Market Analysis

Britain's Payment Systems Regulator (PSR) has released provisional findings indicating that significant fee increases by Visa and Mastercard to retailers have not corresponded with substantial improvements in service quality. The PSR's interim report, spanning 158 pages, highlights that over the past five years, adjusted for transaction volumes, Visa and Mastercard have raised their scheme and processing fees by more than 30% in real terms. Despite these fee hikes, there is scant evidence of commensurate enhancements in service standards.

The PSR estimates that these fee escalations have collectively imposed over £250 million in additional costs on UK businesses. Due to the virtual monopoly of Visa and Mastercard, which together account for 95% of transactions involving UK-issued cards, businesses face limited alternatives and must absorb these heightened expenses.

The PSR has proposed potential "remedies" for public consultation, aimed at enhancing transparency for users. These include requirements for Mastercard and Visa to clarify, consult on, and document reasons for pricing changes. Additionally, the PSR suggests increased reporting of financial data to facilitate ongoing scrutiny of Visa and Mastercard's UK operations.

The public consultation period runs until July 30, with a final report on card schemes and processing fees expected in the last quarter of the year. Pending the outcome of the final report, which will assess whether the market functions adequately, the PSR plans to seek feedback on implementing any recommended remedies.

Paraphrasing text from "Reuters" all rights reserved by the original author.