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PSR: Call for input on card payment systems

The PSR has published a call for input to inform its work in relation to card payment systems.

It has a particular focus on the impact of the new Interchange Fee Regulations (IFR), and how various parties may respond to this new legislation. The key stated objective of the call for input is to:

  • broaden the PSR’s understanding of card systems fees and how they may be affected by reactions to the IFR;
  • build the PSR’s understanding of the provisions on business rules and functional separation included in the IFR and their potential impacts;
  • inform development of policy for monitoring compliance with and enforcing the IFR, subject to the PSR being designated as a competent authority; and
  • understand any possible concerns parties may have relating to indirect access, transparency of information, governance and how service-users’ interests are represented in decision making.

We are supportive of the aims of the Payment Systems Regulator (PSR) and the positive role that it can play in helping the UK industry to maintain its leading position in payments globally. The PSR can provide a focused and impartial view on how the payment system network might be improved. There is already a high level of innovation in the UK payments industry, which has in part resulted from a flexible regulatory regime, and the PSR should aim to ensure that this continues.

We agree that it is sensible for the PSR to undertake a distinct piece of work to look at card payment systems. Card payments are different from other interbank schemes, not least because there is inter-scheme competition between card system operators (Visa; MasterCard; American Express; Diners Club; JCB etc), and because of their inherently international dimension, which require consideration of global interoperability and regulation at a global level.

Card payment systems have evolved to provide an extensive network that enables cardholders to transact in multiple currencies, without geographical boundaries. Card payments have provided a reliable platform to enable the growth of e-commerce, by providing cardholders with a secure and convenient means to transact. Card payments are one of the very few payment mechanisms that offer consumers the ability to transact easily outside the UK and, conversely, allow non-UK citizens to obtain goods and services from UK-based companies. Four-party card schemes are a product of a huge collaborative effort from numerous parties to deliver the standards, rules and technical infrastructure to support a ubiquitous payment product.

In the UK, we believe that the migration of cash and cheque payments to card payments has been of benefit to the economy by delivering a fast, efficient and secure payment mechanism with very wide acceptance. From a consumer perspective, card payments have considerable advantages over other forms of payments in terms of speed, convenience, protection from fraud, personal security and, through the chargeback mechanism, protection from breach of contract or non-receipt of goods.

Generally, we think card payments are working well: they deliver value to consumers and retailers and offer greater flexibility, wider reach and considerably more protection than other payment mechanisms. Nevertheless, we are a proactive and responsive industry, one that embraces change and continually looks for opportunities for further improvement. We want to work constructively with the PSR to deliver such forward looking improvement.

Card payments are underpinned by strong global interoperability principles, providing uniformity, interoperability and confidence in the integrity of the system. The PSR should therefore be alert to the fact that a divergent UK approach to payment regulation, or innovation, could have significant adverse impacts on these principles. Indeed, we believe that, within the complex UK/EU regulatory framework, the PSR can help make sense of regulation for firms, in particular smaller firms, and can help inform and shape relevant regulation to the benefit of the UK industry and of course ultimately to its consumers.

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