MPs To Investigate Post-Brexit Card Fees, PSR Governance

January 17, 2022
The influential Treasury Select Committee has committed to investigating UK card fee rises for businesses, following correspondence with the Payment Systems Regulator (PSR).

The influential Treasury Select Committee has committed to investigating UK card fee rises for businesses, following correspondence with the Payment Systems Regulator (PSR).

The Treasury committee has raised concerns about the cost of card fees for businesses in the UK, following recent cross-border changes to interchange and scheme fees.

The committee, which consists of a cross-party group of parliamentarians, will be holding an accountability hearing with the leadership of the PSR on March 9, it has confirmed.

This will explore the regulator’s role and success in promoting competition within the market and protecting consumers from rising prices.

“There have been significant increases in the fees businesses have to pay to use debit and credit card facilities in recent times,” noted committee chair Mel Stride.

These impose an additional cost on businesses, many of whom are already hard-pressed and facing financial difficulties due to the uncertainties of the pandemic, he continued. “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.”

“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,” he said.

Unwarranted increases

Chris Hemsley, the PSR’s chief, has told Stride that the regulator 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 percent to 0.3 percent and 1.15 percent to 1.5 percent respectively, following the UK’s withdrawal from the European Economic Area at the end of 2020.

Card fees hit the headlines in late 2021, when mega merchant Amazon declared that it would no longer accept credit card payments from Visa as of January 19 (this Wednesday).

Although the rise in cross-border interchange fees between the UK and EU may have partly contributed to this action, it was likely part of a wider debate between the two companies. For example, in September last year, Amazon took similar action against Visa in Australia by announcing customers that used its cards in the country would face a half-percent surcharge on transactions from November 1. Prior to this, Amazon also announced surcharging of Visa cards in Singapore.

In an exchange of letters between the PSR and MPs during the Christmas period, the regulator also acknowledged that a “substantial proportion” of scheme fees were not explained by changes in the volume, value or mix of transactions being undertaken by merchants. Scheme fee is the part of the merchant service charge that is paid to the card network.

This has been an issue for merchants in both the UK and the EU. In 2020, trade association EuroCommerce, which represents retailers across the continent, called for all elements of merchant service fees to be included in the regulation, alongside independent acquiring of three-party schemes and “strong and dissuasive penalties for non-compliance with the regulation”.

More recently, merchants on the continent have expressed concern about new fees being introduced by the card giants because of strong customer authentication (SCA). However, both have denied this.

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