The Interchange Fee Regulation (IFR) has brought major changes to the way UK card schemes (such as Mastercard and Visa) operate, most notably by introducing a cap on certain interchange fees applicable to payment card transactions. It also introduces a number of business rules.
The Payment Systems Regulator (PSR) is the lead competent authority for the IFR in the UK. We are responsible for monitoring compliance with the IFR and for taking enforcement action where appropriate. Since the IFR caps on interchange fees came into effect on 9 December 2015, we have been actively monitoring compliance of issuers and acquirers in the UK with those caps.
This month, we issued information notices to the card schemes that will further help us to monitor compliance with the caps in the IFR. As part of the information we requested, we have asked two card schemes to provide information on the gross amount of interchange fees paid by a subset of acquirers and received by a subset of issuers in the UK from 9 December 2015 to 31 December 2017.
While we do not usually publish the information notices we issue to regulated persons, in the interests of transparency, we are publishing these notices. This is because we are asking the card schemes to report on interchange fees received or paid by individual issuers and acquirers. The Notices for both schemes are shown as a single version, which is redacted of identifying information.
What do the information notices contain?
The information notices consist of:
- a covering letter
- instructions that the card schemes should follow when compiling the information requested
- eight questions which specify the information each scheme should provide.
What happens next?
We will use the information we receive to inform our work to monitor the compliance with the IFR caps of the issuers and acquirers who are within the scope of this year’s requests. If we find a regulated person has failed to comply with an obligation imposed by the IFR, we have the power to take enforcement action where appropriate. This includes the power to publish details of a compliance failure or impose a financial penalty for the compliance failure and publish details of that penalty.
We intend to collect similar information on the gross value of interchange fees paid and received in the previous calendar year from the card schemes each year. This year, we have contacted Visa Europe and Mastercard to gather this information. We may change the identity of the card schemes that are required to provide the information in future years. We may also change the identity of the subset of individual issuers and acquirers who are covered by the information requests.
Our guidance sets out the approach that the PSR will generally apply in relation to its functions as the lead competent authority for the IFR in the UK.