Card acquiring market 'failing smaller merchants'

The Payment Systems Regulator’s (PSR) interim report on the supply of card acquiring services has shown that merchants could make savings by shopping around and either switching or negotiating with their current provider – but many small and medium ones do not.

Card-acquiring services enable retailers to accept card payments. The cost to a merchant of these services are reflected in the prices we all pay for goods and services.

While many small and medium merchants may not be getting a good deal, the report found the market for card acquiring services works well for the largest merchants. Broadly speaking, the PSR identified three areas of concern: on merchant contracts for card acquiring services, on point of sale (PoS) terminal contracts, and on the difficulty for merchants to compare prices.

Therefore, the interim report includes several potential remedies to make it easier to search and switch for a new provider or better deal, including:

• Requiring all contracts for card-acquiring services to have an end date, providing a prompt for merchants to shop around.
• Requiring changes to PoS terminal contracts to limit their length, ending contracts that auto-renew for successive fixed terms and making it easier to exit contracts without incurring exit fees.
• Making it easier for merchants to research and compare prices and options available to them.

Chris Hemsley, the PSR's managing director, said: “While these services are not something many consumers will have heard about, the cost that merchants pay to use them will, for example, affect how much their weekly food shop costs.

“Our interim report shows that while the supply of card acquiring services works for the largest merchants, most other merchants - particularly smaller ones - may not be getting a good deal," he continued. "Many merchants do not shop around or look to negotiate with their existing provider, and so we’re proposing changes that could improve that. Now we want to gather feedback on those options and our findings to help us finalise our approach.”

The PSR is now consulting on the contents of the interim report and wants to get feedback on the proposed remedies. The publication of the interim report will be followed by a consultation period of 12 weeks. The deadline for feedback is 8 December.

After it has considered this feedback and discussed it further with stakeholders, the PSR will finalise its findings and publish a final report in 2021.

The PSR launched its market review because of concerns that card-acquiring services may not offer value for money for merchants. Its aim is to provide the first detailed overview of this sector and assess whether the supply of card-acquiring services is working well for merchants, and ultimately consumers.

In line with the PSR’s objectives, the regulator also considers any impact on innovation and the interests of service-users.

There are around 163 million cards in issue in the UK and consumers made 14.8 billion debit card payments in 2019, according to UK Finance data. "The crucial role card-acquiring services play in the payments sector means that it’s important that they work well for merchants, and ultimately consumers," noted the PSR.

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