Laura WilesPSR has published a third working paper on its market review of card schemes and processing fees. It previously published papers on competitive constraints and approach to profitability analysis.
The latest paper outlines recent changes to scheme and processing fees, and calls for views on its emerging thinking around how Mastercard and Visa approach fee changes, and what their approach might suggest about competition in the market. PSR observes that:
- The increase in revenue expected from fee changes comes mainly from acquirers rather than from issuers, with the asymmetry particularly marked for mandatory services.
- The rationale most commonly mentioned is ‘reflecting the value of the service’. In most cases, however, the relevant Mastercard and Visa documents do not include any quantitative estimate of this value. This lack of specificity is consistent with a lack of engagement with customers.
- Competition does not appear to have been an impediment to implementing material increases in mandatory fees, which comprise the majority of the fee changes considered.
- The relevant documents typically do not include data on costs associated with the scheme and processing services affected by fee changes.
PSR asks for feedback on this paper by 11 August 2023. In particular, it asks that Mastercard and Visa comment on its conclusions around the different rationales for fee changes and the degree to which competition influenced these changes. It asks other stakeholders for insight on any other significant fee changes between 2017 and 2021, the classification of fees, and whether fee levels are commensurate with the value provided by the services.