Updated: 19/12/2023*
We have published the interim report for our market review into cross-border interchange fees. We are now seeking views on our provisional findings and proposed approach to remedies to help inform our final report.
Why are we publishing this document and what does it contain?
Cards are the most popular way for consumers to pay for goods and services in the UK and the EEA, so it is crucial that the market works well.
Every time people use Mastercard or Visa debit or credit cards issued in the EEA for online retail transactions with UK businesses, UK businesses pay cross-border interchange fees. After Mastercard and Visa significantly raised some of these fees in 2021 and 2022, the PSR has been examining the level of these fees to understand whether they, or other factors, indicate the market is not working well.
The PSR has set out its provisional concerns that Mastercard and Visa have likely raised these fees to an unduly high level, at the expense of UK businesses. Last year alone, the PSR estimates that UK businesses paid an extra £150-200 million due to the fee increases.
The PSR is proposing to introduce a price cap to protect UK businesses from overpaying on these interchange fees. Subject to the PSR’s final report and further consultation on remedies, this could happen in two stages:
- An initial time-limited cap of 0.2% for UK-European Economic Area (EEA) consumer debit transactions and 0.3% for consumer credit transactions (where the transactions are made online at UK businesses)
- A lasting cap on these interchange fees in the future, once further analysis has been carried out to establish an appropriate level.
Who should read this document?
The PSR is keen to receive feedback on its provisional findings and proposed approach to remedies from anyone with an interest in online retail payments between the UK and EEA - particularly issuers, acquirers, card scheme operators, businesses, and cardholders.
What happens next?
The window for giving feedback is open until 31 January 2024.
The PSR intends to publish its final report on cross-border interchange fees in Q1 2024, but will confirm these timeframes in due course. If the PSR concludes the market is not working well and it warrants intervention, this report will be followed by a consultation on the remedy package.
*Update:
We have made some amendments to the document, which you can download. For clarity the adjustments we have made are:
Paragraph 9.86c. “applying a cap at 0.2%/0.3% or a level otherwise set by the EU European Commission for intra-EEA CNP transactions”.
Paragraph 9.64 We remain open at this stage to a potential remedy allowing an interim price cap to remain aligned with the intra-EEA price caps, should the European Commission raise the current levels change to a higher level EU IFR cap to a higher level following its review.
Paragraph 9.89 In relation to option (c), applying the outbound IFs caps of 0.2%/0.3% or at a level set by the EU European Commission, we are conscious of the effects of the UK’s withdrawal from the EU, and of the impact of a European Commission review ing, if any, of the EU IFR its own regulations, including that the fees under consideration in this market review would be out of scope of that exercise, and the methodologies applied are unlikely to be ideal. Therefore, while we remain open to representations from the parties on the relative importance of international pricing divergence or convergence, and the appropriate classification of the UK as part of SEPA, rather than RoW, we consider it unlikely that an enduring cap, set by reference to 0.2%/0.3% or to a future level for EEA-RoW transactions set by the European Commission, is likely to be effective or appropriate.