The UK’s Payment Systems Regulator (PSR) is considering introducing a cap on cross-border card fees due to concerns about significant fee increases.
- Visa and Mastercard have raised their cross-border fees significantly in recent years, prompting concern from the PSR about the financial impact on UK businesses.
- In response to a lack of competition allowing fee increases, the PSR is consulting on options to cap these fees.
- Mastercard disputes the PSR’s legal authority to impose such a cap, citing other reasons for fee increases.
- The consultation on the proposed fee cap will close in February 2025, with businesses eagerly awaiting the outcome.
The UK’s Payment Systems Regulator (PSR) is actively evaluating the introduction of a cap on cross-border card fees, following significant hikes by Visa and Mastercard. This move comes as the PSR expressed concerns about the adverse effects on UK businesses.
Over recent years, cross-border interchange fees have seen a substantial increase. Visa and Mastercard have raised these fees fivefold, with debit card fees climbing from 0.2% to 1.15%, and credit card fees rising from 0.3% to 1.5%. The PSR estimates that this has led to an annual additional cost of £150-200 million for UK businesses.
David Geale, Managing Director of the PSR, highlighted the lack of competition that enabled Visa and Mastercard to increase their fees significantly. He noted that the consultation aims to explore options for capping prices to benefit UK businesses.
In the post-Brexit environment, the previous EU-regulated caps on outbound cross-border interchange fees no longer apply to the UK, allowing companies to alter their fee structures. Despite this, Mastercard contends that these changes are not directly linked to Brexit, arguing instead that other factors, such as fraud differentials, justify the increases.
Furthermore, Mastercard questions the PSR’s legal authority to impose a cap, challenging the basis of the PSR’s proposed interim remedy.
The PSR has outlined a two-stage intervention plan. Initially, it is exploring the introduction of a short-term, interim cap on fees. This proposal includes evaluating previous fee levels before recent increases. The interim cap is intended to be temporary until a more comprehensive analysis can define a suitable long-term cap. The consultation process will conclude by 7 February 2025.
The outcome of the PSR’s consultation on capping cross-border card fees is highly anticipated and could significantly impact UK businesses.
