LONDON: In a move to support UK businesses, the Payment Systems Regulator (PSR) has published its final report on the market review of cross-border interchange fees. The report reveals that the steep rise in fees by major card companies, Mastercard and Visa, is harming businesses, prompting the PSR to propose a price cap to protect against overcharges.

Over 2021 and 2022, Mastercard and Visa escalated their cross-border interchange fees from 0.2% to 1.15% for debit cards and from 0.3% to 1.5% for credit cards, a fivefold increase. The PSR’s analysis confirms that these hikes are detrimental to UK businesses and, consequently, their customers.

David Geale, Managing Director of the PSR, stated, “Cards are a popular way we make payments in the UK. Our findings confirm that, due to a lack of competition, Mastercard and Visa were able to raise cross-border interchange fees to an unduly high level, costing UK businesses hundreds of millions of pounds.”

Key findings from the PSR’s report include:

– Lack of Competition: Mastercard and Visa faced minimal competitive pressure, enabling significant fee increases.

– Costly Impact: Businesses are facing an additional £150-200 million in annual costs due to these fee hikes.

– Unjustified Increases: The PSR found no valid justifications for the fee increases, with neither company conducting a specific assessment prior to the hikes.

In response to these findings, the PSR is launching a consultation on a proposed price cap remedy. This consultation will explore the possibility of an interim cap on fees while a thorough analysis is conducted to determine a sustainable long-term cap.

The PSR invites all interested parties to submit feedback by February 7th. Depending on the consultation results, the PSR plans to publish a final remedies notice on the initial price cap next year, followed by a comprehensive methodology for a lasting cap.

Stay tuned as the PSR works towards ensuring a fairer deal for UK businesses in the payment systems market.

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