The UK's Payment Systems Regulator (PSR) has launched two market reviews of fees set by Visa and Mastercard, which have increased fivefold since the UK left the EU. Visa and Mastercard account for more than 90 per cent of debit and credit card payments in the UK. The first PSR review will look at why there was such a big post-Brexit increase in the cross-border interchange fees paid by retailers for the processing of consumer purchases made by phone or online in the EU.
The EU had previously introduced a cap in 2015 after concerns that the hidden fees were leading to hundreds of millions of euros in costs for companies and higher prices for consumers. The cap on transaction fees between the UK and Europe was removed after the UK left the EU, which permitted card operators to increase cross-border payment charges.
Mastercard and Visa now charge 1.5 per cent of the transaction value for every online credit card payment from the UK to the EU, up from 0.3 per cent previously. For debit card payments, the fee jumped from 0.2 per cent to 1.15 per cent.
Preliminary inquiries by the PSR have been unable to provide an explanation for the increase based on volumes, value or mix of transactions.
The second review is into fees for services that allow retailers to accept card payment as the fees paid by the banks to process transactions have risen significantly over the years.
The increases in the fees have an impact on consumers, who faced higher costs if companies chose to pass on the fee. This is an additional burden imposed on buying and selling products between the UK and EU after Brexit, alongside customs and VAT charges.
The draft terms of reference for the reviews have been put out for public consultation until August 2.
The PSR has indicated that the investigations process could take years - would the PSR impose fines (possibly similar to the recent fines imposed on NatWest for overcharging fees on credit cards) or would it refer the the matter to the Competition and Markets Authority? It remains to be seen what action may be taken against Visa and/or Mastercard or what other action regulators may take to ease the impact on consumers.
“Since the UK left the EU, Visa and Mastercard have increased these fees fivefold,” the watchdog said in a statement on Tuesday, referring to an element of cross-border fees that caused concern among MPs and consumers when the changes were revealed last year.
https://www.ft.com/content/b3d4c697-4c7b-4a06-ac25-112b64e5f553