Visa and Mastercard respond to Treasury Committee on card fee increases
24 August 2022
In October 2021, Visa and Mastercard increased cross-border interchange fees on purchases made by UK consumers to European businesses, and by European consumers to UK businesses. Fees increased from 0.2 per cent to 1.15 per cent for debit cards and 0.3 per cent to 1.5 per cent for credit card transactions.
The European Union Interchange Fee Regulation, which caps interchange fees, no longer applies to cross-border fees following the UK’s exit from the EU.
In response to the Committee, both companies argue that higher fees are justified by the greater risk of fraud in cross-border transactions, and the costs incurred by banks to prevent and detect such crime.
Visa and Mastercard also point out that they do not benefit directly from fee increases, as it is a customer’s card issuer, rather than the card payment system, who receive the additional revenue from interchange fees.
The Payment Systems Regulator (PSR) previously told the Committee it has not seen “evidence that shows that there have been significant changes in the costs” for card issuers, that could justify the increase in fees. The PSR also recently expressed concerns that these fee rises may demonstrate the market is “not working well” and “could result in higher prices paid by UK merchants and consumers”.
Commenting on the responses, Rt. Hon. Mel Stride MP, Chair of the Treasury Committee, said:
“All businesses, particularly small and medium sized firms, are facing rising costs on many fronts, and the increase in cross-border card fees will only add to these pressures. It is vital that these businesses have every opportunity to succeed and are not burdened with disproportionate additional costs at this time.”