Yahoo Finance MasterCard and Visa fee rises unwarranted, says UK Treasury
The rise in processing fees of Mastercard (MA) and Visa (V) are unnecessary and action may have to be taken to protect consumers and businesses that are being impacted, the UK's payment systems regulator (PSR) has said.
The PSR, which works with HM Treasury, said it has “not seen evidence that the costs of operating payment services have increased for card issuers to warrant the recent increases in fees.”
Interchange fees are paid by businesses to card issuers each time a card is used by a consumer. In October, both Mastercard and Visa increased cross-border interchange fees for debit and credit card transactions, from 0.2% to 0.3% and 1.15% to 1.5% respectively.
Since Brexit, fees are no longer capped at the intra-regional rate, allowing major card brands to raise interchange fees on some online or “card not present” transactions.
The higher prices “impose an additional cost on businesses, many of whom are already hard pressed and facing financial difficulties due to the uncertainties of the pandemic,” said Mel Stride MP, chair of the Treasury Committee.
“Given that Visa and Mastercard currently dominate this space, it’s vital to ensure that there is sufficient regulation and competition in the market so that businesses are not subject to ever-increasing servicing costs,” he said.
Read more: Card costs rise to £150m a year
“My committee will be closely following the PSR’s plans to protect consumers and businesses from rising prices, and we look forward to exploring these issues in greater depth when they appear before the Committee in March.”
According to the PSR, the two card companies account for 99% of all card transactions that take place in the UK.
The regulator said that if it feels there are “no real prospects of improving competition in the market,” it will consider additional regulation to protect consumers and businesses from these rising prices. It plans to finalise publish a remedies consultation on its market review in January.
It noted a downside of the fees hike was that Amazon (AMZN) has prevented consumers from paying with Visa credit cards.
And it said scheme fees, which are paid by businesses to card payment operators for use of the service, have also risen substantially, with average fees more than doubling between 2014 to 2018.
A report in November showed retailers in the UK and the European Economic Area are facing an increased estimated cost of £150m ($202m) a year to accept cross-border card payments, largely due to fee changes, which have risen up to 475% in some cases, after the UK left the European Union.
Research by retail payments advisory firm CMSPI revealed that British retailers alone are taking on an extra £36.5m, or £100,000 every day.
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