The U.K. Payment Systems Regulator (PSR) has announced its intention to cap cross-border interchange fees on credit and debit cards. The regulator believes that Mastercard and Visa have excessively raised these fees, prompting a review of the market’s functionality.
Mastercard and Visa cards currently make up 90% of online transactions at U.K. businesses that accept cards issued in the European Economic Area. As a result, U.K. businesses are left with limited options but to bear the burden of these increased costs.
Based on its estimates, the PSR suggests that U.K. businesses have paid an additional £150 million to £200 million ($188.4 million to $251.3 million) due to these fee hikes.
The aim of the proposed cap is to protect U.K. businesses while the PSR seeks feedback on its initial findings and suggested remedies, which will contribute to the final report.
Chris Hemsley, Managing Director of the PSR, stated, “In this market review, we have provisionally found that the fees charged by Mastercard and Visa to U.K. businesses accepting payments from within the EEA are likely too high. In short, at this stage, we do not think this market is working well.”
Interested parties have until January 31 to provide comments on the PSR’s provisional findings. The PSR plans to release its final report in the first quarter of next year.
In the event that the PSR determines the market’s insufficient functionality and intervention is necessary, a consultation on the remedy package will follow this report.
Visa has strongly disputed the PSR’s findings and believes that the proposed remedies lack justification. A spokesperson for Visa argued that these interchange rates only apply to less than 2% of U.K. card payments made by European (EEA) cardholders purchasing online from U.K. sellers. They also asserted that these transactions are more complex and pose a higher risk of fraud.
As of now, Mastercard has not responded to requests for comment.
UK Payment Systems Regulator to Cap Interchange Fees on Credit and Debit Cards
The UK Payment Systems Regulator (PSR) has announced its provisional plans to impose a cap on cross-border interchange fees for credit and debit card transactions. The PSR believes that Mastercard and Visa have increased these fees to an excessive level.
Concerns were raised after the companies raised some of the fees in 2021 and 2022. As a result, the PSR launched a review to assess whether the market is functioning properly. The regulator’s findings showed that Mastercard and Visa cards represent 90% of online transactions made by UK businesses with cards issued in the European Economic Area. This means that UK businesses have limited options but to pay the higher costs imposed by these companies.
It is estimated that UK businesses paid an additional £150-200 million ($188.4-$251.3 million) as a result of these fee increases.
To safeguard UK businesses, the PSR plans to introduce a cap while seeking feedback on its provisional findings. This feedback will help inform the final report and any proposed measures to address the issue.
Chris Hemsley, Managing Director of the PSR, stated, “In this market review, we have provisionally found that the fees charged by Mastercard and Visa to UK businesses accepting payments from within the EEA are likely too high. In short, at this stage, we do not think this market is working well.”
Interested parties have until January 31 to provide comments on the provisional findings. The PSR intends to publish its final report in Q1 of next year. If the PSR determines that the market is not functioning properly and intervention is needed, a consultation on the proposed remedy package will follow.
Visa has strongly disputed the findings and argues that the proposed remedies are unjustified. According to a Visa spokesperson, these interchange rates apply to less than 2% of UK card payments made by European (EEA) cardholders purchasing online from UK sellers. Visa believes that the higher rates reflect the complexity and increased risk of fraud associated with these transactions.
Mastercard has not yet responded to requests for comment.
