Britain’s Payment Systems Regulator said in preliminary findings on Tuesday that there is no indication that significant increases in fees levied by Visa and Mastercard on merchants using their cards have also resulted in a significant improvement in service, raising fears that competition was failing.

Due to their long-standing dominance in the payment card sector, Visa and Mastercard were called for deeper examination by UK legislators, and the PSR responded by opening an inquiry.

“The PSR discovered that Mastercard and Visa had raised their schemes and processing fees by more than 30% in real terms over the previous five years, even after accounting for volume variations. Little data suggests that the level of service quality has increased at the same pace, according to a statement from the PSR.

According to estimates in the 158-page initial report released by the PSR, fees for UK firms have increased by more than 250 million pounds as a result of the charge rises.

According to the PSR, 95% of transactions using UK-issued cards include Mastercard and Visa cards, therefore UK firms are forced to bear these higher expenses.

“We don’t agree with the PSR’s interim review’s conclusions. Mastercard released a statement saying, “The payments industry is more competitive than ever, as evidenced by the variety of payment options available to British consumers and businesses.”

Visa could not be reached for comment at this time.

According to the PSR, it has put up “remedies” for public comment that include more user openness and requirements for Mastercard and Visa to provide justifications for pricing adjustments by consultation, explanation, and/or documentation.

In order to strengthen oversight of Mastercard and Visa’s UK operations going ahead, it noted that it has also suggested increased ongoing financial information reporting to the PSR.

A final report on card schemes and processing costs is due in the latter quarter of the year, and public consultation is open until July 30.

“If the final report upholds the provisional finding that the market is not working well, the PSR will consult on the implementation of any remedies,” the regulator stated.

(Adapted from BusinessTimes.com.sg)

Categories: Economy & Finance, Regulations & Legal, Strategy