Card Fees Reviewed by UK Payments Regulator
The UK’s Payment Systems Regulator (PSR) has responded to repeated calls for urgent action on soaring costs and anti-competitive practices in the card payment sector by launching two separate market reviews of the fees being charged by Mastercard and Visa. This follows an in-progress £14 billion class action against Mastercard, with the company accused of overcharging 46 million Brits.
Last September, we reported on trade associations representing tens of thousands of retail and hospitality businesses nationwide joining forces to demand steps be taken to address ever-rising card fees, damaging profit margins and having negative knock-on effects for customers. The PSR has now announced assessments of Mastercard and Visa’s processing and cross-border interchange fees, noting ‘a substantial proportion’ of fee increases ‘are not explained by changes in the volume, value or mix of transactions.’
In 2021, finance and fintech news site AltFi reports there were 3.5 billion UK-issued credit card payments, amounting to £182 billion, and 21 billion debit card payments, totalling £702 billion. Mastercard and Visa together accounted for around 99 percent of these, both by volume and value.
The PSR will review the market power of the two companies—considering factors such as high barriers to entry and limited acceptance of alternative payment acceptances—and assess whether this is leading to ‘weak constraints in setting fees’.
We’ve been gathering information since the start of this year and have identified that a detailed review of the market is needed. We have set out what we will assess in these reviews, which will then inform any decisions on the steps we might need to take to promote effective competition or to address any harm.
The PSR plans to publish the final terms of reference for the market review in Autumn. In the meantime, cash remains a convenient way to pay, supporting smaller businesses and ensuring no added fees for the customer.