MA MasterCard Incorporated

By Ian Walker

The U.K. Payment Systems Regulator said that it provisionally plans to cap cross-border interchange fees on credit and debit cards as it believes Mastercard and Visa have likely raised them too high.

The regulator said Wednesday that it launched a review to see whether the market was working after the companies raised some of the fees in 2021 and 2022.

It added that Mastercard and Visa cards account for nine out of 10 online transactions at U.K. businesses using cards issued in the European Economic Area, meaning that U.K. businesses have little choice but to pay the increased costs.

It estimates U.K. businesses paid an extra 150 million pounds to GBP200 million ($188.4 million to $251.3 million) due to the fee increases.

The PSR said that the cap will protect U.K. businesses while it seeks views on its provisional findings and a proposed approach to remedies to help inform the final report.

"In this market review we have provisionally found that the fees charged by Mastercard and Visa to U.K. businesses which accept payments from within the EEA are likely too high. In short, at this stage, we do not think this market is working well," PSR Managing Director Chris Hemsley said.

The regulator has set a deadline of Jan. 31 for interested parties to comment on its provisional findings, then plans to publish its final report in the first quarter of next year.

It added that if the PSR concludes the market isn't working well and it needs intervention, this report will be followed by a consultation on the remedy package.

Visa said that it strongly disputes the findings and believes the proposed remedies aren't justified.

"These interchange rates apply to less than 2% of U.K. card payments, European (EEA) cardholders buying online from a U.K. seller, and reflect the fact that these transactions are more complex and carry far greater risk of fraud," a Visa spokesperson said.

Mastercard wasn't immediately able to respond when approached for comment.

Write to Ian Walker at ian.walker@wsj.com

(END) Dow Jones Newswires

December 13, 2023 03:35 ET (08:35 GMT)

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