- The Payment Systems Regulator (PSR) suggests a cap to prevent businesses from excessive payments following a review of interchange fees post-Brexit.
- The cap proposal responded to demands from UK lawmakers and may take many years to be established.
- Mastercard and Visa, accounting for 99% of UK card payments, are the primary focus of the review.
- PSR indicates these companies may have excessively increased fees, costing UK businesses an extra £150-200 million last year.
- An initial time-restrictive cap of 0.2% on UK-EEA debit transactions and 0.3% on credit transactions is proposed, with longer term solutions in review.
- The report by the regulator faced criticism from Visa.
- A final report from the PSR is expected in early 2024.
PSR Proposes Cap On Transaction Fees
Written by Iain Withers, according to the Payment Systems Regulator (PSR), capping payments will prevent businesses from paying excessively. The proposal occurred after an interim market review on interchange fees since Brexit. Previously, the European Union’s cap no longer applied to the UK.
Pressure from UK Lawmakers
The UK lawmakers had previously expressed the crucial need for the PSR to consider reapplying a cap within the UK territory. The watchdog agreed to carry out two reviews of the market but signaled the process can extend over the years.
Focus on Mastercard and Visa
The review by PSR primarily targeted Mastercard and Visa, which form 99% of all debit and credit payments in the UK. Both companies allegedly increased their fees to an “unquestionably high level,” costing businesses an additional £150-200 million ($190-250 million) last year.
Critical Response from Visa
The interim findings of this review by PSR faced objections from Visa, dismissing the suggested remedies as “unwarranted”. They emphasised the value of reliable and innovative digital payments for UK businesses, despite the higher risk of fraud.
Invitation for Feedback
The PSR is welcoming feedback on the proposed solutions until the end of January. A final report is expected to be published in the first quarter of 2024. Regardless of the PSR’s decisions, the need for a “digital alternative” to Visa and Mastercard is reflected in a report commissioned by the government last month.
In the context of forex trading, the proposed cap on interchange fees and the potential emergence of a domestic digital alternative to Visa and Mastercard could impact the costs and strategies of international transactions and online purchases. This might notably affect the assets of businesses that heavily rely on these card payment systems. ($1 = 0.7990 pounds)