UK firms aim to attract more EU customers with plans to cut ‘harmful’ £200m-a-year card costs
- Mastercard and Visa are in the spotlight due to a PSR payment investigation
British companies are expected to boost their revenue from customers in the European Union (EU) under regulatory plans to save up to £200 million a year on interchange fees.
Cross-border interchange fees are charged to customers in the European Single Market when they use credit and debit cards to make online purchases from UK businesses.
Some of these fees have been high since 2021, when Mastercard and Visa began raising them from 0.2 percent to 1.15 percent for debit cards and from 0.3 percent to 1.5 percent for credit cards.
But now the Payment Systems Regulator (PSR) is advising on plans to reduce these fees. It is estimated that they add £150 million to £200 million a year to the cost of European purchases of British goods.
A statement from PSR said: ‘The PSR believes this was detrimental to the interests of UK businesses and ultimately their customers.’
Continental charges: Higher interchange fees increase costs for EU consumers buying British goods
The PSR is discussing whether it should limit these reimbursements, and if so, at what level.
Any limit would be temporary, with the intention of bringing it to a more permanent level.
PSR managing director David Geale said: ‘Cards are a popular way we make payments in the UK.
‘Our findings confirm that, due to a lack of competition, Mastercard and Visa were able to increase cross-border interchange fees to unnecessarily high levels, costing UK businesses hundreds of millions of pounds.
‘We believe that advice on a range of price cap options is the best way to ensure UK businesses get a better deal.’
The PSR is collecting feedback on its consultation until February 7, 2025 and will announce any plans for a price cap later next year.
A Visa spokesperson said: ‘We continue to challenge the PSR’s overall findings and it will be important to ensure that any action does not lead to uncertainty and unintended consequences.’
A Mastercard spokesperson said: ‘Artificial traffic controls do not reflect the commercial realities of the current market and, if not set at the right level, could negatively impact the value people and businesses receive from card payments.’