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UK Interchange fees overview:
- Who: The United Kingdom’s Payment Systems Regulator (PSR) is proposing a price cap on interchange fees charged to businesses.
- Why: The interchange fees have risen dramatically since the UK left the European Union in 2020, the PSR says.
- Where: The interchange fee cap announcement came from the PSR’s London office.
The United Kingdom’s Payment Systems Regulator (PSR) is proposing a price cap on interchange fees charged to businesses after seeing dramatic increases in those fees from Mastercard and Visa since the UK left the European Union (EU) in 2020.
The PSR estimates that UK businesses paid an extra £150-200 million due to the fee increases in 2022 alone.
The initial fees would be capped at 0.2% in the UK-European Economic Area (EEA) for debit card transactions and 0.3% for credit card transactions, the PSR said.
“Should we ultimately conclude this is the case, our interim report sets out a range of potential solutions which could be implemented,” PSR Managing Director Chris Hemsley said in a statement. “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. We are also considering the longer-term outcomes so we can determine how we may need to adapt these fees in future.”
PSR will accept feedback until Jan. 31, then issue final market report
The PSR created an interim report and plans to accept feedback until Jan. 31, when it will issue a final market report during the first quarter of 2024.
The PSR began examining the interchange fees after the Visa fees and Mastercard fees rose dramatically in 2021 and 2022, the office said. UK businesses have no choice but to pay the fees since nine out of 10 online transactions at UK businesses come from EEA-issued cards, the PSR says.
After the UK’s EU withdrawal, the Visa fees and Mastercard fees rose from 0.2% and 0.3% to 1.15% and 1.5% respectively for debit card and credit card interchange fees on EEA transactions, the PSR report says.
“The PSR wants to understand the rationale behind these increases, whether they are an indication that the market is not working well, and any potential impacts of these increases,” the interim report says.
A series of antitrust class action lawsuits were filed mid-2022 against Visa and Mastercard on behalf of European merchants alleging they were charged illegal UK and European Union interchange fees.
Do you work at a business charged interchange fees in the UK? Let us know in the comments.
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