#519
Tackling Giants

Published:

Dec 18, 2023


Author:

Cindy Grazer

Published:

Dec 18, 2023


Author:

Cindy Grazer


Share:

In a decisive move, British regulators are taking a stand against Visa and Mastercard by proposing a cap on card fees. This step aims to protect UK businesses, which have been grappling with increased charges since Brexit. The Payment Systems Regulator (“PSR”) is making headlines with its plan to reinstate the pre-Brexit cap on interchange fees for cross-border and online credit and debit card payments.

Visa and Mastercard had sharply increased their fees on transactions between the UK and the European Economic Area after the UK's departure from the EU. This spike in fees has led to UK businesses paying between £150m to £200m extra annually. In a notable turn, the regulator has proposed recapping the cross border fees at the lower levels set by the EU in 2015, reflecting the urgency to address the burden on companies and the potential impact on consumer prices.

As the debate heats up, Visa and Mastercard defend their heightened fees, citing the risks and complexities inherent in cross-border transactions. The proposed fee cap may prompt these networks to seek alternative ways to recuperate their lost revenue, potentially limiting cashback or loyalty points or introducing new charges for credit card users.

This move is part of a broader push in the UK to challenge the dominance of existing payment networks and encourage the development of more efficient systems. Observing the successful cases of systems like Pix in Brazil and UPI in India raises the question: Can the UK draw inspiration from these emerging market models to revolutionize its payment system? Or will they continue tackling giants?

Newsletter Image - 12/18/24

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Tackling Giants


UK watchdog proposes cap on card fees in blow to Visa and Mastercard - British regulators plan to reintroduce a cap on card fees imposed on transactions between the UK and EU, in a blow to the Visa and Mastercard duopoly that raised charges on businesses more than fivefold since Brexit. Read more

PSR provisionally proposes to cap cross-border interchange fees on credit and debit cards to protect UK businesses - The Payment Systems Regulator (PSR) has published the interim report for its market review into cross-border interchange fees. It is now seeking views on its provisional findings and proposed approach to remedies to help inform the final report. Read more

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