Regulatory Changes Impacting Payment Acceptance

Recent regulatory changes such as the Interchange Fee Regulation (IFR) and the second Payment Services Directive (PSD2) have wide implications for Merchants. Although some of the finer details are still being worked through by financial institutions, here are some ways your acceptance of payments could be affected:

Co-badged cards:

Retailers will have the right to define preferences for the processing of co-badged cards at physical point of sale or ecommerce check-out, to minimize transaction fees, but must also permit the consumer to override this automatic priority selection in a non-discriminative and transparent manner. Previously the default application for processing payment on a co-badged card was set by the card issuer.


Surcharging is already subject to local national law and banned by some Member States as a consumer protection issue. Under PSD2 rules, retailers may not surcharge transactions made with regulated cards (i.e. subject to interchange caps) anywhere in the EEA. Surcharges on other cards, where not prohibited locally, cannot exceed the real cost of processing the card. Surcharging Diners or Amex cards or commercial cards will be permitted and certain retailers may wish to consider this option. 

No Need to Honor all cards:

The Interchange Fee Regulation (IFR) has largely been revoked the honor all cards rule under the argument that it adds cost to the entire system. Retailers however are still obliged to accept all capped consumer cards of the same brand and of the same category (e.g.: prepaid, debit or credit).

Direct from Account Payments:

PSD2 obliges banks to open Access to Accounts (XA2A) to Third Party Payment Service Providers (TPP). This is expected to fuel the development of payments direct from account.

As these new services emerge, Retailers should benefit from lower transaction fees, instant payment for goods and services, lower fraud rates and reduced PCI DSS over heads. However, acceptance and refund processes, dispute resolution and transaction reconciliation will require further definition.

Fraud and Security Controls:

The European Banking Authority (EBA) published the long-awaited draft of the Regulatory Technical Standards (RTS) in August 2016 covering Secure Customer Authentication (SCA) and secure communication of personal data as outlined in PSD2. These standards set out a requirement for two different authentication methods by the customer, such as a PIN and a physical identifier for all payments. Although the technical standards provide exemptions for low value payments at the point of sale, such as contactless and mobile payments it is still unclear whether merchants will be able to adopt a risk-based approach using previous behaviors and other indicators.


The European Union’s Second Payment Services Directive (PSD2) is expected to be transposed into UK law by January 2018. 3C Payment can support you to ensure compliance and realize operating efficiency improvements that boost profitability.

Back to business insight overview