UK payments regulator charges Visa, Mastercard with high fees and competition restrictions

Synopsis

The UK Payment Systems Regulator has accused Visa and Mastercard of imposing excessive fees and limiting competition, costing businesses £170 million annually and stifling economic growth. The regulator plans potential remedies, including fee caps and mandatory pricing disclosures, to address these market concerns.

Key Takeaways

PSR accuses Visa and Mastercard of charging excessive fees.
Businesses face a financial burden of £170 million annually.
Fees have increased by over 25 percent since 2017.
Lack of transparency in pricing is hindering competition.
Regulator considers fee caps and mandatory disclosures as remedies.

London, March 6 (NationPress) The Payment Systems Regulator (PSR) of the United Kingdom has on Thursday accused Visa and Mastercard of imposing "excessive" fees and inhibiting competition within the card payments sector, resulting in a financial burden of at least 170 million pounds (approximately 218.96 million U.S. dollars) annually and obstructing economic development.

In its conclusive report after a comprehensive year-long market analysis, the regulator disclosed that these two payment leaders, which dominate 95 percent of UK debit and credit card transactions, have raised their fundamental scheme and processing fees by more than 25 percent above inflation since 2017. These fees, paid directly to the networks for services such as payment authorization and fraud prevention, have placed a considerable burden on businesses, particularly small retailers, amidst unclear pricing practices.

The PSR pointed out that Visa and Mastercard experience "ineffective competitive constraints" in the UK, granting them the liberty to establish fees without rigorous cost assessments or adequate market rivalry. The absence of clear pricing information has further skewed negotiations, compelling merchants and payment processors to either transfer higher costs to consumers or absorb them, according to the regulator.

"Cards are essential to the UK economy, yet the prevailing market challenges adversely affect businesses and, ultimately, consumers," stated David Geale, the PSR's Managing Director, as reported by Xinhua news agency. "The intricate fee structures and unchecked price increases by Mastercard and Visa have enabled them to charge millions more than a competitive market would allow, hampering businesses' capacity to invest and expand," he added.

In response to these issues, the regulator intends to consult on potential solutions, including fee limits and mandatory disclosure of pricing methods, prior to contemplating enforcement actions.

The report's findings signify the latest regulatory endeavor to mitigate Visa and Mastercard's supremacy, following years of complaints from merchants regarding escalating transaction costs. With card payments constituting over 80 percent of consumer transactions in the UK, the PSR emphasized the necessity for market reforms to guarantee fair competition and promote innovation.