Expense Reduction Analysts warmly welcomes the news that the UK card acquiring market will be investigated following retailer complaints about increasing costs and ineffective competition.

From 2017, debit cards have accounted for more transactions than any other method in UK retail, equating to 13.2 billion total payments. It is, therefore, vital that retailers have access to a transparent and competitive market for accepting such payments.

The Payment Service Regulator (PSR) is leading the review and intends to explore whether the supply of card-acquiring services is competitive, working in both the interests of the merchants and the consumers.

The draft proposal for review includes the following points:

• The structure and characteristics of the card acquiring services on the market

• The card-acquiring providers and their market history

• The buying process of merchants for card acquiring services

• Creditable alternatives to these services for some (if not all) merchants

• Outcome of competitive deals – i.e. fees attached and level of customer service received

In particular, the PSR aims to address concerns that acquirers are holding on to the cost savings they made from the EU-imposed interchange fee caps. These draft terms were open for consultation until 14th September 2018, where any feedback, questions or evidence could be submitted to the regulator.

In light of this upcoming review, we asked our UK payment specialists what their immediate thoughts were on hearing the news.

Steve Whitlam of our Banking & Payments Team explained that “from ERA’s perspective, we have been consistently successful in making sure that our clients have benefitted as much as possible from the changes in interchange fees (the fees paid through the payment processor – or acquirer – to the bank which issued the card.) However, it has been clear that for the last couple of years acquirers have taken different approaches to how they meet the requirements for transparency in disclosing their own margins. We hope that the review will result in a more consistent presentation of costs by the acquirers which will make comparisons clearer and competition more open.”

Steve went on to say, “At the risk of being technical, a particular concern for us is that the EU regulations seem to be quite clear that acquirer pricing should differentiate between their external costs and their own margin in detail by default, and yet, many proposals still try to blend pricing in a way that masks this.”

The positive benefits that should flow from the review are echoed by the comments of Banking and Payments specialist Paul Davidson. “Since the regulation came into force, and in response to the opening up of the markets, many new players are now offering their services. This also includes new means of payment like Paypal, new technologies like mobile and contactless and includes operators from European and American markets. Typically, greater supply should lead to falling margins, but, if anything, we have seen the market rates rise on the back of cost changes introduced by Visa and MasterCard. This is perhaps because each supplier presents their pricing differently, so comparisons are often challenging. ERA experts challenge these cost models to generate value for our clients. We shall certainly be pushing for an outcome to the review that helps transparency in this complex area and helps us ensure our clients benefit from the best proposals.”

Should Businesses who Accept Card Payments Just Sit Back and Watch Their Costs Fall?

“Absolutely not!” says Paul Lucraft, a former General Manager of MasterCard (UK) and a key member of ERA’s Banking and Payments Team. “For one thing, this review will take time; the terms of reference aren’t even going to be signed off until the end of 2018.

“Secondly, Steve Whitlam, Paul Davidson and I are absolutely convinced that it is in the best interests of our clients to undertake card acceptance cost projects now to get the benefits of the regulation as soon as possible.

“Whilst ERA will be making representations to the Regulator in support of more openness and transparency, we stand ready today to help our clients demystify the proposals they are offered and achieve the best rates from acquirers.”


The EU interchange regulations have been fully adopted by the UK government and will continue, regardless of the outcome of Brexit negotiations. The PSR review – of the UK market by a UK regulator – is a timely, welcome and a natural move towards defining and refining what the regulations mean in practice, and extending it to cover Amex and other means of payment.

ERA believes there is a real opportunity to see early benefits for our clients as the acquirers seek to demonstrate their competitiveness and commitment to transparent pricing. It is, therefore, imperative that businesses seek advice on this matter earlier rather than later. Consult with our Banking and Payments team today to see how we can help you navigate a better deal for the card-acquiring services you use and get a better control of your retail business expenses.

Article by: The Banking Team