Payment Systems Regulator issues final decision on its card acquiring market review

The Payment Systems Regulator (PSR)’s market review into the supply of card acquiring services concluded that the market was not working well for merchants with an annual card turnover of under £50 million.   For further detail on the background to the review, please see our previous articles - Payments: card acquiring market review - TLT LLP.

On 6 October 2022, the PSR published its final remedies and issued Specific Directions for implementing the remedies to 14 payment service providers (PSPs). The 14 directed PSPs were identified by the PSR as the most significant providers of card acquiring services to the merchants it is looking to protect, who collectively cover 95% of retailer transactions in the UK.

At this stage, only the 14 directed PSPs will need to implement the remedies, but the PSR has noted that it will keep the market under review and may extend the specific directions by requiring the card schemes, Mastercard and Visa, to mandate that all payment service providers operating in card acquiring services within the UK implement the PSR’s remedies for merchants with an annual card turnover of under £50 million.

What are the remedies?

As anticipated, the PSR has mandated that the 14 direct PSPs  will need to implement the following:

• Provision of information:
  1. Summary boxes: containing bespoke key price and non-price information to be sent to merchants and made available in their online accounts to assist them in understanding key terms and making comparisons between different providers.
  2. New online quotation tools: directed PSPs will need to make these available so merchants can make comparisons between different providers more easily (i.e. with the bespoke summary boxes).

• Trigger messages: directed PSPs will need to provide these to merchants in a prescribed form at specified points (linked to minimum contract term expiry dates or, for indefinite contracts, every 30 working days).

• Maximum 18 month term for POS terminals: will be introduced for POS terminal lease and rental contracts (where arranged through relevant PSPs), with notice periods limited to one month after renewal.

These remedies will apply to the 14 directed PSPs in respect of their merchant customers with a turnover of up to £50 million, except for the POS terminal remedy – which will apply to merchants with a turnover of up to £10 million.

When do the remedies need to be implemented by?

The 14 directed PSPs are required to implement the remedy around POS terminal contracts from January 2023 and the two remedies around the provision of information and trigger messages from July 2023.

What does this mean for the 14 directed PSPs?

The 14 directed PSPs will need to implement the remedies within the timescales stipulated by the PSR within their own direct businesses and also ensure that any independent sales organisations (ISOs) / payment facilitators with whom they deal with also implement the relevant remedies.  Additionally, the 14 directed PSPs will need to ensure compliance by any POS terminal lease and rental providers with whom they work (and ensure their terms with such providers align accordingly), so the wider, knock-on implications of the remedies should not be overlooked.

As a result and within the timescales stipulated by the PSR, the 14 directed PSPs must ensure that their respective commercial and legal terms with ISOs / payment facilitators and related third party organisations (such as POS terminal providers) are reviewed and, where required, updated and may also wish to revisit what oversight arrangements they have in place.

Next steps

Whilst only the 14 directed PSPs are mandatorily impacted at this stage, given the direction of travel the wider providers in the UK card acquiring market who serve merchants with an annual card turnover of under £50 million may wish to consider the work required to implement the remedies issued by the PSR. We will continue tracking the developments and will provide further updates. If you are a PSP or otherwise require advice on the impact of these changes, please do get in touch.

Contributors: Matt Atkinson and Alex Williamson

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at October 2022. Specific advice should be sought for specific cases. For more information see our terms & conditions.