Visa and Mastercard face regulator inquiry over card fees

VISA and Mastercard are being investigated by the payments watchdog over concerns they are exploiting a postbrexit loophole to raise card fees by up to fivefold.

The Payment Systems Regulator (PSR) has launched a study into socalled “interchange” fees after warning the market was “not working well”. Card firms have been accused of taking advantage of relaxed rules since Brexit to increase these cross-border fees.

While interchange fees are paid by merchants and issuers when British cardholders make payments, costs are ultimately passed on to consumers. The interchange fee regulation, brought in by the EU in June 2015, capped such fees at 0.3pc for credit cards and 0.2pc for debit cards.

Since October 2021, however, Visa and Mastercard began charging 1.5pc for credit card payments and 1.15pc for debit card transactions.

The payment watchdog said Mastercard and Visa accounted for 99pc of debit and credit payments in the UK – and that fees paid by card holders had risen “significantly” from 2014 to 2018.

Natalie Timan, of PSR, said the regulator wanted to “make sure that merchants, and ultimately consumers, get a good deal”. She added: “We’ve been gathering information since the start of this year and have identified that a detailed review of the market is needed.”

British cardholders made 21bn debit card payments totalling £702bn in 2021, and 3.5bn Uk-issued credit card payments amounting to £182bn, according to lobby group UK Finance.

The rise in interchange fees prompted Amazon to threaten a ban on Visa credit cards last November, blaming “the high fees Visa charges for processing credit card transactions”. Amazon backed down in January.

A Visa spokesman said: “We look forward to continuing a constructive dialogue with the PSR.”

A Mastercard spokesman said: “We’re committed to working together with the PSR to advance payment choice in the interests of everyone who makes and receives payments.”