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Cross-border charges levied on credit and debit card transactions by payments companies, notably Visa and Mastercard, should be capped “to protect UK businesses from overpaying on these interchange fees”, a British financial watchdog has proposed.
The Payment Systems Regulator, which oversees financial transfers, said in a report on Wednesday that fees on transactions by debit card between the UK and European Economic Area should initially be capped at 0.2 per cent and those made by credit cards online at 0.3 per cent.
Since the UK left the EU the fees have risen 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 cards, it added.
“The PSR has set out its provisional concerns that Mastercard and Visa have likely raised these fees to an unduly high level, at the expense of UK businesses,” the watchdog said, noting that it estimated that last year “UK businesses paid an extra £150mn-£200mn due to the fee increases”.
The PSR also argued that at present British businesses have little choice but to pay the increased costs as Mastercard and Visa cards account for nine out of 10 online transactions at UK businesses using EEA-issued cards.
Visa said it “strongly” disputed the findings and said the “proposed remedies are not justified”. It added the fees “reflect the fact that these transactions are more complex and carry far greater risk of fraud”.
The PSR has given interested parties until the end of January to respond to its findings and proposals.
This is a developing story.