Credit, Collections & Insolvency News
The Payment Systems Regulator (PSR) has announced that it is proposing to introduce a price cap to protect UK businesses from overpaying on these interchange fees. Subject to the PSR’s final report and further consultation on remedies, this could happen in two stages:
An initial time-limited cap of 0.2% for UK-European Economic Area (EEA) consumer debit transactions and 0.3% for consumer credit transactions (where the transactions are made online[1] at UK businesses). A lasting cap on these interchange fees in the future, once further analysis has been carried out to establish an appropriate level.
The PSE Cards are the most popular way for consumers to pay for goods and services in the UK and the EEA, so the market must work well. Every time people use Mastercard or Visa debit or credit cards issued in the EEA for online retail transactions with UK businesses, UK businesses pay cross-border interchange fees. After Mastercard and Visa significantly raised some of these fees in 2021 and 2022, the PSR has been examining the level of these fees to understand whether they, or other factors, indicate the market is not working well.
The PSR has set out its provisional concerns that Mastercard and Visa have likely raised these fees to an unduly high level, at the expense of UK businesses. Last year alone, the PSR estimates that UK businesses paid an extra £150-200 million due to the fee increases.
The PSR’s current view is these UK businesses have little choice but to pay the increased costs as Mastercard and Visa cards account for 9 out of 10 online transactions at UK businesses using EEA-issued cards.
Chris Hemsley, Managing Director at the PSR, said “In this market review we have provisionally found that the fees charged by Mastercard and Visa to UK businesses which accept payments from within the EEA are likely too high. In short, at this stage, we do not think this market is working well.”
“Should we ultimately conclude this is the case, our interim report sets out a range of potential solutions which could be implemented. They are designed to make sure cross-border interchange fees are set at a level that better reflects the interests of all Mastercard and Visa users. We are also considering the longer-term outcomes so we can determine how we may need to adapt these fees in future.”
