Mastercard, Visa and Revolut have lost a legal challenge against the Payment Systems Regulator over the UK watchdog’s decision to cap interchange fees on cross-border online payments.
Editorial
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In late 2024, the PSR decided to push ahead with plans to introduce a price cap on the fees Visa and Mastercard charge UK merchants when European shoppers make online purchases.
The card giants, alongside fintech Revolut, brought a case at London’s High Court over the plan, arguing that the regulator did not have the power to impose price caps.
Judge John Cavanagh has rejected the challenge and ruled that the PSR does have the power to impose the caps.
David Geale, MD, PSR, says: “We welcome the High Court’s decision, which confirms our powers to ensure card payment costs are fair for UK businesses and consumers. This enables us to drive forward the work we have been doing to ensure cross-border interchange fees are set at an appropriate level.”
Visa, Mastercard and Revolut have yet to comment on the ruling.
Explaining its initial decision to impose caps, the PSR said in 2024 that, over the course of 2021 and 2022 Mastercard and Visa raised their cross-border interchange fees fivefold from 0.2% to 1.15% for debit cards and 0.3% to 1.5% for credit cards. This post-Brexit increase, claimed the PSR, costs businesses £150-200 million extra per year.
The PSR has now consulted on the methodology for assessing an appropriate cap and says this will “inform the regulator’s next steps”.
Commenting on the decision, Michelle Quinn, partner at Grosvenor Law, says: “If the proposed cap comes into effect, there is a clear line between the potential winners and the losers. A cap on interchange fees could give retailers some much needed breathing room by cutting the costs they face every time an EU customer pays online, and consumers could benefit if those savings translate into lower prices.
“But for banks and fintechs, it’s a squeeze – interchange fees are a meaningful revenue stream and there is a real risk to their business if the fees are capped at such a level that they lose money on each transaction.”
