Executive Summary: In March 2026, the FCA issued formal notices of investigation to PayPal, Visa, and Mastercard. The probe centers on Chapter I (anti-competitive agreements) and Chapter II (abuse of dominant position) of the Competition Act. Regulators suspect that the contractual terms governing how PayPal’s wallet is funded and used may be distorting the UK payment landscape, potentially limiting cheaper alternatives or inflating costs for end-users and merchants.
The Legal Microscope: Chapters I and II
The FCA is exploring two distinct but related paths of potential misconduct:
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Chapter I: Restrictive Agreements: The probe looks at the bilateral contracts between PayPal and the two card networks. The concern is whether these agreements contain "steering" restrictions or fee structures that prevent more competitive payment methods (like Open Banking) from gaining traction.
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Chapter II: Abuse of Dominant Position: Specifically targeting Visa and Mastercard, the FCA is investigating if these networks are using their market power to impose terms that solidify their duopoly over digital wallet funding.
The Impact on FX and CFD Brokers
Brokerages are heavily reliant on these rails for "Instant Funding," a key selling point for retail traders.
| Broker | Payment Stack Used |
| IG Group | Visa, Mastercard, PayPal |
| CMC Markets | Visa, Mastercard, PayPal (specific regions) |
| Plus500 | Visa, Mastercard, PayPal, Skrill |
| Pepperstone | Visa, Mastercard, PayPal |
Why it matters: If the FCA finds that these agreements artificially protect card-based funding at the expense of cheaper direct-bank methods, brokers may be paying higher-than-necessary processing fees. A successful probe could lead to a rebalancing of deposit costs, potentially benefiting retail traders through lower "hidden" surcharges or more diverse funding options.
Global Regulatory Convergence
The UK action is not an isolated incident. It reflects a growing global frustration with the perceived lack of competition in digital payments:
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The US Swipe-Fee Settlement: Last year, Visa and Mastercard agreed to a $38 billion settlement with US merchants to cap swipe fees for five years.
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FTC "Debanking" Warnings: The US Federal Trade Commission (FTC) recently sent formal warnings to Visa, Mastercard, PayPal, and Stripe regarding the denial of services based on political or religious views, citing Section 5 of the FTC Act.
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UK Open Finance 2030: This probe fits into the FCA's broader 2030 Roadmap, which aims to facilitate a shift away from expensive legacy card rails toward a more integrated and competitive "Open Finance" ecosystem.
Current Status: Evidence Gathering
The FCA has been clear that this is an early-stage investigation.
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No Breach Found Yet: The regulator has made no formal conclusions of illegal behavior.
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PayPal Cooperation: PayPal confirmed it received the RFI (Request for Information) in March 2026 and is currently cooperating with the FCA.
Next Steps: If evidence of a violation is found, the FCA will issue a Statement of Objections, giving the firms a chance to respond before any fines or structural changes are mandated.
