The UK’s Payment Systems Regulator (PSR) is taking action against Mastercard and Visa following significant increases in card fees by the two companies.
The regulator’s market review revealed that between 2017 and 2023, both Mastercard and Visa raised their core scheme and processing fees by over 25% in real terms. It also indicated that the companies fail to provide acquirers and merchants with sufficiently clear and detailed information, leading to confusion and incomplete insights regarding scheme and processing services and fees. This lack of transparency contributes to increased costs for acquirers and merchants, hindering their ability to negotiate better deals.
Although the PSR has not drawn a definitive conclusion about the profit levels of the schemes, evidence suggests that Mastercard and Visa’s margins in the UK may exceed what would be expected in a competitive market.
Following an interim review last May, the PSR refrained from imposing financial penalties. Instead, it recommended a series of measures aimed at enhancing transparency around costs and ensuring acquirers and businesses receive clearer information about the services offered.
The proposed actions will require Mastercard and Visa to explain, consult on, and document reasons for price changes and the pricing of new services, as well as provide more comprehensive financial information to the PSR in the future.
David Geale, managing director of the PSR, stated, “We have identified a lack of competition in the market and found evidence that Mastercard and Visa may be charging UK businesses significantly more than they would in a properly competitive environment, affecting their ability to invest and grow. The confusing information provided by Mastercard and Visa contributes to higher costs for acquirers and merchants due to the complexities involved in understanding it.”
The PSR plans to consult on potential remedies to address the identified issues before taking any corrective actions.
The Federation of Small Businesses (FSB) is urging the regulator to implement stronger measures than those previously proposed. Tina McKenzie, policy chair at the FSB, remarked, “To foster economic growth, small businesses are looking to the regulator for remedies such as fee caps. This would help control costs for small business merchants in the short to medium term while broader steps are taken to enhance competition in the card market and the payments sector overall.”
Visa maintains that its fee structure reflects the innovative value it delivers to customers, asserting, “Visa’s fees are indicative of the significant value we provide to financial institutions, merchants, and consumers. This encompasses high levels of security and fraud prevention, exceptional operational resilience and reliability, as well as a variety of consumer protections and high-quality products that meet the needs of both consumers and merchants. Our investments have positioned the UK as a leader in payments technology.”