Last week the UK’s Payment Systems Regulator (PSR) proposed a price cap on cross-border interchange fees and is seeking comment on the level at which the cap should be set.
Given our perspective that legacy card schemes hold a dominant position akin to a duopoly, resulting in high total costs of payments for merchants and consumers, it might be natural to assume that we align with this proposal.
However, in our view, price regulation does not result in price competition. Card fees are too high – but they are too high because of the complexity and opacity of the card systems and the fact that they are deeply embedded middlemen in the world’s commerce. By imposing downward pressure on one aspect of card costs (interchange fee, for instance), these systems will simply react by increasing fees on another cog in the machine to maintain high margins.
To truly reduce costs for merchants, the industry needs competition that disintermediates card systems altogether. Pay by Bank is a much simpler, much cheaper alternative to card payments. The broad adoption of Pay by Bank will not only introduce price competition, but will also introduce simplicity and choice for merchants and consumers, which will weaken the hold that card schemes have on global commerce. What’s needed now, in other words, is not narrow, targeted regulation – but instead market-driven, systemic change.
In the UK, Pay by Bank transactions have more than tripled over the past three years, reaching 22 million in 2024. This trend highlights a clear consumer preference for the simplicity and security of account-to-account (A2A) payments, signalling a significant shift in payment behaviours. We’ve also seen major ecommerce merchants like Ryanair and Just Eat recently add Pay by Bank to their checkouts.
These trends show that merchants and consumers are increasingly seeking alternatives to traditional card networks, pushing back against the Visa and Mastercard duopoly. Solutions like Pay by Bank are stepping up, offering payments that are faster, more secure, and more reliable. 2025 will be dominated by a battle for checkout share among Pay by Bank, BNPL, card payment schemes and others. This competition will bring long overdue innovation and pricing reductions to consumers and merchants. We believe the PSR should be focusing on nurturing this competition, rather than on regulating one very narrow element in the grand scheme of payments.
This approach would also reestablish the UK’s leadership in shaping the transformation of the global payments landscape. Despite the growing adoption of Pay By Bank in the UK outlined above, the UK still lags behind when compared with the incredible growth of Pix in Brazil or UPI in India. Pix, for example, processed 42 billion transactions in 2023 (75% growth compared to 2022), with a turnover of 17.2 trillion Brazilian reals (around 3.5 trillion US dollars).
Of course, the specific needs of emerging markets are different to those of western economies, but the opportunity here is even larger given the complexity of our commerce ecosystem and the growing demand for simplification that brings cost and speed efficiencies.
With that in mind, we are pleased to see that the UK government recognises the impact and benefits of Pay by Bank and A2A payments, with the recent National Payments Vision highlighting the ambition for seamless account-to-account payments to become a “ubiquitous choice for consumers”. While this vision represents a major step toward modernising the UK’s payment infrastructure, we need the PSR, the FCA and other industry stakeholders to drive and support initiatives that promote competition and innovation in the payments industry, paving the way for a more level playing field in the world of payments.
Francesco Simoneschi is Founder and CEO of TrueLayer
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