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UK Payments Regulator Criticizes Visa and Mastercard Over Fee Hikes

 |  May 21, 2024

The U.K.’s Payment Systems Regulator (PSR) has released a critical report highlighting the lack of significant service improvements following fee increases imposed by Visa and Mastercard on retailers. The interim report, issued on Tuesday, indicates that the two U.S.-based card giants, which dominate 95% of U.K. card transactions, have not faced effective competition.

Over the past five years, Visa and Mastercard have raised their scheme and processing fees by over 30% in real terms, according to the PSR. This increase has resulted in an estimated £250 million in additional annual costs for U.K. businesses. Despite these substantial fee hikes, the PSR found “little evidence” that the quality of services provided by Visa and Mastercard has significantly improved.

The PSR is contemplating requiring Visa and Mastercard to offer greater transparency in their U.K. operations and to justify their pricing decisions. The regulator noted difficulties in obtaining adequate data from the card schemes, which currently prevents it from imposing price caps on their fees. “The issues we have encountered gathering suitable data from the card schemes mean that it is not an appropriate response, at the present time, to the harm we have identified,” the report stated.

Read more: How Card Regulation is Killing Competition

Chris Hemsley, the PSR’s managing director, emphasized the need for more comprehensive data to consider effective regulatory actions. In January, Hemsley discussed with the Treasury Committee the possibility of seeking enhanced powers to obtain information from firms, as MPs accused Visa and Mastercard of evading regulatory scrutiny.

This report emerges amid global criticism of the fees charged by Visa and Mastercard. Both companies maintain that their fees are justified by the value they provide in terms of secure transactions and fraud protection. A Visa spokesperson defended the fees, citing “extremely high levels of security, near-perfect operational resilience, and a wide range of consumer protections.” Similarly, a Mastercard spokesperson argued that the payments sector “has never been more competitive” and pledged continued cooperation with the PSR to demonstrate the value of their services to the U.K. economy.

Source: UK Finance Yahoo