The Payment Systems Regulator is pushing ahead with plans to introduce a price cap on the fees Visa and Mastercard charge UK merchants when European shoppers make online purchases.
Over the course of 2021 and 2022, Mastercard and Visa raised their cross-border interchange fees fivefold from 0.2% to 1.15% for debit cards and 0.3% to 1.5% for credit cards. This post-Brexit increase, says the PSR, is costing businesses £150-200 million extra per year.
As the PSR publishes its final report into the issue, the watchdog's MD, David Geale, says: "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."
In response, the PSR is launching a consultation on a price cap that wold come in two stages. A short-term, interim cap on fees could see fees set at the levels that were in place before the schemes raised them. The PSR says it is open to other options.
During the interim cap, further analysis will be conducted to determine an appropriate methodology and level for a longer lasting solution.
In a statement, Mastercard says it welcomes the PSR's willingness to collaborate and that it will continue to engage, but warns: "Artificial controls on interchange do not reflect the commercial reality of today’s market and, if not set at the right level, can negatively impact the value people and businesses receive from card payments."
However, Chris Owen from the British Retail Consortium, welcomed the move: "The Payment Systems Regulator has confirmed what businesses have long known - that the cards payment market is broken and needs fixing...The proposed price cap to address this is welcomed by the retail industry."
Earlier this year, the PSR stepped back from capping Visa and Mastercard charges for UK payments, despite competition concerns and sharp increases in processing fees.