On Wednesday, the British payments regulator announced a provisional proposal to cap the cross-border interchange fees that Mastercard and Visa charge for transactions that take place between the United Kingdom and the European single market.

Following the release of the preliminary results of a market evaluation on interchange fees levied since Brexit, when the bloc’s long-standing cap ceased to apply in Britain, the Payment Systems Regulator (PSR) declared that a cap would prevent companies from overpaying.

The PSR was under pressure from UK MPs to think about reintroducing a cap in the country, and the watchdog announced last year that it will carry out two market evaluations, but it might take years to get a decision.

According to the PSR, as Mastercard and Visa handle 99% of debit and credit card payments in the UK, their fees were the main focus of the examination.

According to the watchdog, both enterprises probably increased prices to a “unduly high level” last year, costing UK businesses an additional 150–200 million pounds ($190–250 million).

“In short, at this stage, we do not think this market is working well,” PSR managing director Chris Hemsley said in a statement.

The PSR would initially impose a time-limited restriction of 0.2% on debit transactions and 0.3% on credit transactions between the UK and the European Economic Area. After additional analysis is completed, a permanent cap will be implemented.

According to a Visa representative, the corporation vehemently disagrees with the PSR’s interim report’s conclusions and believes the suggested fixes are “not justified”.

“Accepting reliable, secure, and innovative digital payments represents enormous value to UK businesses, especially when selling overseas,” the spokesperson said.

“These interchange rates apply to less than 2% of UK card payments – European (EEA) cardholders buying online from a UK seller – and reflect the fact that these transactions are more complex and carry far greater risk of fraud.”

There were no comments on the issues from Mastercard.

The PSR is requesting comments on the ideas through the end of January, and by the first quarter of 2024, a final report is expected.

Regardless matter what the PSR does, a government-commissioned assessment released last month stated that Britain needs a “digital alternative” to depending on Visa and Mastercard. This statement echoes long-standing EU hopes for a “home grown” alternative to the American duo that has not yet materialised.

(Adapted from ft.com)