Mastercard and Visa are facing a crackdown from the UK’s merchant fees regulator

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Visa and Mastercard will be required to share more information about the fees they charge merchants under new rules proposed by the UK’s payments regulator.

The Payment Systems Regulator proposed on Tuesday that the two companies, which account for 95 percent of all debit and credit card payments in Britain, should regularly disclose financial information to the regulator and consult merchants and retailers before changing their rates .

The proposal comes after the PSR found that while card networks had increased their system and processing costs by more than 30 percent in real terms over the past five years, there was ‘little evidence that the quality of service has improved at the same rate’. ”.

Visa and Mastercard charge merchants fees for access to their networks and various processing fees for payment authorization, clearing and settlement.

Unlike interchange fees, which are passed on to the banks, the scheme and processing fees go directly to the card networks. These fees have historically received less attention than interchange fees because they make up a smaller portion of the costs incurred by merchants.

“Every time someone uses a Mastercard or Visa card, UK businesses are charged a fee,” said PSR director Chris Hemsley. “These fees have increased significantly in recent years, and those increases cannot be explained by improvements in service quality.”

Other proposed changes include requiring the card networks to make pricing methodologies public.

Hemsley said there were concerns about the transparency and quality of information made available by the card networks, with a PSR review finding that “the market is not working well”.

The PSR proposals are the latest attempt to loosen Visa and Mastercard’s grip on the payments industry, following complaints about merchant and retailer fees and calls for more competition.

Trade bodies including the British Retail Consortium and the Federation of Small Businesses have called on the PSR to cut card costs, with their ‘Axe the Card Tax’ campaign.

Visa and Mastercard say the fees reflect the value of their services, which have been strengthened in recent years by investments in cybersecurity and network resilience.

Mastercard said it disagreed with the findings and that the “payments industry has never been more competitive,” while the PSR analysis “does not take into account the significant investments required to provide a secure network” that prevents fraud.

It also pointed to a 2021 Boston Consulting Group report that estimated fees across Europe at 6p for a £50 transaction.

The company added that it would “continue to work transparently with the PSR” to demonstrate the value it brings to the UK economy.

Visa said the fees “reflect the tremendous value we provide to financial institutions, merchants and consumers, including extremely high levels of security, near-perfect operational resilience and a broad range of consumer protections and high-quality products and services that serve consumers.” and needs of traders”.

A parallel PSR inquiry into interchange fees last year called for the reintroduction of a cap on cross-border transaction fees, which was scrapped after Britain left the EU.

In Britain, Mastercard is facing a class-action lawsuit alleging that interchange fees it charged between 1992 and 2008 were passed on to consumers by stores and businesses through higher prices. ‎

In the U.S., Visa and Mastercard agreed this year to lower their transaction fees in a $30 billion settlement in an antitrust lawsuit brought by merchants.

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