The United Kingdom’s Payment Systems Regulator (PSR) proposed a price cap on cross-border interchange fees and is seeking comment on the level at which the cap should be set.
The PSR is doing so after publishing a final report on its market review in which it found that Mastercard and Visa raised their cross-border interchange fees fivefold during 2021 and 2022 and that these hikes are costing U.K. businesses an extra 150 million pounds (about $190 million) to 200 million pounds (about $253 million) per year, the regulator said in a Friday (Dec. 13) press release.
“Our findings confirm that, due to a lack of competition, Mastercard and Visa were able to raise cross-border interchange fees to an unduly high level, costing U.K. businesses hundreds of millions of pounds,” PSR Managing Director David Geale said in the release.
Reached by PYMNTS, a Mastercard spokesperson said in an emailed statement that the company welcomes the PSR’s willingness to collaborate with the industry on this topic and will continue to engage with the regulator.
“The payments landscape is more dynamic and competitive than ever,” the statement said. “Artificial controls on interchange do not reflect the commercial reality of today’s market and, if not set at the right level, can negatively impact the value people and businesses receive from card payments.”
Visa did not immediately reply to PYMNTS’ request for comment.
In a statement provided to Bloomberg, Visa said it disputes the regulator’s findings.
“It will be important to ensure that any measures do not lead to uncertainty and unintended consequences,” Visa said, according to the Bloomberg report.
The PSR’s announcement came a day after Bloomberg reported that European lawmakers asked the PSR to reconsider its plans to restore a cap on interchange fees that was lifted after Brexit.
Politicians and lenders inside the European Union said this change would disproportionately affect European banks and would be seen as “clear discrimination,” according to the report.
In the PSR’s Friday press release, Geale said the regulator “carefully considered” feedback it had received.
“We consider that consulting on a range of options for capping prices is the best way forward to ensure U.K. businesses get a better deal,” Geale said in the release. “We look forward to receiving evidence on these proposals from all interested parties.”
Feedback can be given until Feb. 7, 2025.
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