Overview
Britain’s payments regulator has put forward a provisional proposal to cap cross-border interchange fees charged by Mastercard and Visa on transactions between the UK and the European single market. This move aims to protect businesses from excessive charges following Brexit, when the bloc’s payment regulations no longer applied in Britain. The Payment Systems Regulator (PSR) recently released interim findings from its market review on interchange fees, focusing on Mastercard and Visa, which account for 99% of debit and credit card payments in the UK. The PSR highlighted that both firms have likely increased fees to levels that are unreasonably high, resulting in additional costs of £150-200 million for UK businesses.
The Proposed Cap
The PSR’s proposal includes an initial time-limited cap of 0.2% for UK-European Economic Area debit transactions and 0.3% for credit transactions. These measures aim to ensure that businesses are not overcharged for cross-border transactions between the UK and the European single market.
Disputed Findings
Visa, in response to the PSR’s interim report, strongly disputes the findings and claims that the proposed remedies are unjustified. A spokesperson for Visa argues that secure and innovative digital payments provide significant value to UK businesses, particularly when selling overseas. They assert that the proposed interchange rates only apply to less than 2% of UK card payments, specifically European Economic Area cardholders purchasing online from UK sellers. Visa maintains that these transactions are more complex and carry a higher risk of fraud, thus justifying the current interchange rates.