British lawmakers to scrutinize Visa and Mastercard fee increases

• Mastercard and Visa increased the fees in October from 0.2% to 0.3% and 1.15% to 1.5%, respectively

• Amazon will stop accepting payments from UK-issued Visa credit cards from January 19

British lawmakers are planning to scrutinize the rise in the processing fees Visa Inc (NYSE: V) and Mastercard Inc (NYSE: MA) charge businesses after the country’s payments regulator found no evidence that justifies the increase, a parliamentary committee said.

Parliament’s Treasury Select Committee on Thursday said the two U.S. payment giants, whose networks account for 99% of card transactions in Britain, had increased cross-border interchange fees for debit and credit card transactions.

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Last October, Mastercard, and Visa increased the fees, which have to be paid by the businesses to card issuers for every transaction from 0.2% to 0.3% and 1.15% to 1.5%, respectively.

However, UK’s Payment Systems Regulator (PSR) said there was no evidence that the costs of operating payment services have increased for card issuers to warrant the recent increases in fees.

“There have been significant increases in the fees businesses have to pay to use debit and credit card facilities in recent times. These impose an additional cost on businesses, many of whom are already hard-pressed and facing financial difficulties due to the uncertainties of the pandemic,” the chair of the committee, Mel Stride, said in a statement.

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Issue with interchange fees

UK’s Payment Systems Regulator (PSR) said in November that card services did not work well for smaller businesses; moreover, the rises in fees that merchants need to pay to the card issuers are typically passed on to consumers.

“Given that Visa and Mastercard currently dominate this space, it’s vital to ensure that there is sufficient regulation and competition in the market so that businesses are not subject to ever-increasing servicing costs,” Stride said.

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In November, Amazon.com Inc (NASDAQ: AMZN) said it would stop accepting payments from Visa credit cards in Britain from January 19, 2022, due to rising fees.

The U.S. payment giants hiked the interchange fees it charges merchants for processing every purchase by British consumers from the European Union. However, after Brexit, the EU put a cap on interchange fees, which no longer applies in the UK, allowing card networks to raise their charges.

Stride said the committee would be holding an accountability hearing with the leadership of the PSR on March 9.

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