Last updated: 11 January 2023 *
In October we set out the next stages for our two market reviews into card fees: one on scheme and processing fees and the other on cross-border interchange fees. We have now published a working paper covering UK-EEA cross-border interchange fees (IFs).
Cards are the most popular way for consumers to make a payment. To accept card payments, businesses must pay certain fees which can ultimately impact the cost we all pay for goods and services. We want to understand whether card payments are working well and to make sure that businesses, and ultimately consumers, get a good deal.
In this working paper we set out our current understanding of how the recent increases in UK-EEA card-not-present (CNP) cross-border IFs may be affecting UK service users. We also invite stakeholder feedback on our understanding so far to test and receive suggestions on any additional issues that we may want to consider going forward.
Cross-border IFs are the card fees for international transactions where the issuer of the card and the merchant acquirer and/or point of sale location are based in different countries.
Following the UK’s withdrawal from the EU at the end of 2020, the EU IFR no longer applies to UK domestic and cross-border transactions between the UK and EEA. This led to the UK IFR being introduced which replaced the EU IFR for UK domestic card transactions. Shortly after the EU withdrawal, Mastercard and Visa increased IFs for CNP UK-EEA transactions using consumer debit and credit cards from 0.2% and 0.3% to 1.15% and 1.5% respectively.
The aim of our market review is to understand the rationale behind the increases in IF rates for Mastercard and Visa’s consumer debit and credit CNP transactions between the UK and the EEA since the UK’s withdrawal from the EU. We also want to understand the impact these increases may have on UK services users. We expect to publish our interim findings in the second half of 2023 and our final report by the end of 2023.
What this document contains and who should read it
This document illustrates our current thinking and understanding on how the recent increases in UK-EEA CNP cross-border IFs may be affecting UK service users. This paper is relevant to various individuals or groups with an interest in using or making card payments between the UK and EEA, in particular issuers, acquirers, card scheme operators, merchants, and cardholders where cardholder is not present (such as payments made by phone or online).
What happens next
We will continue to engage with a wide range of stakeholders as we progress our investigations, through further updates, publications, and consultations.
The consultation on this working paper will close at 5pm on Thursday 19 January, 2023 and we would welcome your feedback by then.
You can email us at email@example.com or write to us at:
Card fee market review team
Payment Systems Regulator
12 Endeavour Square
* We have made the following amendments to this working paper. They are outlined below:
- In relation to Figure 4 title, this has been amended this to: “Figure 4: EEA cards used at UK merchants, transaction volumes and values 2019 – H1 2022.”
- In relation to Figure 6 title, this has been amended this to: “Figure 6: UK cards used at EEA merchants, transaction volumes and values 2019 – H1 2022.”
- For paragraph 3.10, the sentence has been changed to: “The large declines in values and volumes seen for EEA cards used at UK merchants (see Figure 4) are not mirrored in the values and volumes for UK cards used at EEA merchants (see Figure 6) which followed a different pattern between 2019 and 2021”.