- Mastercard and Visa are in the spotlight for a PSR payments investigation
UK businesses are set to win more business from European Union (EU) customers thanks to regulatory plans to cut up to £200m a year in interchange fees.
Cross-border interchange fees are charged to customers in the European Single Market when they use credit and debit cards to shop online at UK businesses.
Some of these fees have been elevated since 2021, when Mastercard and Visa began raising them from 0.2 percent to 1.15 percent for debit cards and from 0.3 percent to 1.5 percent for credit cards. of credit.
But now the Payment Systems Regulator (PSR) is consulting on plans to reduce these fees. They are estimated to add between £150m and £200m a year to the cost of European purchases of UK products.
A statement from the PSR said: “The PSR considers that this was detrimental to the interests of UK businesses and ultimately their customers.”
Mainland costs: Higher interchange fees increase cost for EU consumers buying UK products
The PSR is consulting on whether it should cap these fees and, if so, at what level.
Any limit would be temporary, with a view to setting it at a more permanent level.
PSR CEO David Geale said: ‘Cards are a popular way to make payments in the UK.
‘Our findings confirm that, due to a lack of competition, Mastercard and Visa were able to increase cross-border interchange fees to an unduly high level, costing UK businesses hundreds of millions of pounds.
“We believe consulting on a range of options for capping prices is the best way forward to ensure UK businesses get a better deal.”
The PSR is gathering feedback on its consultation until February 7, 2025 and will reveal any plans for a price cap later next year.
A Visa spokesperson said: “We continue to question the overall conclusions of the PSR and it will be important to ensure that any action does not create uncertainty or unintended consequences.”
A Mastercard spokesperson said: “Artificial controls on interchange do not reflect the commercial reality of today’s market and, if not set at the appropriate level, can negatively impact the value people and businesses receive from card payments.”