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13 December 2023

An interim report, published today by the Payment Systems Regulator (PSR), suggests that the cross-border interchange fees set by the card schemes for UK businesses is too high, and that the market is not working well. Cross border interchange fees are currently set by card schemes and paid by UK merchants when accepting payments from EEA customers.

Key findings from the PSR include:

  • There is ineffective competition in the payments market
    “Evidence shows that Mastercard and Visa are likely to be subject to ineffective competitive constraints on the acquiring side and that there is a lack of effective competition in relation the setting of outbound interchange fees which distorts the market against the UK merchants and their customers.”
  • Businesses have little choice but to accept the major card schemes
    “Both card schemes [Visa and Mastercard] have a commercial incentive on the issuing side to increase Interchange Fees. Limited alternatives mean that UK merchants who engage in international trade with the EEA must take both Mastercard and Visa.”
  • High interchange fees are costing UK businesses and consumers
    “Merchants unable to relocate in response to the interchange fees increases must either absorb those additional costs or pass them on to consumers via higher prices.”

As a result, the PSR has suggested the implementation of a price cap for UK-EEA outbound consumer payment interchange fees. This would limit the cost for UK retailers who are accepting payments from EU consumers.

The recent BRC Annual Payments Survey showed that 85% of spending is made using credit or debit cards in the UK. This outlines the vital importance of card payments to the UK economy.

Hannah Regan, Payments Policy Advisor at the British Retail Consortium, said:
“This report is just the tip of the iceberg – high cross border interchange fees are not the only consequence of the ineffective competition in the payments market. We are seeing high fees across the board, with retailers paying £1.26bn to process card transactions last year. We call on the PSR to implement meaningful reforms to increase competition and reduce costs in the payment market. Furthermore, Treasury should conduct a full review of interchange fees to examine if they are fit for purpose in the UK market.”

-ENDS-

  • Download the BRC Payments Survey 2023: https://www.brc.org.uk/media/683937/payment-survey-2023.pdf
  • Definitions:
  • Card Schemes – Payment networks e.g. Visa and Mastercard
  • Interchange fees – fees paid by merchants to the issuing companies e.g. Barclaycard, Santander, Capital One. The rates paid are set by the card schemes.