UK Regulator Proposes Visa, Mastercard Fee Transparency
The UK payments regulator, the Payment Systems Regulator (PSR), has proposed new rules aimed at increasing transparency around the fees charged by Visa and Mastercard to merchants. These proposed changes come as the PSR raises concerns about the lack of clarity and substantial fee increases over recent years.
Proposed Rules:
Under the proposed rules, Visa and Mastercard, which collectively handle 95% of all debit and credit card payments in the UK, would be required to regularly disclose financial information to the regulator. Additionally, the companies would need to consult with merchants and retailers before making changes to their fees. The PSR aims to address the disparity between fee increases and improvements in service quality, as well as enhance transparency in pricing methodologies.
Background:
The PSR's proposal follows a review that revealed a significant rise in scheme and processing fees by more than 30% in real terms over the past five years. Despite these increases, there is little evidence of corresponding improvements in service quality. Unlike interchange fees, which are passed on to banks, scheme and processing fees go directly to card networks.
Industry Response:
Trade bodies such as the British Retail Consortium and the Federation of Small Businesses have been vocal in their calls for reduced card fees. They have launched campaigns, such as "Axe the Card Tax," urging the PSR to implement reforms to increase competition, transparency, and reduce costs. Visa and Mastercard, however, defend their fees, citing the value of their services and investments in cybersecurity and network resilience.
Ongoing Investigations and Legal Actions:
The PSR's scrutiny of interchange fees and its call for the reintroduction of caps on cross-border transaction charges highlight ongoing efforts to regulate the payments sector. In addition, Mastercard faces a class-action lawsuit in the UK alleging that interchange rates led to higher consumer prices. In the US, Visa and Mastercard recently settled an antitrust lawsuit with merchants, agreeing to lower transaction fees.
