Visa and Mastercard have both cited fraud as the primary reason for their respective increase in interchange fees between the UK and the EU after Brexit.
Visa and Mastercard interchange fees hike
Both companies face a number of probes into the functioning of the card market. The two groups — which represented 99 per cent of card payments in the UK last year — laid out their arguments in letters written to a UK Treasury committee examining the increase in card fees.
In their responses, both networks cite the higher levels of fraud in cross-border transactions as a main cause for the increase in costs.
Visa and Mastercard are also facing investigations by the UK’s payments watchdog over whether high charges mean that the £884 billion card market is failing.
In June, the Payment Systems Regulator announced a probe into cross-border interchange fees, warning that the networks’ ability to increase these charges potentially showed that the market was “not working well”.
The EU introduced a cap in 2015 following concerns that the hidden fees were leading to hundreds of millions of euros in costs for companies and higher prices for consumers.
But last year, both Visa and Mastercard raised the costs for online payments between the EU and the UK following the end of the Brexit transition period.
Debit card interchange fees rose from 0.2% to 1.15% for every payment, while credit card fees rose from 0.3% to 1.5%.
Visa said that the majority of UK merchants operating domestically had not seen an increase in costs and that the new rates were in line with those levied on transactions between the UK and other regions.
The watchdog also launched a separate market review into other charges, including those levied on businesses that use the networks of Visa and Mastercard for processing payments.
In a letter to the committee in July, the PSR said it did not rule out an interim cap on card networks’ fees, although it said it did not anticipate imposing one in the immediate future.
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