UK PSR consults on methodology for developing a price cap remedy

The UK Payment Systems Regulator (PSR) has published consultation paper MR22/2.8 on a methodology for developing a price cap on multilateral interchange fees (MIFs) for UK-EEA card-not-present (CNP) outbound transactions. The PSR's 2024 final report found that interchange fees on UK-EEA CNP outbound transactions had increased to unduly high levels and were detrimental to UK merchants and consumers. The PSR proposes using the Merchant Indifference Test (MIT) as a starting point. The MIT assesses whether a merchant would refuse a card payment if they were certain that a customer who was about to pay at the cash register had an alternative means to pay. The test is passed if accepting the card does not increase the merchant's operating costs, therefore making the merchant indifferent between a card transaction and one using the alternative payment method. The PSR will decide on an appropriate cap based on the results of the MIT and on evidence of the impact of interchange fees on issuers' incentives and on competition between methods of payment.

The deadline for responses is 21 November, with next steps including a potential further consultation before a final decision is made on whether to impose any cap. The PSR had separately consulted in December 2024 on whether to have a two-stage process and impose a first-stage, interim price cap while developing the longer-term cap. It has now decided not to proceed with a first stage cap; with reasons for this decision set out in the statement of reasons published alongside this consultation.

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