The UK's Payment Systems Regulator is take action against Mastercard and Visa in the wake of steep hikes on card fees by the duopoly.
The regulator's market review found that between 2017 and 2023, Mastercard and Visa raised their core scheme and processing fees by more than 25% in real terms.
The PSR also found that the schemes do not provide sufficiently clear and detailed information to acquirers or merchants, resulting in them receiving complex or incomplete information on scheme and processing services and fees, raising both acquirers’ and merchants’ costs and preventing them from negotiating a better deal.
While the PSR has not been able to reach a firm view on the level of the schemes’ profits, the regulator found evidence in Mastercard and Visa’s UK profits that is consistent with a finding that their margins are higher than would be expected in a competitive market.
Following an intterim review in May last year, the watchdog stepped back from imposing financial penalties but instead suggested a series of remedies to improve transparency around costs and ensure acquirers and business are given clearer information about the services provided.
The remediation effort will make obligations on Mastercard and Visa to explain, consult on and/or document the reasons for price changes and the pricing of new services, and provide more detailed financial information to the PSR going forward.
David Geale, the PSR’s managing director, says: “We have found that there is a lack of competition in the market, and evidence that Mastercard and Visa might have been able to charge UK businesses millions of pounds more than they would in a properly competitive market, impacting on their ability to invest and grow. The confusing information Mastercard and Visa make available to acquirers and merchants contributes to poorer market outcomes through raising their costs of dealing with this overly complex information.
“We will shortly consult on potential remedies to address the issues we have identified in our final report before we take any corrective action. We look forward to engaging with parties as part of this process.”
In response, a Visa spokesperson says: “Visa’s fees reflect the immense value that we provide to financial institutions, merchants and consumers. This includes extremely high levels of security and fraud prevention, near-perfect operational resilience and reliability, and a wide range of consumer protections and high-quality products and services that serve consumer and merchant needs. Through our investments, the UK has been a global pioneer in payments technology.”