UK payments watchdog plans to cap Mastercard and Visa interchange fees
Make us a preferred source
Make us a preferred source on Google
The news: In a report published on Wednesday, the UK’s Payment Systems Regulator (PSR) proposed a price cap to protect British businesses from overpaying on interchange fees charged by Visa and Mastercard.
The numbers: The PSR proposed 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 at UK businesses).
Post Brexit, Visa and Mastercard significantly raised some interchange fees between the UK and the EEA from 0.2% to 1.15%, and credit card fees from 0.3% to 1.5%. Last year alone, the PSR estimates that UK businesses paid an extra £150-200 million ($286-381 million) due to the fee increases.
The context: An interchange fee (IF) is a fee that acquirers pay to issuers every time a card is used to purchase goods and services. The amount of the fee is typically calculated as a percentage of the transaction value. Visa and Mastercard’s cross-border IFs affect cards issued in the EEA and used at UK businesses (outbound IFs), and cards issued in the UK and used at EEA businesses (inbound IFs). UK businesses are primarily impacted by the increases in outbound IFs, which the PSR’s suggested caps would apply to.
The PSR has been under pressure to address the duopoly and attempt to challenge the dominance that the payment giants hold.
What they said: 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.”
The source: Payment Systems Regulator
