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Smaller firms will no longer be required to pay regulatory fees under £100 as part of the UK Payment Systems Regulator’s (PSR) new fee structure, while Visa and Mastercard escape a broad "special fee" for regulatory reviews targeted at them.
Last week, the PSR announced two changes to its fees. First, the agency set a minimum yearly fee threshold of £100 for payment service providers (PSPs).
This measure is intended to provide time and cost saving to small fee payers “by reducing administration, and free up our time for more productive activities”.
Secondly, the agency introduces a “special project fee” where payment system operators with a for-profit business model are charged for work related to or arising from their designation.
Smaller firms relieved from paying fees
The PSR is funded by firms it regulates, which include PSPs and payment system operators. These firms pay annual fees to cover the agency’s operating costs.
The PSR uses a complex fee allocation formula to calculate its fees by setting its projected spend for the following year and dividing it among the firms it regulates based on the relative size of their total transaction volumes and total transaction values across all PSR-regulated payment systems.
In 2022, the PSR found that 46 of the 238 fee payers altogether paid a total of £1,842, an average of just over £40 each. None of these firms paid more than £100.
In a December consultation paper, the regulator said it could remove the administrative burden and improve the efficiency of the process by changing the fee structure and eliminating invoices of under £100.
The PSR estimated that the change will have a “small” impact on other fee payers, increasing their fees by around £10 on average.
Visa and Mastercard escape special fees aimed at funding PSR reviews targeted at them
As per the announcement, the fee changes include a new special project fee where payment system operators with a for-profit business model “are charged for work related to or arising from their designation”.
The scope of the special fee has been significantly narrowed compared with what was originally proposed by the PSR, which would have meant that for-profit payment system operators (PSOs) must contribute to “one-off” and “significant” projects, such as the agency’s designation activity, market studies or market reviews.
For example, existing for-profit PSOs, Visa and Mastercard, would have been required to help finance projects such as the PSR’s ongoing card fees market review.
The agency had argued in its proposal that these entities do not currently contribute to its regulatory costs. The absence of the special fee may divert funds from other regulatory work carried out by the PSR and could generate knock-on, adverse effects on the market and end users.
But after receiving mixed responses from market participants, the PSR decided to adopt the special project fee with a limited scope. This does not allow the PSR to collect fees for market reviews, the agency’s spokesperson confirmed.
Instead, the final version allows the regulator to charge fees for the work carried out when new payment systems are designated to the agency.
This could include making sure an appropriate regulatory framework is agreed upon, the spokesperson added.
Currently, the only entity that may be required to pay the special fee is Fnality, a for-profit payment system which uses distributed ledger technology to transfer funds between its participants.
Fnality was designated by HM Treasury last August but the spokesperson said that the PSR’s work related to the designation will continue throughout the next financial year, which means it is the PSR’s discretion to decide whether or not to charge a special fee.
The adopted fee changes, therefore, leave the card networks off the hook for now but the document says it is an “interim step” taken in light of the responses received.
But a future review “may revisit a broader special project fee mechanism”.
