UK Regulator Opens the Door for Credit Card Data Reporting Mandates

Higher fees from the payments networks across the pond have not translated into better service, according to a new report.

The U.K.’s Payment Systems Regulator (PSR) issued a 158-page report Tuesday (May 21) that charged increases in the fees levied on acquirers and issuers through the past five years by U.S. firms Visa and Mastercard “could not be explained by changes in the volume, value or mix of transactions.”

The report mulls a series of actions and possible remedies — which, we note, do not include caps, at least for the moment.

In tandem with those fee increases, as estimated the PSR, U.K. businesses pay more than “£250 million extra annually” for card acceptance, largely due to the fact that “Mastercard and Visa cards account for 95% of transactions using U.K.-issued cards,” the regulator wrote.

One-Stop Shops

The report says the market is such that, with the current landscape of core scheme and processing services, the payment giants “face no direct constraint from alternative providers … as Mastercard and Visa can provide a one-stop shop solution for core and optional services, they are in a stronger position than alternative providers of optional services,” per the report.

“The evidence we have gathered is consistent with a finding that Mastercard’s and Visa’s margins are higher than would be expected in competitive markets. However, there is insufficient data available to us in order to reach a firm conclusion on the existence of unduly high prices or excessive profits (and the level of harm arising from it), noting the wide range of possible margins,” the regulator charged.

The payment networks, for their part, have contended that the quality of service has indeed improved, where responses to the PSR detail, in Mastercard’s instance, enhancements to chargeback and dispute resolution processes. And both networks told the PSR that open banking, buy now, pay later (BNPL) and digital wallets all offer competition, underscored by a broad range of payment methods and choices available to users. Big Tech, in addition, can develop in-house processing to offer payments that serve as alternatives to cards.

In written response to a request from PYMNTS for comments, a Mastercard spokesperson said Tuesday that “we disagree with the findings of the PSR’s interim review. The payments industry has never been more competitive, which is reflected in the wide choice of payment options available to British consumers and businesses.” The spokesperson added, “In its analysis, the PSR has failed to account for the significant investment required to provide a secure network which prevents billions of pounds of fraud each year … We will continue to work transparently with the PSR and demonstrate the significant value Mastercard and electronic payments bring to the U.K. economy.”

Separately, Visa told PYMNTS via email that “Visa’s investments in reliable, safe and innovative digital payments mean that everyone in the U.K. can buy and sell with confidence,” and stated that “this powers economic growth.”

What’s on the Table

As for caps, the PSR added that “if we had had access to more accurate information, we would have been able to make a more precise and robust assessment of harm and, if appropriate, pursue remedies to address the concerns we have identified on a more direct basis. Such remedies may have included a price cap or a form of price control. As set out further below, we are not currently considering a price cap.”

Among the actions that are on the table: The PSR said it is considering requiring the card schemes to provide their U.K. financial information and performance on an ongoing basis, which would require the card schemes to prepare reports comprising profit and loss and balance sheet information in relation to their U.K. activities.

That mandatory reporting, the watchdog wrote, “will take time to get right, and that it may require investment and changes to the card schemes’ processes.”  In addition, U.K. pricing decisions may be made under “a governance structure that include a U.K. pricing committee or sub-committee.”