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Visa and Mastercard will have to share more information about the fees they charge merchants under new rules from the UK payments regulator.
The Payments Regulatory Authority suggested on Tuesday that the two companies, which account for 95 percent of all debit and credit card payments in the UK, should regularly share financial information with the regulator and consult merchants and retailers before changing their fees.
The proposal comes after the PSR found that while card networks have increased their system and processing fees by more than 30 percent in real terms over the last five years, there is “little evidence that service quality has improved at the same rate.” .” “.
Visa and Mastercard charge sellers fees to access their network, as well as various processing fees for authorizing, processing, and processing payments.
In contrast to interchange fees, which are passed on to banks, system and processing fees go directly to the card networks. These fees have historically received less scrutiny than interchange fees because they represent a smaller portion of the fees incurred by sellers.
“Every time someone uses a Mastercard or Visa card, UK businesses have to pay fees,” said PSR chief executive Chris Hemsley. “These fees have increased significantly in recent years and these increases cannot be explained by an improvement in the quality of service.”
Other proposed changes include requiring card networks to disclose their pricing methods.
Hemsley said there were concerns about the transparency and quality of information provided by card networks, with a PSR review finding “the market is not functioning well”.
The PSR’s proposals are the latest attempt to loosen Visa and Mastercard’s grip on the payments sector after merchants and retailers raised complaints about fees and called for more competition.
Trade organizations such as the British Retail Consortium and the Federation of Small Businesses have called on the PSR to reduce card fees through their Ax the Card Tax campaign.
Visa and Mastercard say the fees reflect the value of their services, which has been strengthened in recent years by investments in cybersecurity and network stability.
Mastercard said it disagreed with the findings and said the “payments industry has never been more competitive,” while the PSR’s analysis “fails to take into account the significant investments required to provide a secure network” that prevents fraud .
It also pointed to a 2021 report by the Boston Consulting Group that estimated system fees across Europe at 6p for a transaction worth £50.
The company added that it would “continue to work transparently with the PSR” to demonstrate the value it brings to the UK economy.
Visa said its fees “reflect the immense value we provide to financial institutions, merchants and consumers, including extremely high levels of security, near-perfect operational resilience and a broad range of consumer protections, as well as high-quality products and services that serve consumers and merchants’ needs”.
A parallel PSR inquiry into interchange fees last year called for the reintroduction of a cap on interchange fees on cross-border transactions, which was removed following the UK’s departure from the EU.
In the United Kingdom, Mastercard is facing a class action lawsuit alleging that interchange fees charged by stores and businesses between 1992 and 2008 were passed on to consumers through higher prices.
In the U.S., Visa and Mastercard agreed this year to lower their transaction fees as part of a $30 billion settlement in an antitrust lawsuit brought by merchants.