A look Into Card-acquisition Services: PSR Announces Plans to Review Market

Friday, September 21st, 2018

Merchant acquirers in the Card-acquisition market are set for scrutiny by a UK payment overseer after alarms were raised concerning the levying of fees and the ease of switching (for merchants) from one service provider to the next.

Card-acquiring services involve many different parties, like the card providers that run card payment schemes, payment providers UK and the major banks that process the payments made through those avenues

UK Payment Systems Regulator (PSR) noted that its projected market assessment is to make sure the delivery of these card-acquiring services work in favor of both merchants and consumers. It also said that concerns raised by different stakeholders had inspired the planned review.

The matters raised include; a spotlight on the transparency of fees merchants pay to have somebody else accept card payments for them and whether these processing firms, also known as merchant acquirers, have shared the savings they have made in relation to an EU restriction on interchange fees to merchants.

The IFR caught in between

According to Alan Davis, an attorney at Pinsent Masons, the Interchange Fee Regulation (IFR) placed their credit card mutual interchange fees at a 30-basis-points cap per transaction and at 20 basis points for debit cards.

While the IFR did not really require it, this reduction was meant to be passed on to retailers by merchant acquirers as a lower merchant service fee. The watchdog, therefore, seeks to understand whether competition is fair in acquiring sector.

Claims of unfair competition

The regulator fears that larger merchants may be enjoying significant fee reductions but small firm owners may not have succeeded in discussing the same savings, which may also be due to many other reasons which the PSR looks to investigate,” he said.

“But again, the question arises whether the watchdog should also assess if retailers will pass on the cost on buyers by reducing the retail prices. According to Davis, the market lacks the confidence of IFR’s ability to benefit the consumer.

Other Matters on the spotlight

The PSR also mentioned that red flags rose as regards to the existing barriers retailers face in switching from one acquirer to another, the scheme fees (a charge card scheme operators lay on acquirers), and the percentage of the scheme fee merchants pay to acquirers.

In conclusion

The full terms of reference for PSR’s review are open to consultation in their official site, and interested parties can submit feedback until 14 September. The firm says it plans to print the finalized terms of reference for the oncoming review before the close of 2018 together with its schedule for work.