- Regulator publishes final terms of reference for two market reviews
- PSR is looking at increases in cross-border interchange and scheme and processing fees
- PSR is engaging with businesses and other stakeholders to better understand the impacts of the increases on them
Cards are the most popular way to pay for things in the UK, and Visa and Mastercard account for 99% of debit and credit card payments. Businesses have to pay fees to accept card payments meaning they pay billions in fees every year. These fees can be passed on to consumers through higher prices.
In the final terms of reference published today, the PSR has set out an ambitious timetable. This important work, which focuses on the fees charged by Visa and Mastercard, will help make sure businesses and consumers are protected.
If, during its investigations, the PSR finds evidence of harm to users or negative impacts on competition or innovation, it will act swiftly to take steps to remedy this.
Market review of card scheme and processing fees
The PSR’s recently concluded market review of card-acquiring services identified that scheme and processing fees had increased significantly between 2014 and 2018. Having finalised its plans to improve card services and choice for businesses, the regulator is now going further by looking in detail at the levels, structure and types of scheme and processing fees.
To help identify whether there are any issues in the market, the PSR will be seeking further detailed information and insights, including from businesses, Visa and Mastercard and others. The regulator expects to publish a report setting out its interim conclusions on card scheme and processing fees in quarter four of 2023 and a final report which would include any proposed remedies in quarter two of 2024.
Market review of UK-EEA consumer cross-border interchange fees
The regulator’s second market review focuses on consumer cross-border interchange fees between the UK and the European Economic Area (EEA). Since the UK left the EU, Visa and Mastercard have increased the fees associated with some UK-EEA payments fivefold. This affects UK businesses which accept an online or mobile payment made using an EEA-issued credit or debit card, for example. The PSR wants to understand the reason for the increases, as well as engage with businesses to better understand how the increases are impacting them.
The PSR expects to publish a report setting out its interim conclusions on UK-EEA consumer cross-border interchange fees by quarter three in 2023 and its final report in quarter four in 2023.
Chris Hemsley, Managing Director at the PSR said:
“Cards are the most popular way for people to make payments in the UK, but the concerns we have heard indicate that businesses could be paying over the odds by the fees imposed by Visa and Mastercard.
“We are moving as quickly as we can, but this is a complex issue to assess fully, and we want to make sure we take the right course of action - especially as it affects millions of businesses in the UK.”
Notes to editors
- Visa and Mastercard accounted for around 99% of all UK debit and credit card payments in 2021, both by volume and value.
- The increases in consumer cross-border interchange fees are for certain card transactions between the UK and the EEA, where the cardholder is not present (such as payments made by phone or online). Since the UK left the EU, previous IFR caps on these fees no longer apply. Visa and Mastercard have increased the interchange fees on online purchases made by UK consumers to European businesses and vice versa fivefold, from 0.2% to 1.15% for debit cards, and 0.3% to 1.5% for credit cards.
- Market reviews are one of the principal ways in which the PSR investigates the market for payment systems, or the markets for services provided by payment systems, to see how well they are working for service users. More information about our market reviews can be found here.