Trade bodies urge MPs to tackle ‘anti-competitive’ practices in card payments

Business groups, including the ACS, have called on the MPs to intervene and protect businesses and customers from soaring card costs, which add to the price of goods and services.

The British Retail Consortium (BRC), British Independent Retailers Association (BIRA), Association of Convenience Stores (ACS), Federation of Small Businesses (FSB), and UKHospitality said immediate action must be taken to tackle the mounting cost of “anti-competitive practices” in card payments.

The call comes as the UK’s Payment Systems Regulator consultation on its five-year strategy closes today. Trade bodies alleged that regulator is failing to meet its statutory objectives and that it’s new Strategy is a five year license to deliver very little at the taxpayers’ expense.

“Convenience retailers play a crucial role in offering customers a breadth of payment options and providing access to cash for consumers in communities right across the country. The Payment Systems Regulator is right to prioritise securing long-term access to cash through its work with the LINK ATM network and encouraging innovation to reduce processing costs for retailers, which are ultimately shared with customers too,” James Lowman, ACS chief executive, noted.

“The PSR is now an established regulator and must act to prevent excessive increases in card scheme fees for debit and credit cards. The card acquirer review is a positive step but needs implementing so that retailers can shop around and switch card payments providers, securing the best deals for them and their customers.”

The pandemic has led to an increase in the use of card payments than ever before, with more customers shopping online or paying by card in store. Cards now constitute more than 80 per cent of UK retail sales, with Visa and Mastercard accounting for 99 per cent of card transactions. Retailers spent £1.3 billion in 2020 to accept payments from their customers and ultimately these costs, equivalent to more than £46 per household, will be passed onto the consumer.

The trade bodies noted that the regulator has not taken any action on a similar joint call made last year, and called on the MPs, to whom the PSR - an independent arm of the government - is accountable, and the Treasury Committee to urgently intervene.

“Our national regulator is proposing vague and distant goals for tackling today’s payment problems and it’s far too little, too late. The Treasury Select Committee should conduct an appraisal of the PSR’s effectiveness and the value of this Strategy,” Andrew Cregan, head of finance policy at the BRC, said.

Jeff Moody, commercial director of BIRA, added: “Following the UK’s departure from the European Union, the UK government and its regulator have yet to address new opportunities for anti-competitive behaviour and abuse of the card schemes dominant market position in Europe’s largest card payments market. The PSR is tackling the area of future payments but we also need to focus on the current payments issue where card-based transactions constitute at least 80 per cent of retail payments today.”

Nearly 40 cross-party MPs have already written to the regulator this year calling for robust regulatory measures on card fees. Last year, the Supreme Court ruled that Visa and Mastercard interchange fees are unlawful.

The trade bodies demanded that the UK should not continue to allow such fees and the regulator must directly address anti-competitive card fees in its future Strategy.

“This so-called strategy from the regulator does little to address the distortions in the payment market that results in higher costs for business and higher prices for consumers,” David Sheen, public affairs director at UKHospitality, said

“We need a clear plan of action to introduce more competition and oversight to the market. This should be a priority as the country recovers from its unprecedented shock, and where card payments have become even more central to our economy.”

Martin McTague, national vice-chair of FSB, noted that card transaction charges are weighing heavily on small businesses with the shift to contactless payments accelerating.

“The Payment Systems Regulator should be doing more to address the surging fees charged by a handful of providers. Interchange regulation means little if card companies have free rein to increase other fees, fees which often hit the small firms that make-up 99 per cent of our business community. Greater parliamentary scrutiny of the PSR’s work should help to spur the regulator to set more measurable, concrete aims,” he said.