PSR proposes cross border price cap to protect UK businesses

The Payment Systems Regulator (PSR) has published its final report of its market review into cross border interchange fees. The report finds that the high level of fees is harming businesses.

The report found that throughout 2021 and 2022, Mastercard and Visa raised their cross-border interchange fees fivefold from 0.2% to 1.15% for debit cards and 0.3% to 1.5% for credit cards. The PSR finds that this was harmful to the interests of UK businesses and ultimately their customers.

As a result, the PSR is publishing a consultation on a proposed price cap remedy that seeks to protect UK businesses from overpaying these fees.

David Geale, the PSR’s Managing Director, said “Cards are a popular way we make payments in the UK. 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, costing UK businesses hundreds of millions of pounds. 

“We have carefully considered the feedback we have received. We consider that consulting on a range of options for capping prices is the best way forward to ensure UK businesses get a better deal. We look forward to receiving evidence on these proposals from all interested parties.”

In response a Visa spokesperson said “Accepting reliable, secure, and innovative digital payments represents enormous value to UK businesses, especially those selling overseas, and drives economic growth, as acknowledged by UK Government in the recent National Payments Vision. We continue to dispute the overall findings of the PSR and it will be important to ensure that any measures do not lead to uncertainty and unintended consequences, which could jeopardise the UK’s leading status as a competitive, thriving and innovative payments ecosystem.

“The rates under discussion are based on those that have been mutually agreed with the European Commission following extensive engagement. In agreeing the rates, the EC recognised that there is additional complexity and risk with e-commerce cross border transactions.”