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A Regulatory Revolution

2015 and 2016 will see wholesale changes to the UK and European card payment landscape, bringing benefits both for merchants and consumers, explains Lloyds Bank Cardnet’s Steven Bisoffi.

The regulatory changes we’re seeing impacting the card payment space will help small businesses and start-ups to survive in today’s business environment. These new rules and regulations will establish a robust and fair basis for the card payment arena, supporting merchants' working capital and cashflow, while giving an optimal outcome for consumer transactions.

The changes include:

  1. Establishment of new Payment Systems Regulator (PSR)
    On 1st April 2015 the new Payment Systems Regulator (PSR) was established to foster innovation, drive competition and support new entrants in to the UK payment arena. This includes, but is not exclusive to, card payments. The PSR is an independent body, working alongside the Financial Conduct Authority, and has substantial powers to ensure the UK payment landscape is open, fair and transparent. The PSR has issued its Policy Statement under three key themes:
    • Strategy setting projects
    • Payment market projects
    • Pipeline projects
  2. Speedier Settlement
    Lloyds Bank Cardnet has been offering a Speedier Settlement service for Lloyds banked merchants for a number of years, but recently introduced a Speedier Settlement service for non Lloyds banked merchants which went live in March 2015. Speedier Settlement for Cardnet merchants is delivered through either an in-house settlement process or Faster Payments. Driven by the UK regulatory authorities, Speedier Settlement reduces the period between the card payment transaction and the merchant receiving the funds. Instead of the previous 3-5 day timeframe, merchants can now choose to receive funds within 1-2 days. That will allow them to benefit from better and more efficient cashflow and working capital management.

    With the number of card payments increasing year on year, consumer expectations are encouraging more small businesses to accept card payments. At the same time, the rise of contactless payments is allowing customers to access the speed and convenience of cash through card usage. These push and pull demands mean small businesses cannot afford to ignore card acceptance. With the advent of Speedier Settlement, merchants’ settlement times are reduced, removing a potential barrier to card payment integration felt by small businesses.
  3. Interchange Regulation
    We expect the implementation of the Interchange Regulation across Europe in December 2015 will have a positive impact on the fees merchants pay to the card acquirer for processing card payment transactions. The intention is to bring the cost of accepting card payments in line with the implied cost of accepting cash payments, after charges such as bank and handling charges are taken into account.

    As the new regulation comes into force, there will be moves to ensure that the cost saving from lower merchant fees is passed on to the consumer. This will be achieved by stopping merchants placing surcharges on consumer card payments (for example, by charging a set fee or percentage for credit card use). This will be enforced under a new Payment Services Directive, due to be implemented within the next 24 months.

These changes are the largest to impact the card payment industry in over 20 years and present massive challenges for merchants, payment service providers (PSPs) and card acceptance. However, the new rules and regulations will establish a robust and fair basis for the card payment arena. At Lloyds Bank Cardnet, we work with our customers to ensure any regulation updates are communicated effectively and seamlessly implemented. We already offer faster settlements to our customers, as well as providing additional functionality to those Cardnet customers who have a full banking relationship with Lloyds Bank.

We continue to monitor the developments of the Payment Services Directive and will support its intention to create a harmonised payments landscape. The changes due to impact the UK will be implemented between 2017 and 2018 and we will provide clear information to our customers when available.

For more details about our Speedier Settlement Solutions or to discuss the impact of regulatory changes on your business, please contact your Cardnet Relationship Manager.

Download the table of Interchange rates

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