UK payments regulator proposes cap on cross-border fees for Mastercard, Visa By Reuters
© Reuters. FILE PHOTO: Visa credit and debit cards are shown in this photo taken August 2, 2022. REUTERS/Benoit Tessier/File Photo
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Ian Withers
LONDON (Reuters) – Britain’s payments regulator on Wednesday tentatively proposed limits on cross-border interchange fees charged by Mastercard (NYSE:) and Visa (NYSE:) for transactions between Britain and the European single market.
The Payments Systems Regulator (PSR) said the cap would protect against overpayments by businesses after publishing interim results of its market review of interchange fees charged after Brexit, which saw the bloc’s long-standing cap suspended in the UK.
UK lawmakers have put pressure on the PSR to consider reintroducing the cap in England, with the watchdog saying last year it would conduct two market reviews but the results could take years.
PSR said its review focused on rates set by Mastercard and Visa, which account for 99% of debit and credit card payments in the UK.
The watchdog said both companies had increased their fees to “excessively high levels,” costing British companies an extra 150 million to 200 million pounds ($190 million to $250 million) last year from fee hikes. He said he did.
“Put simply, we don’t think this market is working at this stage,” PSR managing director Chris Helmsley said in a statement.
Under the proposals, the PSR would impose an initial time-limited cap of 0.2% on UK-European Economic Area debit transactions and 0.3% on credit transactions. A persistent upper limit will be imposed as further analysis is performed.
A Visa spokeswoman said the company strongly disputed the findings of PSR’s interim report and that the proposed relief was “unjustified.”
A spokesperson said: “Accepting trusted, secure and innovative digital payments means enormous value to UK businesses, especially when selling overseas.”
“This interchange rate applies to less than 2% of UK card payments (European (EEA) cardholders purchasing online from UK merchants) and reflects the fact that these transactions are more complex and pose a much greater risk of fraud.”
Mastercard did not immediately respond to a request for comment.
PSR is soliciting feedback on the proposals until the end of January, with a final report expected in the first quarter of 2024.
A government-commissioned report last month said the UK needed a ‘digital alternative’ to its reliance on Visa and Mastercard whatever the PSR does, part of the EU’s bid for a ‘homegrown’ alternative to the US duo that is yet to emerge. It reflects a long-standing ambition.
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