Regulator to clamp down on post-Brexit credit and debit card fees
An “unduly high” surge in credit and debit card interchange fees has cost UK businesses an extra £150m to £200m in the past year, the Payment System Regulator (PSR) has found.
As a result, the regulator has proposed a price cap to protect UK businesses from overpaying, as it believes a significant raise in fees has harmed businesses and raised prices for consumers.
When the UK left the EU, interchange fees on card-not-present transactions jumped fivefold, from 0.2 per cent to 1.15 per cent for debit cards and from 0.3 per cent to 1.5 per cent for credit cards. Fees were previously capped under EU legislation, which was not carried over after Brexit.
The price cap proposed is an initial “time-limited” cap of 0.2 per cent for UK-European Economic Area (EEA) debit consumer transactions and 0.3 per cent for consumer credit transactions when transactions are placed online at UK businesses. A lasting cap will be established with further analysis.
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 PSR’s interim report published today sets out a range of potential solutions to 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,” Hemsley said.
“We are also considering the longer-term outcomes so we can determine how we may need to adapt these fees in future.”
A Visa spokesperson: “We strongly dispute the findings of the PSR’s interim report and believe that the proposed remedies are not justified. Accepting reliable, secure, and innovative digital payments represents enormous value to UK businesses, especially when selling overseas.
“These interchange rates apply to less than 2% of UK card payments – European (EEA) cardholders buying online from a UK seller – and reflect the fact that these transactions are more complex and carry far greater risk of fraud.”
A Mastercard spokesperson said: “We do not agree with the PSR’s findings and will continue to educate them on the critical importance of electronic payments to the UK economy.
“In an extremely competitive payments market, interchange reflects the value provided to consumers and businesses.
“We enable fast, safe and simple transactions, protect consumers from fraud and help business grow in the UK and across the globe.”
Updated to include comments from Mastercard