UK’s payments regulator slams Mastercard and Visa for hiking fees
The UK’s payments regulator has said the card market “isn’t working well” following a review into the fess charged by industry giants Mastercard and Visa.
The Payment System Regulator (PSR) said on Thursday that the firms have raised core scheme processing fees 25 per cent since 2017, costing UK businesses an extra £170m a year.
Mastercard and Visa, which do not issue cards themselves but instead work with banks and other financial institutions, were scrutinised for not providing clear information on fees, particularly for smaller retailers.
The PSR’s managing director said: “The confusing information Mastercard and Visa make available to acquirers and merchants contributes to poorer market outcomes through raising their costs of dealing with this overly complex information.”
Businesses forced to offset costs
According to the PSR’s market review, higher fees had led to added pressure on businesses, forcing them to absorb added costs or transfer them to consumers.
The regulator stated there was no evidence that the inflated fees were due to competition, costs, or innovation.
The PSR found the two payment firms were “subject to ineffective competitive constraints in the supply of scheme and processing services to acquirers and merchants in the UK”.
The regulator also stated profit margins at the two UK payment networks were “higher than would be expected in a well-functioning market”.
It stressed the role of cards in society as a “popular payment method for customers” and the importance the “market works well” for both consumers and businesses.
The PSR said: “Cards are critical to the smooth running of the UK economy” and pledged to “shortly consult on potential remedies to address the issues”.
Geale added: “Cards are a popular and convenient way to make payments in the UK, so any issues in the card market can have a negative impact on both businesses, and ultimately consumers.”
A Mastercard spokesperson said: “We disagree with the findings in today’s report, which continues to underplay the true competitiveness of the payment industry and our ongoing innovation and investment into security and the consumer experience.
“Our resilient, global network provides peace of mind and strong consumer protections, preventing billions of pounds of fraud each year.
“We will continue to work transparently with our customers and demonstrate to the PSR the significant value Mastercard and electronic payments bring to people and businesses across the UK.”
A Visa spokesperson said: “Visa’s fees reflect the immense value that we provide to financial institutions, merchants and consumers.
“This includes extremely high levels of security and fraud prevention, near-perfect operational resilience and reliability, and a wide range of consumer protections and high-quality products and services that serve consumer and merchant needs.
“Through our investments, the UK has been a global pioneer in payments technology.”