The remedies focus on addressing the root causes of the PSR’s finding from its November 2021 final report on its card-acquiring services market review that the supply of card-acquiring services does not work well for small, medium and large merchants with an annual card turnover of up to £50 million, who represent over 90% of the merchant population.
The PSR consulted on initial remedies in January 2022 (see our related Engage article here), with a further consultation on its provisional decision on remedies in June 2022. The three remedies mandated by the PSR to address the concerns identified through its market review are:
- Greater transparency: Summary boxes containing bespoke key price and non-price information will be sent individually to each merchant and made available in their online account. Merchants will use these with the new online quotation tools providers will also be required to provide. The aim is to help merchants compare all available offerings.
- Greater engagement: Trigger messages to prompt merchants to shop around and/or switch must be sent by providers of card-acquiring services to their merchant customers and shown prominently in their online account. The timing of these messages will be linked to minimum contract term expiry dates or, where contracts are indefinite, be provided at least once every 30 calendar days.
- The ability to change providers easily: There will be a maximum duration of 18 months for POS terminal lease and rental contracts. After the expiry of initial minimum terms, contracts that do not terminate immediately at the minimum term must move to rolling renewal terms of no greater than 31 calendar days. Any exit or termination fees for POS terminal lease and rental contracts will be required to be cost based, fully explained and transparent to merchants before they enter into their contract.
The PSR has concluded that these remedies will be effective and proportionate, individually and in combination, to address the identified concerns. They will be implemented through the following three specific directions given to 14 firms that are considered to be the most significant providers of card-acquiring services to the merchants that the PSR is looking to protect (the directed providers):
All remedies will apply to the directed providers, their associated companies and any independent sales organisations (ISOs) that they have a contract with to provide services to merchants. The PSR will keep the companies directed under review and may extend the mandate by directing Mastercard and Visa to mandate all acquirers who are members of their schemes to adopt the remedies, if necessary.
The remedies addressing price transparency (summary boxes and online quotation tools) and the indefinite nature of some contracts (trigger messages) will apply to the directed providers in respect of their merchant customers with card turnovers of up to £50 million.
The remedy addressing POS terminals and POS terminal contracts will apply to the directed providers in respect of their merchant customers with card turnovers of up to £10 million, reflecting the findings in its final report.
Advice on the format and content of information required under Specific Directions 14 and 15 has also been published.
Next steps
The 14 directed providers must implement the remedy relating to POS terminal contracts from January 2023, and the two remaining remedies from July 2023. The ISOs of the directed providers should ensure they are compliant with the requirements as set out in the relevant directions. The PSR will monitor compliance with the directions and the impact of the remedies to decide whether any further action is required.
The PSR is considering how to develop a framework to evaluate merchant and consumer outcomes in the card-acquiring market and states that it could use this to assess the effectiveness of the remedies, and if they are still required considering market developments. The PSR also comments that the framework could also be used to implement a proportionate means to monitor compliance. This is in response to feedback received from several respondents to its consultation that:
- more information is needed on its approach for monitoring and enforcement; and
- it will be difficult for some directed providers to manage compliance by downstream ISOs and POS terminal providers.
The PSR plans to engage with industry on the development of an appropriate framework, including possible trials, during the implementation period.
