The PSR will not review the fees and rules set by Visa and Mastercard, but will look at the practice of bundling, and will examine effects on innovation in card-acquiring services.

By Brett Carr, Stuart Davis, and Christian McDermott

Following the publication of its Draft Terms of Reference in July 2018, the PSR has now listened to market feedback and has issued its Final Terms of Reference, marking the launch of its review into whether competition in the supply of card-acquiring services is working well for merchants and consumers.

Card-acquiring services allow merchants to accept payment for goods and services via debit, credit, charge, and prepaid cards. In order to benefit from card-acquiring services, merchants must enter contracts with so-called “merchant acquirers”. Card-acquiring services are often bundled with other services, referred to by the PSR as “card acceptance products” — these include physical card readers (also known as point-of-sale (POS) terminals) and payment gateways (the e-commerce equivalent of POS terminals).

The Final Terms of Reference follow a consultation period on the Draft Terms of Reference, the details of which are covered in Latham’s previous blog post.


The PSR is taking these steps to investigate concerns that competition is not working well in the card-acquiring market, as evidenced by:

  • Savings from the interchange fee cap not being passed-on to merchants (the fee cap is imposed at EU level and implemented in the UK)
  • A lack of transparency around the fees merchants pay to accept card payments
  • Barriers to the comparison and substitution of card-acquiring service providers
  • Scheme fees favouring large acquirers, and the portion that merchants pay to acquirers increasing significantly

A range of actions is open to the PSR: the regulator could give directions to the market and its participants, submit proposals to the Financial Conduct Authority, or make a market investigation reference to the Competition and Markets Authority.

Why the review matters [1]

In 2017, there were 13.2 billion debit card payments totalling £523 billion, overtaking cash as the most frequently used payment method for the first time. Credit card payments in the same year numbered 3.1 billion and amounted to £168 billion.

The number of merchants accepting card payments has also grown. In 2017, 1.38 million outlets accepted card payments, and over the last five years the number of POS terminals has increased by 50%.

Chris Hemsley, Head of Policy at the PSR, said:

“Consumers and businesses rely on payments made by cards more than ever before. That’s why this is an important review. We want to make sure the card-acquiring market is working for businesses and ultimately consumers. If we find that the market is not working well, we will look to make changes”.

Next steps

The PSR will now begin gathering evidence and information from a range of stakeholders using a variety of methods, including:

  • Issuing information requests to stakeholders, including:
    • Providers of card-acquiring services (acquirers and payment facilitators)
    • Other parties that help merchants accept card payments, including independent sales organisations and gateway providers
    • Card scheme operators (Mastercard, Visa, and operators of other card payment systems in the UK)
    • Large merchants
  • Carrying out a survey of small- and medium-sized merchants
  • Holding meetings with various parties

The PSR plans to publish a report setting out its interim conclusions on the supply of card-acquiring services in Q4 2019, with a final report due in Q2 2020.

[1] Figures from UK Finance, UK Payment Statistics 2018 (2018), tables 6.2 and 6.3.