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This will be interesting - I have always suspected that competition in retail payments in Norway must be limited, for example, Vipps charges as high as 2.99% + 1NOK for online payments there. In Denmark, using the same platform (owned by Vipps) the cost is 1.49% + 1DKK. Even that is high, in a truly competitive market the cost of any retail payment goes below 1%.

The only competition in credit and debit card fees is in the network fees that card issuers (usually banks) pay to access the card networks, dominated by Visa and Mastercard. Card issuers have to decide whether to issue Visa or Mastercard cards, or one of the smaller card network brands.

Interchange fees distort this competition, as they are paid by the acquirer, recouped from the merchant and set by the network. The interchange an issuer receives is usually a multiple of the network fee they pay, so naturally they go for the card network which sets the highest interchange (there are other, lesser factors such as incentive refunds networks may give to the issuer).

There is no competition for card networks on the acquiring side, merchants have little choice but to accept at least Visa and Mastercard and their acquirer needs to pay the card network fees, at whatever level they are set, for all the networks they use. Acquirers' only incentive is to scale their business to maximise their card network volumes to get better network fees which are typically tiered on volume.

The cap on interchange fees is a good start in limiting the distortion to competition but the PSR should be more radical and eliminate the competition distortion to encourage growth in other networks, alternative payment methods and innovation - i.e. ban interchange fees altogether, allow networks to charge whatever network (access) fee they wish but ensure that the network fee for acquirers is no higher than that for issuers.

The Nexus specs state that liquidity provision is the responsibility of the FX providers - so the most challenging part of cross-border payments is out of scope of the scheme!