Visa and Mastercard have cited fraud and increased competition to justify post-Brexit fee increases on cross-border payments from the UK, Finextra has revealed.
Back in 2021, the two firms increased cross-border interchange fees on purchases made by UK consumers to European firms. Fees climbed from 0.2% to 1.15% for debit cards and 0.3% to 1.5% for credit card transactions.
This move caused ‘uproar’ in UK Parliament and led to a market review by the Payment System Regulator, which said it has not seen evidence that shows that there have been significant changes in the costs for card issuers.
Earlier this year, the Treasury Select Committee wrote to the card schemes requesting a justification for the fee hikes. In response, both companies argue that higher fees are justified by the greater risk of fraud in cross-border transactions, and the costs incurred by banks to prevent and detect such crime.
Visa and Mastercard have also noted that they do not benefit directly from fee increases, as it is a customer’s card issuer, rather than the card payment system, who receive the additional revenue from interchange fees.
Mel Stride MP, chair of the Treasury Committee, says: “All businesses, particularly small and medium sized firms, are facing rising costs on many fronts, and the increase in cross-border card fees will only add to these pressures. It is vital that these businesses have every opportunity to succeed and are not burdened with disproportionate additional costs at this time.”
A report by The Payments Association, UK Finance and global law firm Latham & Watkins has explored the current and future trends in the UK payment industry regulation.
The trio published ‘UK Payments Regulation Review: Making sense of where to go now’ which explored the impact of regulation and outlined how industry, lawmakers and regulators can work together to strengthen and enhance the country’s payment infrastructure and regulatory and supervisory frameworks following Brexit and the continuing trend of digitalisation.
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