UK court backs regulator and rejects Revolut, Visa, and Mastercard challenge

The UK High Court just sided with the Payment Systems Regulator (PSR), shutting down a legal challenge from Revolut, Visa, and Mastercard.

All three companies were trying to stop a plan that would limit what banks can charge each other for cross-border online payments. They lost.

The court said the UK regulator was right to introduce price caps on these fees, even though Visa and Revolut had filed a judicial review last year. They claimed the regulator was stepping out of line and hurting competition. The court didn’t agree.

Visa and Mastercard raised their fees after Brexit

This fight started in 2023 when the PSR claimed it had noticed the fees had jumped five times higher since the UK left the EU.

The regulator then said this proved it was time to step in and limit what banks could charge when people used a card to shop online across countries.

The PSR pointed to “card not present” payments, where a buyer in one country pays a seller in another, usually online, as where the fees have particularly surged.

Between 2021 and 2022, Visa and Mastercard’s debit card fees went from 0.2% to 1.15%, and credit card fees surged from 0.3% to 1.5%.

Even though Visa and Mastercard don’t actually keep the interchange fees, they still have something to lose. The court said banks are more likely to use their services when the fees are high, because that’s how banks make more money. Lower the fees, and banks might look elsewhere.

The PSR had warned in a briefing seen by the Financial Times that these changes are costing UK businesses between £150 million and £200 million more every year. That’s what pushed them to act. They said the cap was needed “to protect UK businesses from overpaying”.

Fintechs and banks say the cap puts them at a loss

Not everyone agreed. A lot of European fintechs and banks went straight to the Treasury to complain. One trade body said the cap would make them “lose money on each transaction” because the cost to process a payment would be more than the fee they’re allowed to charge.

Fintechs like Revolut said the same thing. Unlike big banks, they don’t make money from loans. Their business depends on payment fees. Capping those fees hits their core revenue.

Some also said this new rule would make things worse for the economy. They claimed it went against the UK government’s plans to grow the industry. They said it was anti-competitive.

Things have already gotten more expensive since Brexit.

Banks now have extra work to process payments between the UK and Europe. Then there’s the rise of digital wallets like Apple Pay and Google Pay, which have their own costs and need new tech to support them.

While the price cap still doesn’t have a set date or limit, this ruling means the PSR can move forward. But the regulator itself won’t be around much longer. The government is scrapping it and merging it into the Financial Conduct Authority.

And all this happened right after Donald Trump pushed for a 10% cap on credit card interest rates. Banks weren’t happy. Now they’ve got this on their plate too.

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