The Payment Systems Regulator (PSR) has confirmed the terms of reference for its Market Review into card payments, which will see it determine if retailers are being unfairly treated by acquirers and payment facilitators.

Card payments are an increasingly important payment method, with debit cards becoming the most frequently used payment method in 2017.

The review comes amid concerns that the market may not be operating fairly for smaller businesses and not working well for consumers.

The final terms of reference take into account the feedback that PSR received following a consultation on its draft terms, and explain what will be included in the review.

As part of the review it will examine:

  • The nature and characteristics of card-acquiring services.
  • How merchants buy card-acquiring services.
  • Who provides card-acquiring services and how their market shares have developed historically.
  • Whether there are credible alternatives to card-acquiring services for some or all merchants.
  • What the market is delivering for merchants and consumers, including the fees merchants pay and the quality of service they receive.

The Association of Convenience Stores (ACS) welcomed the review.

The ACS has raised a number of concerns about how the market is currently operating, including the fear that acquirers may not be passing on savings from interchange fee caps to retailers, and that there is a lack of transparency around the fees merchants pay to accept card payments.

It is also concerned about barriers that make it hard for merchants to compare and switch acquirers.

More than half of convenience retailers have seen an increase in the cost of processing card payments since 2016, with 32% reporting that costs have increased significantly, the ACS Voice of Local Shops Survey shows.

ACS chief executive James Lowman said: “The vast majority of retailers in the convenience sector accept card payments, but the costs of accepting those payments is increasing which will ultimately be harmful to consumers, and the only beneficiaries being the big card schemes boosting their profits.”

PSR head of policy Chris Hemsley added: “Consumers and businesses rely on payments made by cards more than ever before. That’s why this is an important review.

“We want to make sure the card-acquiring market is working for businesses and ultimately consumers. If we find that the market is not working well, we will look to make changes.”

The PSR will be gathering evidence throughout 2019, with a view to publishing an interim report before the end of the year.

The full details of the Market Review are available here