Visa And Mastercard Under Scrutiny For Fee Increases In The UK - What's On The Cards?

Visa Inc. V, Mastercard Inc. MA, and their increasing fees on retailers have not resulted in significant service improvements, according to the provisional findings of Britain’s Payment Systems Regulator (PSR).

The PSR expressed concerns that competition within the market is lacking, leading to these hikes in fees without corresponding enhancements in service quality.

Visa and Mastercard have maintained a stronghold on the payment card market, prompting U.K. lawmakers to call for more stringent oversight by the PSR, which initiated this investigation, reported Reuters. 

Over the past five years, and after adjusting for volume changes, Mastercard and Visa have raised their scheme and processing fees by over 30% in real terms. 

However, as per the regulatory, there is scant evidence to suggest that service quality has improved in tandem with these fee increases.

The PSR’s interim report, spanning 158 pages, estimates that these fee hikes have added over £250 million to the costs faced by U.K. businesses. 

“Every time someone uses a Mastercard or Visa card, UK businesses have to pay fees. These fees have significantly increased over recent years, and those increases cannot be explained by improvement in service quality,” said Chris Hemsley, Managing Director of the PSR.

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Given that Mastercard and Visa cards account for 95% of transactions using U.K.-issued cards, businesses have little alternative but to absorb these increased costs.

The PSR has suggested several remedies for public consultation, including improved transparency for users and obligations on Mastercard and Visa to explain, consult on, and document the reasons behind price changes. 

“The remedies would also increase transparency around Mastercard and Visa's UK operations, allowing the PSR to better hold them to account,” as per the regulatory statement.

The public consultation will remain open until July 30, with a final report on card schemes and processing fees expected in the last quarter of the year. 

Should the final report confirm that the market is not functioning effectively, the PSR will consult on implementing any necessary remedies.

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Price Action: MA shares closed lower by 0.13% at $459.66 on Monday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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