On Tuesday, the Payment Systems Regulator in Britain stated that American powerhouses Visa and Mastercard imposed significant fee increases on shops. However, there is little indication that these increases have resulted in a significant improvement in service, raising concerns that competition is failing.
Because customers ultimately pay the fees through increased pricing for the goods and services they purchase, Visa and Mastercard have long had a dominant position in the payment card market. This has led UK legislators to demand that the PSR examine the issue more closely.
European attempts to develop domestic competitors have failed because banks are reluctant to make the necessary investments. The United Kingdom requires a “digital alternative” to the two U.S. payment processing networks, according to a paper that was commissioned by the British government last year.
“The PSR found that over the past five years, and after taking account of volume changes, Mastercard and Visa have increased their scheme and processing fees by more than 30% in real terms. There is little evidence that the quality of service has improved at the same rate,” the PSR said in a statement detailing its provisional findings.
In Britain, cards are the most widely used payment method, accounting for 27.1 billion transactions valued at 954 billion pounds in 2022.
According to the 158-page PSR initial report, the price rises have increased UK businesses’ costs by more than 250 million pounds ($317.78 million) a year.
According to the PSR, 95% of transactions using UK-issued cards include Mastercard and Visa cards, therefore UK businesses are forced to bear these higher expenses.
“There is currently no effective competition preventing the two biggest schemes raising prices,” stated the PSR.
“HEIGHTS OF SECURITY”
Visa stated that its costs reflect the “immense value that we provide to financial institutions, merchants and consumers including extremely high levels of security, near-perfect operational resilience”.
In a statement, Mastercard stated that it didn’t agree with the PSR’s conclusions.
“The payments industry has never been more competitive, which is reflected in the wide choice of payment options available to British consumers and businesses,” added the statement.
The PSR claimed to have put out “remedies” for public comment. These included heightened user transparency and requirements for Mastercard and Visa to provide notice of, invite input on, or record the rationale behind price adjustments.
Additionally, it suggested that more financial data be continuously reported to the PSR to enhance oversight of Mastercard and Visa’s UK activities.
A final report on card schemes and processing costs is due in the last quarter of the year, and public consultation is open until July 30.
“If the final report upholds the provisional finding that the market is not working well, the PSR will consult on the implementation of any remedies,” the regulator stated.
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