A new report commissioned by the UK government has called for the creation of a ‘digital alternative’ to relying on Visa and Mastercard for card payments.

The Future of Payments Review, initially launched at Mansion House in July, considers how payments are likely to be made in the future and makes recommendations on the steps needed to successfully deliver world leading retail payments, further boosting UK fintech competitiveness.

This conclusion underpins widespread concern across Europe about overreliance on Visa and Mastercard for payments due to a multitude of factors.

The report says: “While cards make a tremendous contribution to the payments landscape, we heard notable dissatisfaction with the cost of card schemes on the part of shops, services, and other merchants – which may be in part due to a lack of choice or digital alternatives to the existing card schemes.

So far, calls to create a local alternative to the American duo have not manifested in any major breakthroughs, and though the report notes that Open Banking would allow for the creation of a lower-cost alternative to card schemes such an option is not yet here and this is driving merchant dissatisfaction.

“Currently, the only digital alternative to cards are bank transfer processes which, if accessed via online banking, involves entering a name, sort code and account number,” it says. “This bank transfer process: a) is a bit clunky and typically takes over a minute to complete, b) lacks consumer purchase protection or dispute resolution process and c) does not have attractive commercials to scale.”

"If choice can be created, we believe that merchant dissatisfaction will decrease."

The report goes on to note that the Payment Systems Regulator (PSR) in the midst of a review of card scheme fee changes which could positively impact the existing status quo but “regardless of the outcome of the PSR’s work, we believe the market would be further improved if there was a viable digital alternative to the card schemes," the review notes.

Commenting on the review, Visa said it is “keen to work with Government to ensure the UK continues to be at the forefront of payments innovation", while Mastercard welcomed the review’s findings and said that it is investing in innovative payment technologies including Open Banking.

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