The UK’s payments regulator has said the card market “isn’t working well” following a review into the fess charged by industry giants Mastercard and Visa.
The Payment System Regulator (PSR) said on Thursday that the firms have raised core scheme processing fees 25 per cent since 2017, costing UK businesses an extra £170m a year.
Mastercard and Visa, which do not issue cards themselves but instead work with banks and other financial institutions, were scrutinised for not providing clear information on fees, particularly for smaller retailers.
The PSR’s managing director David Geale said: “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.”
Businesses forced to offset costs
According to the PSR’s market review, higher fees had led to added pressure on businesses, forcing them to absorb added costs or transfer them to consumers.
The regulator stated there was no evidence that the inflated fees were due to competition, costs, or innovation.
The PSR found the two payment firms were “subject to ineffective competitive constraints in the supply of scheme and processing services to acquirers and merchants in the UK”.
The regulator also stated profit margins at the two UK payment networks were “higher than would be expected in a well-functioning market”.
It stressed the role of cards in society as a “popular payment method for customers” and the importance the “market works well” for both consumers and businesses.
The PSR said: “Cards are critical to the smooth running of the UK economy” and pledged to “shortly consult on potential remedies to address the issues”.
Geale added: “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.”