Overview 1
Catalyst 1
Summary 1
Methodology 1
Table of Contents 2
Table of figures 3
Table of tables 4
Regulatory Developments in the UK Payment Card Market 5
The UK card market continues to face regulatory intervention at the national level 5
The Banking Code was revised in March 2008 following OFT's call for greater information to be provided with credit card cheques 5
The consultation on the issue of credit card cheques by relevant parties involved began in November 2005 6
Datamonitor Cards and Payments Team view 7
Store card providers have begun to reduce default fees but the OFT's investigation into overdraft default fees may still have further implications for issuers 7
Datamonitor Cards and Payments Team view 8
The CCA 2006 has extended protection offered to consumers and was enacted in April 2008 8
The focus of CCA concerns provision of information to consumers 9
Datamonitor Cards and Payments Team view 11
The Competition Commission published its provisional findings on the sale of payment protection insurance 11
The investigation into PPI started when the OFT referred its report to the Competition Commission 12
The FSA has been independently investigating the sale of PPI since 2005 and has imposed penalties on several players 13
Datamonitor Cards and Payments Team view 15
The Payment Systems Task Force was wound up in November 2006 and replaced with the UK Payments Council 15
The work of the PSTF covered access and governance of the LINK ATM network 16
The PSTF did not pursue its investigation into the access and governance of UK card schemes 17
The OFT has vowed to continue its investigations into multilateral interchange fees but no progress has been made at the national level 18
Background to interchange and its regulation 19
Interchange is one of five key revenue streams for the industry 19
Merchants are behind the downward pressure on interchange 20
Interchange is a hugely important source of revenue for issuers in the UK 21
The OFT's current interest in domestic interchange began when MasterCard applied for an exemption from the UK Competition Act 1998 22
In its September 2005 ruling, the OFT accepted the need for a collective agreement on interchange, but objects to what it sees as 'extraneous costs' 23
In response to this finding, MasterCard, backed by the rest of the industry, lodged an appeal with the CAT 24
Datamonitor Cards and Payments Team view 25
The UK card market also continues to face regulatory intervention at the international level 26
At the European level the EC came down against MasterCard's intra-EEA multilateral interchange fees 26
The EC also found that MIF might stand in the way of the creation of SEPA 26
Understandably, MasterCard appealed the European ruling on interchange 27
The European Commission also initiated formal proceedings against Visa Europe 27
Visa is ready to negotiate a settlement with the EC regarding its cross-border MIF's 28
Datamonitor Cards and Payments Team view 28
The European CCD promises to make further changes to regulation in the UK 28
The changes that have been made to the calculation for the APR will see headline rates rise in the UK 29
Timeline of the directive 29
The revised proposal has seen changes to a number of key areas, but the commitment to maximum harmonization in some areas remains 31
Other areas of the directive remain unchanged from its previous form 33
Despite positive intentions there are key problems with the directive 33
Datamonitor Cards and Payments Team view 34
The European banking industry continues to work towards the creation of SEPA 35
For a number of years the EC has pushed to create a single payments area 35
Yet the threat of further regulation pushed the industry to take steps to self-regulate 36
At the end of 2004, the EPC issued a roadmap to 2010 38
However, there are signs that regulators are becoming frustrated with the slow progress of the banks in regards to SEPA 38
In March 2006, the EPC published a second version of its Cards Framework 38
After missing the original deadline, banks have agreed a new SEPA start date 39
Datamonitor Cards and Payments Team view 39
Appendix 40
Definitions 40
AAGR 40
APACS 40
Average transaction value 40
Balances outstanding 40
CAGR 40
Charge card CAGR 40
Credit card 40
CVV 40
Debit card 41
EMV 41
Fraudulent use of card details (card-not-present fraud), also known as fraud on phone, mail order or Internet transactions 41
Interchange 41
Non-standard 41
OFT 41
Methodology 42
Primary research 42
Secondary research 42
Further Reading 43
Ask the analyst 44
Datamonitor Consulting 44
Disclaimer 44
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