PSR finds market isn’t working well for card scheme and processing services

The Payment Systems Regulator (PSR) has published its final report on the market review of card scheme and processing fees. The report finds that Mastercard and Visa have increased their core scheme and processing fees to acquirers by over 25% since 2017, adding at least £170 million in extra costs for businesses annually. Additionally, a lack of transparent fee information has created challenges for acquirers and merchants, particularly small retailers, increasing their costs and limiting their ability to negotiate better terms.

Cards are essential to the UK economy, enabling smooth transactions for consumers and businesses. However, the PSR’s review concluded that Mastercard and Visa face weak competitive pressures in providing scheme and processing services. Fees have risen significantly without clear evidence that they are based on cost analysis, competition, or innovation. While the regulator has not reached a firm conclusion on profit levels, it found indications that Mastercard and Visa’s UK profit margins are higher than expected in a well-functioning market.

The lack of clear fee information results in higher costs for acquirers and merchants, who either absorb these costs or pass them on to consumers, potentially reducing investment. In response to these concerns, the PSR will soon consult on possible remedies to address the issues identified.