The UK’s payments regulator has confirmed plans to introduce price caps on card fees paid by British merchants when European consumers make online purchases, after Visa and Mastercard hiked prices post-Brexit.
After proposing some restrictions a year ago, the Payment Systems Regulator (PSR) is moving ahead with a consultation to decide at what level they should be set.
The PSR is concerned about charges set by Visa and Mastercard on behalf of banks which apply to online transactions between the UK and European Economic Area.
It is considering an initial cap of 0.3 per cent on credit card fees and 0.2 per cent for debit card spending, which would restore the limit which had been in place before Brexit.
When the UK left the EU, Visa and Mastercard raised these interchange fees fivefold to 1.5 per cent for credit cards and 1.15 per cent for debit cards. The American giants have roughly 98 per cent market share in UK card payments.
“Due to a lack of competition, Mastercard and Visa were able to raise cross-border interchange fees to an unduly high level,” said David Geale, the PSR’s managing director.
“We consider that consulting on a range of options for capping prices is the best way forward to ensure UK businesses get a better deal.”
The PSR found Visa and Mastercard’s price hikes are costing British businesses £150m to £200m extra per year.
It is also consulting on a cap that could allow issuers to cover the costs of a transaction.
“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,” a Mastercard spokesperson said, adding that it will continue to engage with the PSR.
A Visa spokesperson said it still disputes the PSR’s overall findings. They added that any new rules should not “lead to uncertainty and unintended consequences”, which could threaten “the UK’s leading status as a competitive, thriving and innovative payments ecosystem”.
European lawmakers have also pushed back against the PSR’s plans. In a letter seen by City AM, several members of the European Parliament told the regulator earlier this month that it should review its proposals and warned banks in their countries could lose out on revenue.