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Regulatory Influencer: First Step To Permanent Price Cap On UK-EEA Interchange Fees
On October 10, 2025, the UK’s Payment Systems Regulator (PSR) launched a consultation on the methodology for developing a price cap on cross-border interchange fees for transactions between the UK and the European Economic Area (EEA).
This consultation marks the first step towards setting a price cap on UK–EEA cross-border card-not-present (CNP) interchange fees and explores the use of a merchant indifference test (MIT) to determine an appropriate cap level.
The PSR’s December 2024 market review concluded that a price cap was the only effective remedy to address the harm caused by post-Brexit increases in cross-border interchange fees for CNP transactions. In March 2025, the regulator decided to introduce a cap only once a robust methodology was established.
Of the various approaches, the PSR considers the MIT approach the most consistent with its statutory objectives of promoting the interests of card scheme users.
The MIT assesses whether a merchant would be indifferent between accepting a card payment or an alternative method if costs are equal.
The regulator has proposed using Single Euro Payments Area (SEPA)-funded account-to-account (A2A) payments, and potentially PayPal, excluding card-linked fees, as comparator payment methods.
Quantitative approaches will be applied to estimate the indifference in interchange fees, reflecting the marginal costs and transaction values of card and alternative payments.
The consultation closes on November 21, 2025.
The bigger picture
The PSR’s decision on UK–EEA cross-border interchange fees reflects a broader post-Brexit challenge: balancing the interests of merchants, consumers and payment providers in a regulatory environment that is no longer bound by EU rules.
Once the UK had formally left the trading bloc in 2021, card networks such as Visa and Mastercard no longer needed to maintain the previous caps.
Interchange fees for CNP transactions rose sharply, from around 0.2 percent to 1.15 percent for debit cards and 0.3 percent to 1.5 percent for credit cards, sparking criticism from MPs and trade bodies.
For example, in 2022, the Treasury Select Committee questioned whether such increases could be justified by higher fraud or operational costs, highlighting the financial pressures on UK businesses already facing inflationary challenges.
These pressures could be stark, especially for small and medium-sized enterprises (SMEs) that had previously benefited from the UK’s membership of the EU internal market.
Now, they face barriers. For example, take an online UK retailer that sells goods to customers across the EEA, with most customers paying by cards. A significant portion of transactions will be CNP payments via Visa and Mastercard. Since Brexit, the interchange fees for these transactions will have risen, increasing the retailer’s payment processing costs significantly.
Issues such as this are a drag on the UK government’s growth agenda.
Initially, the PSR considered a phased, temporary cap while developing a robust methodology for a permanent price cap.
However, ongoing legal challenges from Visa, Mastercard and Revolut, combined with consultation feedback, have led the regulator to abandon interim measures.
The PSR warned that a short-term cap would likely provide limited benefits, could invite further litigation and might impose operational and compliance burdens on acquirers and issuers.
Stakeholders remain divided. Merchants and trade groups largely support early intervention to restore pre-Brexit fee levels, whereas issuers and card schemes argue that caps below cost would be harmful, undermining investment and disproportionately affecting non-bank issuers.
EEA issuers have also raised concerns about perceived discrimination, although acquirers are split, noting the risks of confusion and disruption from multiple fee changes.
Why should you care?
International card schemes such as Visa and Mastercard, which dominate UK–EEA cross-border transactions, would be directly affected by the proposed price cap.
Using the MIT to set the cap would likely lower the interchange fees charged on CNP transactions, reducing scheme revenues and potentially pressuring acquirer margins.
There is a chance that schemes could opt to seek to rebalance these losses through higher issuer fees or revised commercial models, although this too could incur regulatory scrutiny.
Others in the payments ecosystem will also feel the effects.
Acquirers could see modest benefits, as lower interchange fees typically improve merchant relationships and transaction volumes, although gains may be offset if schemes or issuers raise other fees.
Issuing banks would lose interchange income from outbound transactions, and might respond by adjusting cardholder pricing or reducing rewards.
The main winners would be merchants, particularly in e-commerce, retail and travel, which would face lower acceptance costs. In addition, consumers could benefit from lower prices and A2A and open banking providers could gain a competitive edge.
For now, firms within the payments ecosystem, wherever they are in the chain, should do their best to engage with the PSR on this by:
- Responding proactively and providing evidence-based feedback on fee structures, operational impacts and potential unintended consequences.
- Assessing their operational readiness by reviewing internal systems, processes and reporting capabilities to ensure they can adapt quickly to any fee caps or methodology changes that could affect their bottom line.
- Planning for different scenarios and modelling the financial impact of different cap levels on interchange revenue, merchant pricing and transaction volumes to inform any future strategic and commercial decisions.
Proactive engagement and careful preparation will be critical for navigating the PSR’s evolving framework.
Firms that anticipate operational, financial and strategic impacts now will be better positioned to manage risk, optimise revenue and maintain strong relationships across the payments ecosystem.
Next steps
The PSR’s consultation on UK–EEA cross-border interchange fees is the first step towards developing a price cap for such fees.
Following the consultation, the regulator will undertake analysis to enable it to assess the appropriate level for UK–EEA outbound cross-border MIFs for CNP transactions.
It plans to publish a statutory consultation setting out the proposed level of any cap before taking a final decision on whether to impose a price cap.
