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Application of the IFR: phase 1 final guidance

The guidance gives clarity on how the IFR will be applied, monitored and enforced in the UK. Specifically it sets out how we will monitor compliance with caps on interchange fees and on certain business rules.

What is the IFR?

The IFR is EU legislation that took effect on 8 June 2015 and brought major changes to the way card payment systems operate in Europe.

Most notably, since 9 December 2015, it caps the interchange costs passed on to merchants processing card payments, therefore giving more certainty around interchange fees.

What is an interchange fee?

Interchange fees are fees paid by the bank of a merchant (such as a supermarket) to the bank of a card user (such as somebody doing a weekly shop) when a card payment is made.

Interchange fees are one part of the total cost to the merchant of processing a card payment, which is known as a merchant service charge or MSC.

Why are we publishing this guidance?

In November 2015 HM Treasury confirmed that the PSR would be the competent authority, or lead regulator, for the IFR in the UK. 

This final guidance clarifies our expectations of the parties the IFR applies to in the UK. It sets our approach to the monitoring and enforcement of the EU regulation.

What are the key points?

As we stated when we published our consultation in December 2015, we will be consulting in two phases to make the process more manageable for respondents. 

The final guidance we are publishing here confirms our approach for the first phase. It provides clarity on:

  • to whom the IFR applies
  • interchange fee caps and how we will consider who may be exempt
  • our approach to monitoring compliance with the IFR
  • our powers and procedures under the IFR
  • penalties under the IFR

Separately, but relevant to this guidance, we have also published a final determination which confirms which card schemes operating in the UK are captured by the IFR interchange fee caps. Read more about this.

Who should read this final guidance?

The guidance is relevant to payment card schemes and their participants (operators, payment service providers and infrastructure providers).

It may also be of interest to merchants and some consumers who are interested in understanding how credit and debit card charges are affected by the cap.

What are the next steps?

Over the summer we will publish a new consultation for Phase 2, focusing on the remaining parts of the IFR that have not been captured. 

How do I get in touch?

You can contacts us with questions about our role in monitoring the IFR by sending an email to

Further information

During consultation we were contacted by a number of merchants who said they had not seen a reduction in their MSC – despite the new cap on interchange fees. 

It’s important to note that interchange fees are just one part of an MSC and there are other factors that need to be considered when attempting to understand why charges have not been reduced across the board. 

Nonetheless, we recognise that many merchants want to get a better rate. We recommend merchants contact their acquirer to discuss their MSC and consider shopping around to see what other rates are on offer.

Further reading