The Payment Systems Regulator published the interim report of its market review into UK-EEA consumer cross-border interchange fees on 19 December 2023, and is seeking views on its provisional findings and proposed remedies1.
The review covers fees paid by UK businesses when consumers use Mastercard or Visa debit or credit cards issued in the EEA for online retail transactions. The PSR said Mastercard and Visa significantly raised some of these fees in 2021 and 2022, and that it has been examining whether the level of the fees, or other factors, indicate the market is not working well1.
The regulator set out provisional concerns that the two card schemes have likely raised these fees to an unduly high level, at the expense of UK businesses. It estimates that UK businesses paid an extra £150-200 million due to the fee increases in the previous year alone1.
"The PSR has set out its provisional concerns that Mastercard and Visa have likely raised these fees to an unduly high level, at the expense of UK businesses."
The proposed caps
The PSR is proposing a price cap to protect UK businesses from overpaying, which it says could happen in two stages subject to its final report and further consultation on remedies1.
| Stage | Proposed cap |
|---|---|
| Initial time-limited cap | 0.2% for UK-EEA consumer debit transactions; 0.3% for consumer credit transactions, where made online at UK businesses |
| Lasting cap | To be set once further analysis establishes an appropriate level |
The interim report also discusses whether an interim cap should remain aligned with the caps the EU applies to intra-EEA transactions. The PSR said it remains open at this stage to a potential remedy allowing an interim price cap to remain aligned with the intra-EEA price caps, but that it considers it unlikely an enduring cap set by reference to 0.2%/0.3%, or to a future level for EEA-rest-of-world transactions set by the European Commission, is likely to be effective or appropriate1.
The PSR published amendments to the document alongside the interim report, covering paragraphs 9.64, 9.86c and 9.891.
Why it matters for households
The fees at issue are paid by UK businesses, not by shoppers at the till, so the immediate effect falls on retailers and other firms selling online to customers in the EEA. The PSR's estimate of £150-200 million in extra costs relates to one year of the increases1.
The proposed caps, if confirmed, would apply to online transactions where the card is issued in the EEA and the business is in the UK. The PSR has not set out in the interim report how any reduction in fees paid by businesses would feed through to prices charged to consumers, and no such pass-through has been reported1.
The review concerns card interchange and scheme fees on cross-border online payments. The Payment Systems Regulator oversees the payments market in the UK, and this work sits within its regulation and policy remit.
What happens next
The window for feedback on the interim report is open until 31 January 20241.
The PSR intends to publish its final report on cross-border interchange fees in Q3 2024, but said it will confirm these timeframes in due course. If it concludes the market is not working well and warrants intervention, the final report will be followed by a consultation on the remedy package1.
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