British lawmakers are turning their attention onto the fee increases charged by the likes of Visa and Mastercard, after the issue was flagged by the UK’s Payment Systems Regulator (PSR).
The PSR said it had not seen evidence as to justify why card payment processors are increasing their fees.
It comes after British consumers were shocked in November when Amazon announced that from 19 January 2022, it will stop accepting UK Visa credit cards for payments in the United Kingdom.
Amazon at the time admitted its decision was “inconvenient” for customers with UK Visa credit cards, but it had taken the decision because of the “high fees Visa charges for processing credit card transactions” on its UK cards.
Amazon said such charges should be “going down over time with technological advancements, but instead they continue to stay high or even rise.”
Amazon has in recent months introduced surcharges on customers using Visa credit cards in Singapore and Australia, citing high fees as the reason.
Days after that Amazon was said to be also considering dropping Visa as a partner on its co-branded credit card in the strategically important market of the United States.
Some are blaming the fee increases on the UK’s exit from the European Union. This is reportedly because the EU enforced a cap on fees charged by card issuers, and this cap is no longer in place, meaning providers are free to increase charges.
In September for example, PayPal announced it was raising its fees for payments between businesses from the European Economic Area to the UK.
And Visa and others now seems to be doing the same.
But now the UK Parliament’s Treasury Select Committee has stepped into the matter, as it published correspondence with the UK payment regulator, which said that it found no evidence to justify the fee rises.
“In response to a letter from the Committee Chair, the Payment Systems Regulator (PSR) outline that they have not seen evidence that the costs of operating payment services have increased for card issuers to warrant the recent increases in fees,” said the parliamentary committee.
The committee noted that interchange fees are paid by businesses to card issuers each time a card is used by a consumer.
In October, both Mastercard and Visa increased cross-border interchange fees for debit and credit card transactions, from 0.2 percent to 0.3 percent and 1.15 percent to 1.5 percent respectively.
According to the PSR, the two card companies account for 99 percent of all card transactions.
The MPs noted that scheme fees, which are paid by businesses to card payment operators for use of the service, have also risen substantially, with average fees more than doubling between 2014 to 2018.
In the correspondence, the PSR suggest that, if it becomes apparent that there are no real prospects of improving competition in the market, they would be willing to consider additional regulation to protect consumers and businesses from rising prices.
The PSR also outlined that they intend to finalise their strategy and publish a remedies consultation on their market review in January.
The Treasury Select Committee meanwhile will hold an accountability hearing with the leadership of the PSR on Wednesday 9 March, which will explore the regulator’s role and success in promoting competition within the market and protecting consumers from rising prices.
“There have been significant increases in the fees businesses have to pay to use debit and credit card facilities in recent times,” noted Rt. Hon. Mel Stride MP, chair of the Treasury Committee.
“These impose an additional cost on businesses, many of whom are already hard pressed and facing financial difficulties due to the uncertainties of the pandemic,” noted Stride.
“Given that Visa and Mastercard currently dominate this space, it’s vital to ensure that there is sufficient regulation and competition in the market so that businesses are not subject to ever-increasing servicing costs,” said Stride.
“My committee will be closely following the PSR’s plans to protect consumers and businesses from rising prices, and we look forward to exploring these issues in greater depth when they appear before the Committee in March,” said Stride.