Interchange Fee Regulation - what it is, what it does, and our role
The IFR is European Union (EU) legislation that took effect on 8 June 2015 and brought major changes to the way card schemes (such as Visa and Mastercard) operate, most notably by introducing a cap on certain interchange fees applicable to payment cards. The IFR mainly imposes requirements on payment card schemes and issuing and acquiring PSPs.
Following EU Withdrawal, the onshored IFR is now retained UK law, which applies in the UK as amended by the Interchange Fee (Amendment) (EU Exit) Regulations 2019 (the ‘UK IFR’). Consumer cross-border card payments between the UK and EU (or any other third country), where either the acquirer or issuer is based outside the UK’s jurisdiction, are no longer subject to the interchange fee caps established under either UK IFR or EU IFR.
The Treasury designated us as the lead competent authority for the IFR in the UK in the Payment Card Interchange Fee Regulations 2015.
What is an interchange fee?
An interchange fee is paid from a merchant’s bank (called an acquirer) to a card user’s bank (called an issuer) for most transactions when a card payment is made (except for American Express cards) – for example, when somebody buys groceries from a supermarket using their card.
What does the IFR do?
The UK IFR caps interchange fees on consumer debit and credit card transactions (except some American Express cards) where the point of sale (‘merchant’), acquirer and card issuer are all within the UK.
Where the caps apply, they currently limit interchange fees to 0.2% of the value of a transaction for consumer debit cards (including prepaid cards), and 0.3% for consumer credit cards. Certain fees relating to some American Express card transactions are also capped. The IFR caps took effect from 9 December 2015.
Our guidance on our approach to monitoring and enforcing the IFR provides more information on the transactions that are not covered by the interchange fee caps.
The IFR is not just about card fee caps
In addition to the interchange fee caps, the IFR also introduced a number of business rules. Most of the business rules took effect from 9 June 2016. They include requirements for an acquirer bank to give their customers (merchants) information about the costs of accepting different brands and categories of cards (credit, debit, prepaid and commercial). This should help merchants negotiate a better deal with their banks.
The PSR’s role
As the lead authority for the UK IFR, we have published guidance on our approach to monitoring and enforcing the IFR. Our powers to monitor and enforce the IFR are set out in the Payment Card Interchange Fee Regulations 2015.
If you have a complaint about a breach of the IFR, you may submit it to us. We may then decide to open an investigation. To find out how to submit a complaint to us, visit our complaints page for more information.
Find out more
Click the links below to learn more about how the IFR affects people and businesses.
Guidance on the PSR’s approach to monitoring and enforcing compliance with the Interchange Fee Regulation (September 2021)This is the 2021 revised guidance on the Interchange Fee Regulation (IFR). It replaces the earlier version of the guidance that we published in 2020.
Onshoring EU Regulatory Technical Standards under the Interchange Fee RegulationThe Treasury has published its Interchange Fee (Amendment) (EU Exit) Regulations 2018: draft statutory instrument (SI).
Card paymentsWhat they are and how the PSR is involved