UPDATE 1-UK Payments Regulator Proposes Cap on Mastercard, Visa Cross-Border Fees
LONDON – Britain’s payments regulator, the Payment Systems Regulator (PSR), has provisionally proposed a cap on cross-border interchange fees charged by Mastercard and Visa. The proposed cap aims to protect businesses from overpaying on transactions made between the UK and the European single market.
In their interim findings of a market review, the PSR highlighted the need for a cap after the longstanding cap imposed by the European Union ceased to apply in Britain following Brexit. UK lawmakers had urged the PSR to consider reintroducing a cap, prompting the market review.
The PSR’s review focused on the charges set by Mastercard and Visa, which dominate the UK market, accounting for 99% of debit and credit card payments. The regulator stated that both companies had likely raised fees to an unduly high level, costing UK businesses an additional £150-200 million ($190-250 million) last year.
PSR managing director Chris Hemsley expressed concern over the functioning of the market, stating, In short, at this stage, we do not think this market is working well.
Under the proposed measures, the PSR would initially impose a time-limited cap of 0.2% on debit transactions between the UK and the European Economic Area, and 0.3% on credit transactions. Further analysis would be conducted to establish a lasting cap.
Visa strongly disputed the findings of the PSR’s report and deemed the proposed remedies not justified. A spokesperson argued that accepting secure and innovative digital payments holds significant value for UK businesses, especially when conducting international sales. They also noted that the interchange rates being discussed affect less than 2% of UK card payments.
Mastercard has yet to respond to the PSR’s proposals.
The PSR is inviting public feedback on the proposed cap until the end of January 2024. The final report is expected to be published in the first quarter of that year.
These developments come after a government-commissioned report recommended the need for a digital alternative to Visa and Mastercard, regardless of the PSR’s decision. Such a move aligns with long-standing ambitions within the European Union for the emergence of a homegrown alternative to the dominant American payment networks.
The imposition of a cap on Mastercard and Visa fees could have broader implications for both businesses and consumers, ensuring fairer and more transparent pricing in cross-border transactions. As the PSR gathers feedback and finalizes its report in the coming months, the future of interchange fees in the UK will become clearer.
($1 = £0.7990)
(Based on Reuters article by Huw Jones; Editing by Sinead Cruise)
