Mastercard and Visa face new rules on shopping fees and it will save Brits money
Shoppers could see a major change to certain Mastercard and Visa fees which could save them money when they shop.
The two payment processing firms could soon face a cap on their cross-border interchange fees after increasing them to "an unduly high level”. The Payment Systems Regulator (PSR) said that it was proposing a return of a cap on these fees that ceased to apply in the UK when Brexit was completed.
When the UK officially left the EU, cross-border fees increased from 0.2% to 1.15% for debit cards and 0.3% to 1.5% for credit card transactions. This was because the Visa and Mastercard were no longer limited to the European Economic Area (EEA) established levels of 0.2-0.3%.
The regulator said the move would protect UK businesses from overpaying on fees charged on transactions made between the UK and the European single market.
The watchdog announced its concerns today estimating that these fees cost UK businesses an extra £150million to £200million last year alone due to the "five-fold fee" increases pushed through by the card firms. The regulator's review concentrated on Mastercard and Visa as the pair account for nine out of 10 debit and credit card payments in the UK.
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The PSR said its review findings so far suggest that the market was “not working well”, with UK businesses having “little choice but to pay the increased costs”. The plans include an initial time-limited cap of 0.2% on UK-European Economic Area debit transactions and 0.3% on credit transactions where the transactions are made online at UK businesses.
It plans to launch a long-term cap, but will do further analysis to look at what the level should be. It is now consulting on its proposals until January 31 and plans to publish a final report in the first few months of next year.
Chris Hemsley, managing director at the Payment Systems Regulator, said: “In this market review we have provisionally found that the fees charged by Mastercard and Visa to UK businesses which accept payments from within the European Economic Area (EEA) are likely too high. In short, at this stage, we do not think this market is working well.”
“Our interim report sets out a range of potential solutions which could be implemented. They are designed to make sure cross-border interchange fees are set at a level that better reflects the interests of all Mastercard and Visa users.”
Both Mastercard and Visa said they do not agree with the regulator's findings. Visa said it “strongly disputes” the findings by the regulator and argued its proposed measures are “not justified”.
A spokesman for Visa added: “Accepting reliable, secure, and innovative digital payments represents enormous value to UK businesses, especially when selling overseas. These interchange rates apply to less than 2% of UK card payments – European (EEA) cardholders buying online from a UK seller – and reflect the fact that these transactions are more complex and carry far greater risk of fraud.”
A Mastercard spokesman said: “We do not agree with the PSR’s findings and will continue to educate them on the critical importance of electronic payments to the UK economy.”
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