UK card fees rise as competition falters, regulator says

LONDON - The Payment Systems Regulator (PSR) has found significant issues within the UK market for card scheme and processing services, identifying a substantial increase in fees and a lack of clear information. According to the PSR’s final report, Mastercard and Visa have raised their core scheme and processing fees to acquirers by at least 25% since 2017, resulting in additional costs of at least £170 million per year for businesses.

The PSR’s investigation revealed that the increased fees were not accompanied by detailed cost analysis or enhanced competition and innovation. Furthermore, acquirers and merchants, including small retailers, have been hampered by complex or incomplete fee information, raising their operational costs and limiting their ability to negotiate better terms. This situation has potentially led to higher costs being passed onto consumers or absorbed by businesses, affecting their capacity to invest and grow.

The regulator’s findings suggest that Mastercard and Visa are not subject to effective competitive constraints in the UK, which may have allowed them to charge fees that exceed what would be expected in a competitive market. The PSR has not definitively determined the profit levels of these card schemes, but evidence points to higher than expected margins.

In response to these findings, the PSR plans to consult on potential remedies to address the market issues before taking corrective action. PSR’s Managing Director, David Geale, emphasized the importance of the card market’s smooth functioning for the UK economy and the negative impacts of the current lack of competition.

The PSR’s review process included engagement with various parties and consideration of consultation responses to reach its conclusions. The regulator has stressed the importance of completing its work on card fees as part of its strategy to contribute to economic growth and support the investment capabilities of smaller businesses.

The information for this article is based on a press release statement.

Visa issued the following statement to Investing.com following the PSR announcement.

“Visa’s fees reflect the immense value that we provide to financial institutions, merchants and consumers," a Visa spokesperson said. "This includes extremely high levels of security and fraud prevention, near-perfect operational resilience and reliability, and a wide range of consumer protections and high-quality products and services that serve consumer and merchant needs. Through our investments, the UK has been a global pioneer in payments technology.”

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