LONDON, Nov 22 (Reuters) - A report commissioned by the government has emphasized the need for the United Kingdom to develop a "digital alternative" to Visa and Mastercard for card payments, regardless of ongoing regulatory efforts. The conclusions of the Future of Payments Review echo longstanding complaints across Europe about the heavy reliance on these American giants for card transactions, with little progress made in creating a 'homegrown' alternative.

The review highlights grievances expressed by shops, services, and other merchants regarding the high costs associated with card schemes. This dissatisfaction may, in part, be due to a lack of choice or availability of digital alternatives to the existing card schemes. In response, Britain's Payment Systems Regulator (PSR) is currently reviewing the fees charged by card schemes, once again pitting Visa and Mastercard against merchants who are charged for accepting their cards from customers.

According to the review, the market would greatly benefit from a viable digital alternative to the card schemes, regardless of the PSR's final decision. One potential solution proposed is the use of open banking, where third-party fintech companies can utilize customer data, with permission, from their banks to offer payment services. This could provide a lower-cost alternative for retailers, potentially reducing merchant dissatisfaction with card schemes. Additionally, open banking has the potential to improve the efficiency of direct consumer-to-consumer transfers, which are currently described as "clunky."

Visa responded to the review's conclusions by stating that the UK payments landscape is in a good position, expressing willingness to collaborate with the government to ensure the country remains at the forefront of payments innovation. On the other hand, Mastercard welcomed the recognition of the contribution made by cards and emphasized its continuous investment in the latest and most innovative payment technologies, including open banking.

As the demand for digital and alternative payment options continues to rise, the report's recommendations highlight the importance of diversifying the payments landscape in the UK. By exploring options such as open banking and fostering competition, the government aims to address merchant dissatisfaction and improve overall payment experiences for consumers.