Mastercard and Visa are facing a regulatory crackdown. The payments watchdog has said that the companies have too much dominance and were able to increase the fees they charge British business unchecked.
The Payment Systems Regulator revealed Tuesday that it is proposing a number of interventions following a review that had been conducted. It was provisionally concluded that Mastercard, Visa and their services to British companies were “ineffectively competitively constrained”.
The watchdog reported that the two groups accounted for 95 percent of UK card transactions. The two charge a variety of fees for merchants, such as retailers and banks that handle payments and help with the processing.
In a recent report, the regulator stated that these fees had risen more than 30% in real terms over the last five years. “There is little or no correlation between the changes in service quality”, it said. It was estimated that this amounted to more than £250 million extra per year. “UK businesses are forced to pay the increased costs”, warned the regulator.
The regulator has proposed several remedies to curb the power of Mastercard and Visa. The regulator said it was proposing several potential remedies to limit the power wielded by Mastercard and Visa.
It did not propose a price ceiling, a more radical measure that had previously been suggested.
According to the PSR, “it would be difficult, based upon the evidence that we currently possess, to design an effective price cap that is consistent with our statutory goals”, but it cautioned it would reconsider such a move in the event of a change.
The consultation is due to end on the 30th of July.
Chris Hemsley is the managing director of the regulator. He said that the proposed remedies would help it hold Mastercard, Visa, and other card companies accountable. He said that UK businesses are charged fees every time a Mastercard card or Visa is used. These fees have increased significantly over the past few years and these increases are not explained by improvements in service quality.
Mastercard disagreed with the conclusions of the watchdog. The payments industry is more competitive than ever, as evidenced by the many payment options that are available to British businesses and consumers. In its analysis, PSR failed to take into account the significant investment needed to create a secure network which prevents billions in fraud every year.
Visa stated that its fees reflect the “immense value” it provides to financial institutions and merchants, as well as consumers and merchants. This includes high levels of security and reliability, a range of protections for consumers and merchants, and high-quality services and products that meet their needs.
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