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The UK payments watchdog has accused Visa and Mastercard of imposing excessive fees and limiting competition, resulting in an additional £170m ($219.7m) in costs annually for businesses.
These revelations were part of the findings released by the UK Payment Systems Regulator (PSR) after a market review into card schemes and the rise in processing fees
The review scrutinises the increases in fees charged to UK businesses when customers use Mastercard or Visa debit or credit cards, with the aim of determining whether the market is functioning effectively.
Since 2017, Mastercard and Visa have hiked their core scheme and processing fees to acquirers by at least 25%, imposing an additional cost of at least £170m per year on businesses.
The regulator stated that the escalation in expenses has implications for the investment and growth potential of UK businesses, smaller merchants, potentially leading to “direct economic constraints”.
The investigation has also uncovered that the complexity and lack of transparency in fee information from Mastercard and Visa have led to higher costs for acquirers and merchants.
This lack of clarity results in businesses receiving incomplete data on services and fees, which in turn hinders their ability to negotiate more favourable terms.
According to the PSR's findings, Mastercard and Visa are “subject to ineffective competitive constraints” in the UK regarding the provision of scheme and processing services to acquirers and merchants.
The regulator has observed a fee increase in recent years without clear justification based on cost analysis, competition, or innovation.
While the PSR has not conclusively determined the profit levels of these card schemes, evidence suggests that Mastercard and Visa's UK profits align with the expectation of a “market is not working well”.
In response to these findings, the PSR plans to publish the annexes to the final report and will issue a consultation paper to gather opinions on potential remedies for the identified issues.
PSR Managing Director David Geale said: “We have found that there is a lack of competition in the market, and evidence that Mastercard and Visa might have been able to charge UK businesses millions of pounds more than they would in a properly competitive market, impacting on their ability to invest and grow. The confusing information Mastercard and Visa make available to acquirers and merchants contributes to poorer market outcomes through raising their costs of dealing with this overly complex information."
In December 2024, the PSR proposed plans to cap cross-border card fees after discovering that European consumers faced “unduly high” charges when buying online from UK businesses.