UK payments regulator eyes Visa's and Mastercard's fees

The watchdog alleged that the fees paid by acquirers increased significantly over the period 2014 to 2018, but that ‘a substantial proportion of these increases are not explained by changes in the volume, value or mix of transactions’.

In 2021, there were 21 billion UK issued debit card payments totalling GBP 702 billion according to the watchdog, while UK-issued credit card payments in the same year numbered 3.5 billion and amounted to GBP 182 billion. Mastercard and Visa accounted for around 99% of the combined total of UK debit and credit card payments in 2021, both by volume and value, as per the press release.

The Payment Systems Regulator said it is planning to review whether there are factors that mean that Visa and Mastercard have market power and face weak constraints in setting scheme and processing fees, such as high barriers to entry and limited payment acceptance alternatives.

Multiple private sector bodies have come out against the high fees charged by card issuers over the past year. The British Retail Consortium estimated that retailers in the UK and the EEA now face an estimated GBP 150 million a year in cost increases to accept cross-border card payments, with British retailers alone shouldering an extra GBP 36.5 million, or GBP 100,000 every day.

In November 2021, officials of the British Retail Consortium called on the UK Government and the Payment Systems Regulator to ‘urgently intervene to reverse these spiralling charges on cross-border trade’.

The payments watchdog also stated it is planning several engagement events with stakeholders during the consultation and that it will also continue to liaise with other authorities (including financial regulators and the Competition and Markets Authority) where appropriate. The final terms of reference (ToR) are set to be published for the market review in Autumn 2022.