Introduction: Payments regulator finds cards schemes do not face effective competition
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Mastercard and Visa do not face effective competition when dealing with merchants and banks in the UK, Britainâs payments watchdog warns today, leading to higher prices.
The Payment Systems Regulator says, in a new, provisional report, that the supply of scheme and processing services âis not working wellâ for âacquirersâ â the financial institution, such a bank, that acts as an intermediary between merchants and card payment networks.
The PRS warns that there is currently no effective competition preventing Visa and Mastercard raising prices â indeed, the two card providers have raised fees by more than 30% in real terms over the last five years.
âThere is little evidence that the quality of service has improved at the same rate,â says the PSR, sternly.
UK businesses have little choice but to pay increased fees, it adds, as Mastercard and Visa cards account for 95% of transactions using UK-issued cards.
The PRS says:
In respect of core scheme and processing services, there is currently no effective competition to Mastercard and Visa.
In some optional services, competition and choice is limited and alternative providers, when present, cannot match the schemesâ one-stop shop solution for core and optional services.
Mastercard and Visa have 95% of payments market and face no effective competition, the @ThePSR finds in provisional report. Their charges to merchants have risen over 30% above inflation in five years with no matching improvement in the service provided https://t.co/kxjPNyYzXJ
— Paul Lewis (@paullewismoney) May 21, 2024
Faced with this seemingly failing market, the PSR is seeking views â and also proposes a number of potential remedies to help businesses v
They include:
improved transparency so that businesses and acquirers can make informed decisions and are more able to switch to alternative suppliers of optional services
obligations on Mastercard and Visa to explain, consult on and/or document the reasons for price changes and the pricing of new services
greater reporting of financial information to the PSR on an on-going basis to improve scrutiny of Mastercard and Visaâs UK operations going forward.
Also coming up today
The International Monetary Fund is in town in London today, to give its annual assessment of the UK economy.
IMF staff have been conducting an Article 4 visit in the UK â collecting economic and financial information, and discussing economic developments and policies.
This will be the final healthcheck on the nationâs economy before the general election, and the Fund will have put chancellor Jeremy Huntâs fiscal plans tax cuts under their microscope.
Last month, IMF officials said their team would look closely at whether tax increases or spending cuts would be needed after the general electionâ¦..
The agenda
8am BST: Kantarâs index of grocery inflation
9.20am BST: Bank of England policymaker Randall Kroszner gives keynote address at London City Week on âbalancing the productivity opportunities of financial technology and AI against the potential risksâ.
11am BST: CBIâs industrial trends survey of UK manufacturing
11.15am BST: IMF to conclude its Article 4 assessment of the UK economy
6pm BST: Bank of England governor Andrew Bailey to give a lecture on âThe importance of central bank reservesâ