquiring services by acquirers and payment facilitators, as well as the role that third parties such as independent sales organisations have in the supply of those services. The market review will predominantly focus on card-acquiring services for Mastercard and Visa but will not exclude other card payment systems.

The PSR’s competition concerns

The PSR is concerned that the following characteristics in the supply of card-acquiring services might not be conducive to effective competition, leading to adverse effects for merchants and end customers:

  • that the interchange fee caps introduced by the Interchange Fee Regulation (“IFR”) have not resulted in acquirers passing on savings to merchants
  • lack of transparency around fees merchants pay to accept card payments
  • barriers to entry for card-acquiring services
  • barriers to searching and switching for merchants
  • scheme fees charged by card scheme operators favouring large acquirers
  • significant increases in the scheme fee portion of the fees that merchants pay to acquirers

Of these concerns, the PSR intends to focus particularly on:

  • the extent and nature of any barriers to entry or expansion for providers of card-acquiring services – including whether fees and rules set by card scheme operators as well as technical, contractual, legal, regulatory or other barriers are having adverse effects on competition
  • how merchants choose between providers of card-acquiring services to better understand the extent of any barriers they face in searching or switching – including in relation to how merchants gather information to make informed choices and are able to compare services, as well as the technological and contractual barriers to switching that might exist

Possible outcomes

The market review is intended to provide the PSR with a better understanding of how competition is working in the supply of card-acquiring services. If the market review identifies detriments to service-users the PSR may take a range of actions to address this, including: making a market investigation reference to the Competition and Markets Authority, making general or specific directions, requiring operators of a regulated payment system to establish or change their operating rules, issuing guidance, or making recommendations to the FCA as to regulatory change.

Separately, while the review does not signal that the PSR believes there are any practices in the sector that are illegal under competition law, market reviews of this nature always present the possibility of the PSR taking separate enforcement action under the Competition Act 1998 should they uncover evidence of anti-competitive practices during its review.

If the PSR considers that further action is necessary, there will be a consultation on its proposed actions following publication of the final report.

Next steps

In the early stages of the review, the PSR will issue information requests to relevant stakeholders, including:

  • providers of card-acquiring services (acquirers and payment facilitators)
  • other parties that help merchants accept card payments including independent sales organisations and gateway providers
  • card scheme operators (e.g. Mastercard, Visa)
  • large merchants

They may also carry out a survey of small and medium-sized merchants.

Engaging with the PSR and responding to information requests and surveys is a valuable opportunity to shape the outcome of the PSR’s review.

The PSR is aiming to publish an interim report at the end of 2019, followed by a final report due in 2020.

Eversheds Sutherland Competition and Payments Expertise

The issues the PSR has identified around, for example transparency, switching and fees, are ones that have been looked at by competition regulators such as the FCA, PSR and CMA in the context of other parts of the financial services sector. As payments and competition specialists, we would be delighted to assist you through this process, drawing on our combined deep sector knowledge and extensive experience of supporting clients through these types of competition reviews including in the financial services sector and dealing with exactly the same sorts of issues as those raised by the PSR. Having advised on recent FCA and PSR market reviews / studies and CMA market investigations we would be able to talk you through what to expect in terms of information requests and face-to-face meetings and how best to devise a strategy to influence the direction and outcome of the review.