The Payment Systems Regulator (PSR), the new economic regulator for the £75 trillion UK payment systems industry, has published draft guidance setting out how it plans to regulate new European legislation covering payment cards.
The Interchange Fee Regulation (IFR) takes effect from 9 December 2015 and will bring major changes to the way UK card payment systems operate, most notably by introducing a cap on interchange fees.
Interchange fees are paid between the bank of a merchant (such as a supermarket) and the bank of a card user (such as somebody doing a weekly shop) when a card payment is made. The European Commission’s intention with the cap is to redistribute the revenue from card issuing banks to merchants and on to consumers.
HM Treasury confirmed the PSR as lead UK regulator for the IFR on 17 November 2015. Our draft guidance consultation includes:
- 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
Read the full paper on our website.
The draft guidance is relevant to payment card schemes and their participants (operators, payment service providers and infrastructure providers) as well as those who use these services. It has been informed by a Call for Input that we published in June 2015 to gather views.
Hannah Nixon, Managing Director of the PSR, said:
"It’s the interchange fee caps that have captured the public’s attention, but the IFR is more than that. The intention of the IFR, as well as providing savings to consumers by reducing fees, is to boost transparency and remove barriers so others can enter the market and compete. These are goals that tally closely with those of the PSR and our wider agenda for UK payment systems.
“The PSR is amongst the first regulators in the EU to have been appointed as a competent authority, and we are the first to have publicly set out how we will oversee the new requirements. This is uncharted territory for any regulator, so I’m proud that we are leading the way and helping clarify how this significant piece of legislation works.”
To ensure the cards industry is clear on what it has to do now, our guidance only covers the parts of the IFR which take effect from 9 December 2015: specifically the cap on interchange fees and other business rules.
Further provisions come into force in the summer of 2016 and we will consult on our approach to those next year.
Interchange fee caps
Who is captured by the cap?
What happens now?
Background
- Read our consultation
- A three party scheme is where the issuer and acquirer are the same company; a four party scheme is where issuer and acquirer are separate entities. A three-party scheme may ‘outsource’ some issuing or acquiring activity (or both activities) to licensees, while continuing to both issue cards and acquire transactions itself.
- Further background reading on the IFR via HM Treasury.
- Read our Call for Input, published in June 2015
- The European Parliament and the Council of the European Union adopted the IFR on 29 April 2015; the full text was published in the Official Journal of the European Union on 19 May 2015.
- The PSR was incorporated on 1 April 2014 and became fully operational on 1 April 2015.
- The PSR has three statutory objectives: to promote effective competition in the markets for payment systems and for services provided by those systems, including between operators, payment service providers and also infrastructure providers, in the interest of service-users; to promote the development of innovation in payment systems, in particular the infrastructure used to operate payment systems, in the interest of service-users; and to ensure that payment systems are operated and developed in a way that considers and promotes the interests of service-users.
- The PSR is responsible for the regulation of designated payment systems and all participants in those payment systems (payment service providers, operators and infrastructure providers to those payment systems).
- The PSR website.