Abstract
Introduction
This brief provides in depth coverage of both national and international
regulatory activity that has impacted on the UK card market. This briefing
also forms part of the UK Plastic Cards 2008 report.
Scope
- The report covers all regulation in 2007 and the first half of 2008 that
has affected the card market in the UK.
- Both national and international regulatory issues are considered.
- In the UK, issues such as default fees on payment cards, payment
protection insurance and domestic interchange are discussed.
Highlights
The UK Office of Fair Trading concluded its investigation into default fees in
2006 but the investigation into overdraft fees applicable to current accounts
may still have an impact on the outcome of its ruling regarding credit and
store card default fees.
In December 2007, the EC ruled that MasterCard' s MIFs for cross-border payment
card transactions with MasterCard and Maestro consumer debit and credit cards
in the European Economic Area violate the EC Treaty rules on restrictive
business practices. MasterCard has since filed an appeal with the European
Court of First Instance to annul the ruling.
The investigations into payment protection insurance (PPI) and domestic
interchange are continuing into 2008. However, the final report of the
findings by the Competition Commission into the sale of PPI is expected to be
published in December 2008.
Reasons to Purchase
- Gain a clear understanding of the regulatory developments in the UK market.
- Understand the impact of changes in regulation in the rest of Europe on UK
issuers.
- Find out how issuers are adapting to changing market conditions.
Table of Contents
- Overview
- Catalyst
- Summary
- Methodology
- Table of Contents
- Table of figures
- Table of tables
- Regulatory Developments in the UK Payment Card Market
- The UK card market continues to face regulatory intervention at the
national level
- The Banking Code was revised in March 2008 following OFT' s call for
greater information to be provided with credit card cheques
- The consultation on the issue of credit card cheques by relevant parties
involved began in November 2005
- 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
- The focus of CCA concerns provision of information to consumers
- Datamonitor Cards and Payments Team view
- The Competition Commission published its provisional findings on the sale
of payment protection insurance
- The investigation into PPI started when the OFT referred its report to the
Competition Commission
- The FSA has been independently investigating the sale of PPI since 2005
and has imposed penalties on several players
- Datamonitor Cards and Payments Team view
- The Payment Systems Task Force was wound up in November 2006 and replaced
with the UK Payments Council
- The work of the PSTF covered access and governance of the LINK ATM network
- The PSTF did not pursue its investigation into the access and governance
of UK card schemes
- The OFT has vowed to continue its investigations into multilateral
interchange fees but no progress has been made at the national level
- Background to interchange and its regulation
- Interchange is one of five key revenue streams for the industry
- Merchants are behind the downward pressure on interchange
- Interchange is a hugely important source of revenue for issuers in the UK
- The OFT' s current interest in domestic interchange began when MasterCard
applied for an exemption from the UK Competition Act 1998
- 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'
- In response to this finding, MasterCard, backed by the rest of the
industry, lodged an appeal with the CAT
- Datamonitor Cards and Payments Team view
- The UK card market also continues to face regulatory intervention at the
international level
- At the European level the EC came down against MasterCard' s intra-EEA
multilateral interchange fees
- The EC also found that MIF might stand in the way of the creation of SEPA
- Understandably, MasterCard appealed the European ruling on interchange
- The European Commission also initiated formal proceedings against Visa
Europe
- Visa is ready to negotiate a settlement with the EC regarding its
cross-border MIF' s
- Datamonitor Cards and Payments Team view
- The European CCD promises to make further changes to regulation in the UK
- The changes that have been made to the calculation for the APR will see
headline rates rise in the UK
- Timeline of the directive
- The revised proposal has seen changes to a number of key areas, but the
commitment to maximum harmonization in some areas remains
- Other areas of the directive remain unchanged from its previous form
- Despite positive intentions there are key problems with the directive
- Datamonitor Cards and Payments Team view
- The European banking industry continues to work towards the creation of
SEPA
- For a number of years the EC has pushed to create a single payments area
- Yet the threat of further regulation pushed the industry to take steps to
self-regulate
- At the end of 2004, the EPC issued a roadmap to 2010
- However, there are signs that regulators are becoming frustrated with the
slow progress of the banks in regards to SEPA
- In March 2006, the EPC published a second version of its Cards Framework
- After missing the original deadline, banks have agreed a new SEPA start
date
- Datamonitor Cards and Payments Team view
- Appendix
- Definitions
- AAGR
- APACS
- Average transaction value
- Balances outstanding
- CAGR
- Charge card CAGR
- Credit card
- CVV
- Debit card
- EMV
- Fraudulent use of card details (card-not-present fraud), also known as
fraud on phone, mail order or Internet transactions
- Interchange
- Non-standard
- OFT
- Methodology
- Primary research
- Secondary research
- Further Reading
- Ask the analyst
- Datamonitor Consulting
- Disclaimer
List of Tables
- Table 1: Current relevant Datamonitor publications, 2008
- Table 2: Future relevant Datamonitor publications, 2008
List of Figures
- Figure 1: Organization chart of the EPC, 2006
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