British businesses could soon see relief from high card transaction fees as the UK’s Payment Systems Regulator (PSR) takes steps to curb the lack of competition in the space where Visa and Mastercard operate.
Per Financial Times, the regulator has cautioned both platforms over the lack of competition in the card payments sector, warning that the two firms, which control 95% of the UK’s debit and credit card transactions, charge merchants too high.
A report by the PSR revealed that since 2017, Visa and Mastercard have increased their fees by 25% above inflation, adding an extra £170 million in annual costs for UK businesses.
The regulator is now considering imposing corrective measures, with possible actions including fee caps and increased transparency requirements.
David Geale, managing director of the PSR, spoke on the impact of these rising costs, revealing findings of a lack of competition in the market and evidence that Mastercard and Visa might have been able to charge UK businesses millions of pounds more than they would in a properly competitive market, impacting on their ability to invest and grow.
The regulator’s investigation found that merchants often receive incomplete or complex information about scheme and processing fees, making it difficult to negotiate better terms.
Unlike interchange fees, which are passed to banks, scheme and processing fees go directly to card networks. These fees have received less scrutiny in the past but are now under increased regulatory attention due to their rising costs.
Visa and Mastercard have defended their pricing, arguing that the fees show the value they provide. Visa stated that its charges account for “extremely high levels of security and fraud prevention, near-perfect operational resilience and reliability, and a wide range of consumer protections and high-quality products and services that serve consumer and merchant needs.”
Mastercard also spoke against the PSR’s findings, saying the regulator “continues to underplay the true competitiveness of the payment industry and our ongoing innovation and investment into security and the consumer experience.” It added: “Our resilient, global network provides peace of mind and strong consumer protections, preventing billions of pounds of fraud each year.”
While the PSR has not yet confirmed specific measures, Geale told Financial Times that the regulator would “shortly consult on potential remedies to address the issues we have identified in our final report before we take any corrective action.”
