The UK’s Payment Systems Regulator (PSR) proposes a cap on cross-border card fees, expressing concerns over recent fee hikes.
- Visa and Mastercard have increased their interchange fees significantly, impacting UK businesses and consumers financially.
- The PSR attributes these hikes to a lack of competition, costing businesses an estimated £150-200 million more annually.
- While Brexit legally allowed fee increases, Mastercard argues other factors justify the hikes, questioning the PSR’s authority.
- The PSR seeks to implement an interim cap pending further analysis, with consultation closing on 7 February 2025.
The UK’s Payment Systems Regulator (PSR) has raised alarms concerning the rising cross-border card fees imposed by Visa and Mastercard. In response, the regulator is considering implementing a cap on these fees, stating that the recent increases are detrimental to UK businesses. The hikes, which have seen fees soar from 0.2% to 1.15% for debit cards and from 0.3% to 1.5% for credit cards, are reportedly costing UK businesses an additional £150-200 million each year.
David Geale, Managing Director of the PSR, emphasised that a lack of competition has allowed these fee increases. “Our findings confirm that, due to a lack of competition, Mastercard and Visa were able to raise cross-border interchange fees to an unduly high level,” Geale stated. He further noted that the PSR has considered feedback and believes that consulting on capping options is crucial to securing better deals for UK businesses.
The cessation of EU-regulated caps following Brexit has been highlighted as a turning point for these fee hikes. Nevertheless, Mastercard contends that the legal ability to increase fees, granted by Brexit, is not the primary reason for the hikes. They claim that fraud prevention costs are a significant factor, asserting that the PSR’s intended price-cap action may not be legally justified. “Mastercard does not believe that the PSR has the requisite powers…to impose a price-cap remedy,” the firm commented.
The PSR is exploring the imposition of a short-term cap on fees while it undertakes further analysis to decide on a permanent solution. The consultation process, which invites input on potential interim fees, aims to ensure that the costs align with pre-increase levels, potentially suiting issuers’ transactional costs. Interested parties have until 7 February 2025 to engage in this consultation.
The proposed fee cap by the UK’s Payment Systems Regulator aims to address the financial strain on businesses, pending further analysis and consultation.
