European Lawmakers Ask UK to Reconsider Cap on Interchange Fees

UK parliament

European lawmakers reportedly asked the United Kingdom’s Payment Systems Regulator (PSR) to reconsider its plans to restore a cap on interchange fees that was lifted after Brexit.

Members of the European Parliament wrote a letter to the PSR, asking the regulator to conduct a full economic review before moving ahead with its plan, Bloomberg reported Thursday (Dec. 12).

The U.K. regulator’s plan would limit the amount British merchants have to pay in credit card fees when making online sales to consumers from the continent, according to the report.

U.K. retailers pay interchange fees of 1.5%, the report said. The PSR’s plan would cap the fees at 0.3% for credit card transactions and 0.2% for debit card ones.

That plan would treat the purchases of consumers from the European Economic Area (EEA) the same as those of shoppers from the U.K., as was the case before Brexit, per the report.

Politicians and lenders inside the European Union said this change would disproportionately affect European banks and would be seen as “clear discrimination,” according to the report.

The PSR is reviewing its plan and expects to publish its findings before Christmas. It is also considering implementing the cap on an interim basis, per the report.

It was reported in August that European banks have issues with the U.K.’s plan to cap international digital transaction fees and that a pair of trade organizations — the European Banking Federation and Payments Europe — said the proposal was “potentially discriminatory” and a “risk to the integrity of national payments and retail banking markets in the EU.”

The PSR proposed the cap in 2023 to protect merchants from overpaying. It did so after reviewing cross-border interchange fees on transactions between U.K. businesses and the EEA.

“In this market review, we have provisionally found that the fees charged by Mastercard and Visa to U.K. businesses which accept payments from within the EEA are likely too high,” Chris Hemsley, the PSR’s then-managing director, said at the time. “In short, at this stage, we do not think this market is working well.”