Payment Systems Regulator begins market review of card-acquiring services

After the publication of its draft Terms of Reference in July 2018, the Payment Systems Regulator has now published its finalised Terms of Reference for the forthcoming market review into card-acquiring services.

This latest publication marks the launch of the Payment System Regulator's (PSR) market review.

For affected card-acquirers, the potential outcomes could be disruptive and create lasting change on card-acquirers business models. Therefore, it is important that card-acquirers engage proactively with the PSR.


The ToR set out a comprehensive scope to the market review, through the identification of a number of core themes that the PSR will focus upon. These include, but are not limited to, a review of:

  • the barriers to entry or expansion in card-acquiring services (which may include technical, contractual, legal or regulatory barriers);
  • how the supply of card-acquiring services may differ across broad types of merchants;
  • the barriers to switching or searching that merchants face;
  • the fees that merchants pay for card-acquiring services including how the level of these fees has responded to changes in the fees that acquirers pay to card scheme operators (scheme fees, including fees relating to PCI-DSS compliance) and card issuers (interchange fees);
  • the support that merchants receive from their acquirer or payment facilitator to comply with card scheme rules (including PCI-DSS requirements), and any fees or fines associated with such compliance; and
  • the quality of service that merchants receive from their provider of card-acquiring services – including how quickly they receive the funds paid by customers using cards, the resilience of the services and the support provided where there are issues accepting card payments.

Why is this happening?

The PSR is concerned that the supply of card-acquiring services has not been working well for merchants, and ultimately consumers. Its main area of concern is that card-acquirers have not passed on to smaller merchants the savings they have made from the interchange fee caps introduced by the Interchange Fee Regulations. Equally, the PSR is also concerned that there is a lack of transparency around the fees that merchants pay to accept card payments, thereby creating a barrier to entry for services that would help merchants to compare and switch between acquirers.


The PSR has confirmed that, for the purposes of the market review, its focus will on the following relevant market participants:

  • acquirers and payment facilitators;
  • card scheme operators;
  • merchants; and
  • third-party providers of card acceptance products (that is, providers that not also supply card-acquiring services).


Publication of the ToR marks the launch of the PSR's market review, which it expects shall follow the below timescales:




What does this entail?

Q1 - Q2 2019

Information gathering

The PSR will begin gathering evidence from a range of stakeholders using a variety of methods, including issuing information requests, carrying out merchant surveys and holding meetings.

Q2 – Q3 2019

Methodology or approach paper publication

The PSR also intends to seek views at an early stage on some of the analysis it proposes to carry out and plans to publish methodology or approach papers in Q2 to Q3 2019 covering:

  • its proposed methodology for assessing how the level of fees that merchants pay has responded to changes in the fees that acquirers pay to card scheme operators and card issuers (the pass-through analysis);
  • its proposed approach to carrying out the survey of merchants; and
  • its proposed methodology for assessing the profitability of a subset of acquirers.

Q4 2019

Interim Report

The PSR plans to publish a report setting out its interim conclusions on the supply of card-acquiring services in Q4 2019.

Q1 2020

Final Report

The PSR plans to be in a position to issue its final report in Q1 2020.

Despite the above timescales, affected firms are invited and welcome to provide their views and provide evidence to assist the PSR in conducting its market review.

Why is this important?

The potential outcomes of the market review could be disruptive, and could result in a significant lasting change on the current business models of card-acquirers (and other affected market participants). Once its market review is complete, the PSR has a range of potential actions open to it and it may be minded to:

  • make proposals to the Financial Conduct Authority as to the ways in which the industry could be reformed;
  • investigate a potential breach of the Competition Act 1998;
  • make a market investigation reference to the Competition and Markets Authority to investigate a market or a feature of several markets; and
  • make recommendations for industry initiatives or enhanced industry self-regulation.

Given the wide range of powers available to the PSR, it is crucial that card acquirers (and other market participants) take steps to actively engage with the PSR throughout its review. Card-acquirers should also ready themselves to receive information requests and formulate their views on issues to bring to the PSR's attention, as well as identifying any potential solutions. 

TLT's Payments Team has extensive experience in this area and is well placed to advise on the particular impacts on your business. If you have matters that you would like to discuss, please get in touch.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at February 2019. Specific advice should be sought for specific cases. For more information see our terms & conditions.

Date published

11 February 2019

by Matt Atkinson


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