British Regulator Accuses Prepaid Card Companies Of ‘Cartel-Like’ Behavior

The U.K.’s Payment Systems Regulator (PSR) has accused five companies in the prepaid card market of operating as a “cartel” by agreeing to not compete or poach each other’s customers. The PSR issued a statement of objection on Wednesday (March 31) based on the behavior of Mastercard, allpay, APS, PFS and Sulion, all accused of violating the 1998 Competition Act.

According to a PSR news release, the case revolves around prepaid cards being used to deliver welfare payments to vulnerable populations, such as the homeless or asylum seekers. Chris Hemsley, managing director of the PSR, called the companies’ tactics “completely unacceptable” and deserving of harsh penalties.

“Prepaid card services like these can provide significant benefits to local authorities as one way to make welfare payments to some of the most vulnerable people in society,” Hemsley said in the news release. “By colluding in this way, we consider the parties were acting as a cartel. Because of the reduced competition, local authorities may have been missing out on an alternative supplier or products that were either cheaper or better suited to both their needs and the needs of those using the prepaid cards.”

According to the PSR, Mastercard sponsored and funded the National Prepaid Card Network, made up of public sector organizations and Mastercard program managers. This network was central to one of the “cartels” the PSR investigated. The PSR’s provisional findings suggest that between 2012 and 2018, the five companies agreed for the program managers not to target each other’s public sector customers. They also allegedly colluded in exclusively allocating leads from network promotional events between the network program managers.

While the statement of objects outlines the case against the parties, the PSR said this is not the end of its investigation, as the parties have the chance to “make representations” on the provisional findings. Last month, Mastercard, allpay and PFS agreed to settle with the PSR, admitting to the alleged anticompetitive behavior. If the PSR finds that there have been infringements to the law, the three companies will pay fines upwards of £32 million.