In February 2018, the UK Payment Systems Regulator (PSR) conducted dawn raids in its first publicised investigation under the Competition Act 1998 (“CA98”). It obtained warrants from the High Court to search a “significant number of sites” around the country in what the PSR’s Head of Legal described as a “significant” operation for the regulator. In progressing the investigation, the PSR has said it is working in close cooperation with the UK Competition and Markets Authority (CMA).

The CA98 investigation

The PSR has indicated that it will not release details of the investigation until it issues the “Statement of Objections” (SO) – setting out the alleged infringements – to the parties. This approach mirrors that of the Financial Conduct Authority (FCA) (of which the PSR is a subsidiary) and is different to the CMA’s, which typically publishes at least the nature of an investigation at launch. The FCA issued its first SO in one of its first CA98 investigations in November 2017.

The PSR’s competition objective and powers

The PSR was incorporated in April 2014 and became fully operational (including with competition enforcement powers) in April 2015. The PSR’s three statutory objectives include an objective to promote effective competition in the markets for payment systems and services, including between operators, payment service providers (PSPs) and infrastructure providers, in the interests of service-users.

The PSR regulates a number of payment systems designated by HM Treasury, which include the largest and most important payment systems. These include CHAPS, Bacs/Faster Payments Scheme (FPS), LINK, Visa Europe and MasterCard. All participants in a payment system fall within the PSR’s remit, including the operator that manages and operates the system, the PSP which uses that system and the infrastructure providers.

In addition to its regulatory functions, the PSR has competition powers under the Enterprise Act 2002 (EA02) and the CA98. It exercises these powers concurrently with the CMA, and they include powers to:

  • carry out market studies;
  • make market investigation references to the CMA; and
  • take enforcement action against anti-competitive agreements and conduct.

Importantly, the PSR’s competition powers set out above can be used wherever there are issues relating to participation in a payment system, not just those designated by HM Treasury in respect of the PSR’s direct regulatory powers.

In 2015, the PSR issued guidance setting out how it intended to use its competition powers (PSR PS 15/2 Final Guidance - Competition Act 1998 & Market Reviews, Market Studies and Market Investigation References).

Since then, the PSR has completed two market reviews (carried out using its regulatory powers): the infrastructure market review and the indirect access market review; and now publicised its first CA98 investigation.

Infrastructure market review

In respect of the infrastructure market review, the PSR concluded that competition in the provision of central infrastructure was not effective and set out remedies:

  • requiring a competitive procurement process for future central infrastructure purchase contracts by Bacs/FPS and LINK (designed to ensure fair, open and transparent procurement of central payment systems infrastructure and to enable new technology providers to enter the market and drive new and innovative products and services);
  • the adoption of a common international messaging standard for Bacs/FPS (to lower barriers and encourage new entrants to the market).

The PSR also identified governance arrangements at VocaLink, which it considered reduced the level of competition in the provision of central infrastructure services. It proposed a remedy requiring the divestment of VocaLink by the four largest VocaLink shareholder PSPs. Ultimately, the PSR did not need to order this remedy given the announced acquisition of VocaLink by MasterCard, which the PSR considered would address its concerns.

Indirect access

Indirect access concerns the ability of one PSP to rely on another to provide access to its payment system. It is critical to banks, building societies and other PSPs, and is especially important for smaller PSPs. The PSR’s review covered indirect access to Bacs, CHAPS, Cheque & Credit and FPS. In concluding the review, the PSR noted concerns regarding the quality of access, limited choice for some PSPs and barriers to switching. It stated its intention to monitor developments to see how such concerns are addressed.

Other issues

Its recent work and stated intentions (e.g. in Annual Plan and Budget 2017/2018) show that the PSR is alive to issues relating to access, which follows from the scope of its remit (i.e. systems and infrastructure).

The PSR is also monitoring developments in the sector; it is focusing for instance on contactless mobile payments (it has issued information requests to a wide number of participants in the contactless mobile payments sector to glean a better understanding of this area) and use of data associated with payments (it is working with other public bodies to understand how payment data is used by PSPs).


With a number of market reviews and now the launch of a CA98 investigation, the PSR is showing its appetite for the use of its competition powers. The PSR has a very specific remit; it is therefore important for companies operating in the payment systems markets to be fully aware of the extent of its powers and how they can be exercised.