The UK’s Payment Systems Regulator (PSR) has placed Visa and Mastercard under scrutiny for their dominant market position and sharp increases in transaction fees, which are costing British businesses an estimated £170 million per year. This move comes as concerns grow over a lack of competition and transparency in the card payments market.
Visa and Mastercard, which collectively handle 95% of all debit and credit card transactions in the UK, have increased their fees by 25% above inflation since 2017, significantly raising costs for merchants and retailers. In response, the PSR has warned that it is prepared to take action to encourage competition and improve clarity around payment processing charges.
The regulator’s review highlighted that UK businesses may have been charged millions more than they would in a competitive market. Merchants have expressed frustration over the complexity and opacity of scheme and processing fees, which make it difficult to negotiate fairer terms. These charges include network access fees and additional processing fees for authorization, clearing, and settlement.
Although the PSR has yet to outline specific remedies, it is considering imposing fee caps and mandating greater transparency in pricing. The regulator has previously explored measures requiring Visa and Mastercard to disclose their pricing methodologies to foster a more competitive landscape.
David Geale, Managing Director of the PSR, stated: “We have found evidence that a lack of competition has allowed Visa and Mastercard to impose higher costs on UK businesses, impacting their ability to grow and invest. Transparency and fair pricing are essential to ensuring a well-functioning payments ecosystem.”
Both card networks have pushed back against the PSR’s findings, arguing that their fees reflect the extensive value they provide to financial institutions, merchants, and consumers. Visa has emphasized its investment in security, fraud prevention, and operational resilience, while Mastercard has pointed to ongoing innovations in the payments space that benefit businesses and shoppers alike.
Despite these justifications, the regulator remains committed to exploring reforms that could alleviate financial burdens on merchants. The Federation of Small Businesses has urged the PSR to go beyond transparency measures and introduce direct fee caps to safeguard small business owners.
As the regulator prepares to consult stakeholders on potential solutions, merchants, retailers, and consumer groups will be closely watching how Visa and Mastercard respond. The outcome of this regulatory action could reshape the UK’s card payments landscape, ensuring fairer pricing and fostering increased competition among payment providers.
With a final decision expected later this year, the payments industry awaits potential reforms that could level the playing field and provide businesses with much-needed relief from escalating transaction costs.
