Today, the Payments System Regulator (PSR) has published its
final report into its market
review of cross border interchange fees. Cross border interchange
fees are currently set by card schemes and paid by UK merchants
when accepting payments from EEA customers.
The report confirms its earlier findings that the unjustified
increases in these fees since the UK left the EU[1] are harming
businesses at a cost of £200 million per year. The PSR is now
proposing to introduce a price cap to protect UK businesses from
further price
increases.
The PSR's key findings include:
-
A lack of competition: “Mastercard and
Visa were not subject to effective competitive constraints,
allowing them to increase their fees to an unduly high
level.”
-
Costly increases: “Mastercard and Visa
raised their fees without regard to the potential impacts on or
interests of businesses and their customers. The PSR found that
the increases are costing businesses £150-200 million extra
annually.”
-
Unclear rationale: “The PSR did not
identify any justifications for the increases. Mastercard and
Visa were not able to show that they undertook any specific
assessment when deciding to increase their fees and the PSR has
seen no evidence that the pre-increase fee levels were not
working.”
We welcome the findings of the report and the proposal to
introduce a price cap. This follows representations from
businesses organisations, including the British Retail
Consortium, who have long called out the dysfunction in the
payments market, which harms businesses. The recent BRC Annual
Payments Survey showed that 85% of spending is made using credit
or debit cards in the UK. This outlines the vital importance of
card payments to the UK economy.
Chris Owen, Payments Policy Advisor at the British Retail
Consortium, said:
“The Payment Systems Regulator has confirmed what businesses have
long known – that the cards payment market is broken and needs
fixing. The lack of competition between the dominant card schemes
and the unjustified, excessive price hikes in cross-border
interchange fees are hurting retailers. The proposed price cap to
address this is welcomed by the retail industry.
“Retailers paid £1.64 billion in card fees last year, and
cross-border interchange fees were a contributor to this. We look
forward to engaging with the PSR to ensure the price cap is set
at a fair level in both the short and the longer term, and we
would urge that the rate for fees be set to 0% until retailers
recoup the extra costs paid since the increases were introduced.
We now urge the Treasury to conduct a full review of interchange
fees to assess whether they are even fit for purpose in the UK
market.”
-ENDS-
- Card Schemes – Payment networks e.g. Visa and Mastercard
- Interchange fees – fees paid by merchants to the issuing
companies e.g. Barclaycard, Santander, Capital One. The rates
paid are set by the card schemes.
