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Mastercard and four other companies have been accused of running a cartel to reduce competition in the market for pre-paid cards.

Allpay, PFS, Sulion and APS ran schemes to distribute welfare payments for local authorities.

The Payment Systems Regulator claims for six years, the firms agreed not to poach clients or compete for bids.

Mastercard and two others have admitted involvement and agreed to pay fines of up to £32m.

The schemes were designed to help local authorities provide pre-paid cards for vulnerable people such as asylum seekers, the homeless and victims of domestic violence.

Mastercard ran the payment systems, and funded a forum where the card providers met potential clients - and each other.

The Payment Systems Regulator was set up in 2015 to oversee the market for electronic payments.

It alleges that from 2012 to 2018 the card providers agreed not to try and poach each other's clients, or compete when bidding for local authority contracts.

APS and PFS also had an additional arrangement from 2014 to 2016.

"By colluding in this way, we consider the parties were acting as a cartel," said Chris Hemsley, Managing Director of the Payment Systems Regulator.

Reduced competition meant local authorities could have missed out on better services and lower prices.

"Collusion in payments is absolutely unacceptable. Where we see it happening, we will take action, stop it, and seek to impose significant penalties," Mr Hemsley added.

This the PRS's first anti-trust case.

The findings are still provisional but Mastercard, Allpay and PFS have all admitted involvement and agreed to pay fines if in due course the regulator decides the law was broken.

Mastercard placed the blame on two former employees, and said it settled the matter "at the earliest possible opportunity."

It would pay almost all of the £32m fines, which reflects its much larger size, not the degree of culpability.

Allpay claims its staff were the ones who blew the whistle on the alleged cartel.

APS, also known as Cashplus, has not admitted liability. It is evaluating the decision, but says that its actions did not cause customer detriment.

A small consultancy, Sulion, which was also named in the case, has not admitted liability. It did not return requests for comment.