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The decision rejecting Visa, Mastercard and Revolut’s challenge clears the way for the Payment Systems Regulator (PSR) to cap interchange fees on outbound card-not-present (CNP) transactions involving UK merchants and European Economic Area (EEA) issuers.
In an 118-page judgment published in mid-January 2026, Justice John Cavanagh ruled that the PSR has the authority to cap interchange fees on these transactions.
The ruling thereby removes a major legal obstacle to one of the PSR’s most high-profile post-Brexit interventions in the payments market.
The case concerned outbound EEA–UK CNP consumer transactions, meaning transactions where a UK merchant accepts a Visa or Mastercard card issued by a bank in the EEA.
In these transactions, the merchant and acquirer are in the UK, and the interchange fee flows from the UK acquirer to the EEA issuer.
In December 2020, when the Brexit transition period came to an end, EU interchange fee caps ceased to apply to these transactions.
Visa and Mastercard subsequently increased their default outbound CNP interchange fees on EEA-issued cards from the pre-Brexit levels of 0.2% (debit) and 0.3% (credit) to 1.15% and 1.5% respectively.
Following a market review, the PSR concluded that these increases were not constrained by effective competition and were costing UK merchants between £150m and £200m per year.
In December 2024, the regulator therefore announced a decision in principle to cap those default interchange fees, using a general direction under Section 54 of the Financial Services (Banking Reform) Act 2013 (FSBRA).
Visa, Mastercard and Revolut did not challenge the PSR’s economic analysis or the merits of the proposed caps. Instead, they argued that the regulator lacked the legal power to impose price caps using Section 54.
Their core argument was that Section 54 allows the PSR to regulate how payment systems “operate”, but it does not authorise price regulation.
If Parliament had intended to give the PSR a power to cap interchange fees, the claimants argued, it would have done so explicitly.
Mastercard and Revolut also argued that, even if Section 54 allows price caps in principle, Section 108 of the FSBRA prevents the PSR from using that power where rules affect access to, or participation in, a payment system.
Why did the High Court rule against them?
Ultimately, the court rejected both of the claimants’ arguments. Justice Cavanagh held that Section 54 is deliberately “broad” and “open-ended”. He further noted, quoting Section 54 directly, that it allows the PSR to “require or prohibit the taking of specified action in relation to [a payment] system”.
The judgment held that, because nothing in the statutory language limits the power to technical or operational matters, pricing can be treated as one element of how a payment system functions.
Capping interchange fees is therefore action “in relation to the system”, even if it has significant financial consequences.
Justice Cavanagh also rejected the idea that the PSR’s other powers presuppose limitations on its powers under Section 54.
For example, although Section 57 explicitly refers to varying fees, that provision is relevant only where a party applies for intervention and affects only individual agreements.
Section 54, in contrast, is designed for system-wide regulatory action. The two powers sit alongside each other, the judgment argues, and one does not displace or limit the other.
On the second ground, the court found that Section 108 applies only where the PSR is acting “for the purpose of enabling a person or persons to obtain access to, or participation in, a payment system”, which was not the case here.
In this instance, the PSR’s stated aim was to advance competition and protect service users, namely UK merchants, not to widen access.
As Justice Cavanagh pointed out, the claimants did not object to the PSR’s conclusion that capping interchange fees would not affect participation, given the “must-take” nature of Visa’s and Mastercard’s network rules.
A previous case relied on by the claimants, Notemachine UK vs PSR (2023), was “distinguished” on the grounds that it genuinely concerned access to a regulated payment system (ATM networks), whereas this case did not.
What does the ruling mean for the interchange fee caps?
The immediate effect of the judgment is that the PSR’s legal authority is now clear.
The court confirmed that the regulator can impose default interchange fee caps by “general direction” under Section 54.
However, the precise details of the policy are yet to be decided: the PSR has not yet set the level of the cap, the methodology for calculating it or the implementation date.
Any future challenge would therefore need to focus on how the cap is set – on proportionality, evidence or consultation, for example – rather than on the PSR’s authority to act.
For schemes, issuers and acquirers, the practical message is that the legal basis for the caps is settled, and the debate now shifts from legality to compliance and implementation.
What does this signal about UK payments regulation going forward?
Beyond interchange fees, the judgment also sends a broader message about the UK’s regulatory direction.
First, it shows a judicial willingness to give broad latitude to specialist regulators in economically complex markets.
The court repeatedly emphasised that sectoral regulation exists in order to allow early, system-wide intervention: ex ante regulation, not just ex post enforcement.
Second, the ruling matters in the context of the government’s plan to fold the PSR into the Financial Conduct Authority (FCA), with legislation to initiate the merger expected to be introduced by the end of 2026.
The judgment endorses the PSR’s assertive use of its powers, and there is little reason to expect a softer approach once those powers sit within the FCA.
Finally, the case underlines a post-Brexit reality: UK regulators are prepared to act on cross-border fee flows where the economic impact is felt domestically.
For payments firms, that is likely to remain a defining feature of the regulatory landscape, and one that should be carefully considered in future compliance planning and pricing strategies.
