On 13 December 2024, the Payment Systems Regulator (PSR) issued:

• A final report of its market review into cross border interchange fees (IFs). In 2023, the PSR set out its provisional concerns that Mastercard and Visa have likely raised cross-border IFs to an unduly high level, at the expense of UK businesses.  In the final report the PSR concludes that cross-border IFs were increased to levels that are unduly high and therefore negatively affect merchants and to the extent of pass-through their customers. As part of that conclusion, the PSR found no evident countervailing benefits or innovation to account for the IF increases (such as improved fraud prevention, quality, efficiency or economy of the card payments systems to the benefit UK merchants). The PSR found that the additional IF-related costs do not translate into increased value reflecting those increases for the service users (organisations that accept cards and their customers). Hence, the PSR has considered the rise in IF levels operated by the card schemes to be detrimental for UK sustainable growth. In the final report, the PSR concludes that the only effective remedy to address the detriment would be a price cap on consumer debit and credit card-not-present (CNP) IFs for UK-EEA CNP transactions (outbound IFs). The PSR has also concluded that alternative actions related to UK-EEA CNP transactions, which would not cap directly outbound IFs, would result in a continuous unnecessary cost to UK merchants and their customers, whilst a price cap remedy would materially mitigate the adverse impacts.

• A consultation paper setting a stage 1 price cap while further work is being carried out with a view to setting a stage 2 price cap. The stage 1 price cap would bean initial, time-limited cap, set for a transitional period while an appropriate methodology for determining the most appropriate level of the price cap is developed and implemented. In Annex 1, the PSR sets out a draft cost-benefit analysis for this intervention and at Annex 2 it provides a draft direction to give effect to a stage 1 proposed remedy. The view set out in the PSR’s interim report was that the stage 1 cap should be set at a level of 0.2% for CNP consumer debit transactions and 0.3% for CNP consumer credit transactions. While the PSR is currently inclined, based on the evidence received to date, towards these levels as being the most appropriate for a stage 1 cap, it is continuing actively to consider the arguments for and against 0.2%/0.3%, as well as alternatives to that level. During the stage 1 period, the PSR would undertake work to develop an appropriate and longer-lasting cap (to be subject to regular reviews), which might be higher, lower or the same as the cap set during the stage 1 period. Stakeholders would be consulted on both the methodology and the cap to be set pursuant to that methodology. The deadline for comments on the consultation paper is 7 February 2025.