In Card acquiring, Payment Services, PSD2, PSR

In July 2018 the Payment System Regulator (PSR) announced a market review of the supply of card-acquiring services in the UK out of concern that these services may not be working well for merchants and ultimately consumers. Following this announcement, several public consultations took place. We summarised these consultations in an article that can be accessed here. In September last year, the Payment Systems Regulator published its Interim Report into this market review and consulted on that as well.

The most recent news on this topic is the PSR’s publication on 3 November 2021 of its Final Report into the card-acquiring market review.

The Final Report sets out its conclusion that the supply of card-acquiring services does not work well for small and medium-sized merchants and large merchants with an annual card turnover of up to £50 million.

The Final Report identifies three features that individually and in combination, restrict merchants’ willingness and ability to search and switch:

  • Acquirers and independent sales organisations (ISOs) don’t typically publish their prices and their pricing structures and approaches to headline rates vary significantly. This makes it difficult for a merchant to compare prices for ISOs, acquirers, and payment facilitators.
  • The indefinite duration of acquirer and payment facilitator contracts for card-acquiring services does not provide a clear trigger for merchants to think about searching for another provider and switching.
  • POS terminals and POS terminal contracts can prevent or discourage merchants from searching and switching providers of card-acquiring services. This can occur as a merchant may need a new POS terminal if it switches provider of card-acquiring services, but it could incur a significant early termination fee canceling its existing POS terminal contract.

The PSR expects that remedying these features will improve outcomes for merchants by (i) encouraging them to search and switch, or negotiate a better deal with their existing provider, and (ii) reducing the obstacles to getting a better deal.

As a next step, the PSR will publish a remedies consultation in early 2022. They will seek views and information from stakeholders, with the expectation that the payments industry will play a key role in developing effective and proportionate measures that increase merchant engagement and ultimately improve choice and prices.

Following this, the PSR will publish a provisional decision on remedies (and potentially a draft remedies notice) for consultation later that year.

This is an important topic that affects the card industry in the UK. If you are a card acquirer, a merchant, or a payments industry association and you have missed previous the PSR’s consultations it is time to get involved. If you need assistance (i) in drafting your response to the next PSR’s remedies consultation, or (iii) if you would like otherwise to discuss how the above topics affect your company, please do not hesitate to contact us.