The Payment Systems Regulator (PSR) has published two papers as part of its card scheme and processing fees market review.  

One is a call for evidence on initial stakeholder feedback that the PSR has received on the competitive constraints that Mastercard and Visa face when setting these fees. The other sets out the regulator’s proposed approach to analysing the profitability of Mastercard and Visa’s UK card businesses which will form an important source of evidence for the review.  

Cards are the most popular way for people to make a payment. To accept card payments, businesses like newsagents and supermarkets must pay certain fees, which can ultimately impact the cost we all pay for goods and services.  

The PSR wants to understand whether scheme and processing fees are working well and to make sure that businesses, and ultimately consumers, get a good deal. 

Call for evidence – competitive constraints  

In the UK, the majority of retail purchases which are made by card, currently go through Mastercard and Visa - the two main card schemes. Over recent years, the fees that businesses have to pay to accept card payments have risen significantly. The PSR is looking at how competition is working in the market, and how this impacts the fees which Mastercard and Visa set.  

In today’s paper, the PSR has outlined four themes it has observed based on initial views from stakeholders. These themes are:  

  • The intensity of competition and innovation in the payments ecosystem 
  • Differences in the competitive dynamics on the issuing and acquiring sides of the market 
  • The impact of transparency on competitive pressure at all levels of the value chain  
  • The must-take status of Mastercard- and Visa-branded cards (in many retail environments) 

These themes are intended to stimulate further discussion and debate. The regulator is looking to hear from more stakeholders on these areas over the coming weeks to help with its ongoing analysis of the market.  

Working paper – approach to profitability analysis  

The PSR is investigating the profitability of Mastercard and Visa’s UK card businesses to understand whether their profit levels are what would be expected in a competitive market.  

Profitability can be measured in a range of ways, and this working paper sets out the PSR’s proposed approach on how it plans to do this for UK scheme and processing services. It also sets out some initial analysis of Mastercard and Visa’s recent European operating profits, which include their UK activities. Following this initial analysis, the PSR has requested further information from Mastercard and Visa and will be looking closely at the additional data to understand what is driving these profits.  

While engaging with Mastercard and Visa, the PSR has also identified that detailed financial information on their UK-specific activities is not currently routinely collected or publicly reported by either card scheme. Therefore, the regulator is considering whether the two schemes should be required to provide such information on a regular basis in the future, through more formal reporting requirements.  

Chris Hemsley, Managing Director of the PSR, said:   

“Cards are the most popular way for people to make payments in the UK, so it’s essential the market delivers good outcomes. This affects people and businesses across the country: whether they’re small businesses that accept card payments, or somebody paying for their weekly groceries. 

“We’ve been discussing these issues with a wide range of stakeholders, to understand their views and concerns. This will help us to take this important work forward as quickly as we can. 

“Today’s publications will help us gain a deeper understanding of whether competition is working effectively in the cards market – and if not, what action we might need to take.”  

Once the regulator has completed its assessment of the market, including receiving views on these papers, it intends to publish its interim findings later this year.   


Notes to editors: 

  • The PSR is calling for evidence on its competitive constraints paper until 11 April 2023. The regulator also welcomes feedback on its approach to profitability analysis working paper. Specific questions and areas the regulator is interested in hearing views on are outlined in each paper.  
  • The PSR sets out the publicly available information about the operating profits of Visa and Mastercard, at a European level. Visa’s operating profits were 60% from 2016/17 to 2021/22 and Mastercard’s were 44% over the same time period. The PSR also compares Mastercard and Visa’s global operating profit margins with those of similar technology and credit services firms. This shows that Visa and Mastercard have some of the highest profit margins. Chapter 4 of the working paper goes into more detail on this.  
  • A decision about more formal reporting requirements for Mastercard and Visa has not yet been taken and would be subject to further consultation before implementing.  
  • According to UK Finance figures, the majority (75%) of personal spontaneous and cash payments (which include retail payments) were made by debit or credit card in 2021. Visa and Mastercard accounted for around 99% of all UK debit and credit card payments in the same year, both by volume and value of payments.
  • The PSR’s market review of card-acquiring services identified that scheme and processing fees had increased significantly between 2014 and 2018.  
  • In October, the PSR published final terms of reference for its market review of scheme and processing fees, including an ambitious timetable setting out the next stages of the PSR’s work.