Inertia set to condemn UK merchants to £1B ($1.56B) of extra costs.
The Payment Systems Regulator (PSR)’s March 2015 Policy Statement includes exemptions for Visa and MasterCard and reveals no strategy with regard to the application of interchange fee regulation (IFR) in the UK, leaving merchants exposed to up to
9 more months of unfairly high fees.
Having fought for regulation for so long, this is a source of great frustration for CMSpi. In 2012, we launched a campaign for an independent UK payments regulator. This campaign was borne out of years of first-hand experience - witnessing the frustrating
burden that fixed, non-negotiable interchange fees incur on struggling merchants of all sizes.
The campaign included a petition signed by more than 30 of the UK’s largest merchants and a letter to the UK Chancellor, George Osborne. Eventually, in March 2013, the UK Treasury announced the intention to introduce such a payments regulator. Following
a public consultation, the PSR initially formed on the April 1st 2014 and became fully operational on the April 1st 2015.
One of the responsibilities of the PSR is to oversee the implementation of IFR in the UK. It is a common misconception that the IFR solves the interchange debate definitively, however, this is not the case. The PSR has the responsibility to ensure that the
IFR is imposed fairly and has the power to impose more stringent rules within the regulations.
The PSR has set up a panel designed to, “offer the PSR advice and early input on the extent to which the PSR’s general policies and practices are consistent with its general duties, and how the PSR is achieving its operational objectives”.
However, having reviewed the list of members of this panel, I have concerns about its composition, and I fear that it will impact on its objectivity as more than 50% of its members are from a banking background. In fact, it has occurred to me that the PSR
panel is beginning to resemble the UK Payments Council, whose shortcomings were one of the reasons for the government’s desire to create a new regulator.
“The Payments Council is the body that represents the payments industry in the UK.”
I’m concerned this failure to create a balanced panel will compromise efforts to achieve a fair outcome. There are already signs of failure of will. In its Policy Statement, the PSR announced it has decided to exempt card schemes from its service user directive,
meaning that Visa and MasterCard will not need to release information about how interchange fees are calculated. Additionally, the Policy Statement revealed that there is no clear policy from the PSR regarding interchange and, with only a matter of months
left until the caps come in anyway, all the indications are that they have no appetite to impose stricter interchange caps.
In other member states, such as France, Spain, Poland and Hungary, regulators have relished the opportunity to introduce fairer interchange fees sooner than the required timeframes.
There are early signs that the PSR will not be as enthusiastic to do so, and I do not anticipate the situation improving in the current environment. Hence, I fear that any attempts made by the card networks to circumvent the regulation may be ignored by
the regulator, to the detriment of merchants and consumers alike.