Revolut and Visa have launched legal challenges against the UK’s Payment Systems Regulator (PSR) over its decision to impose caps on interchange fees for cross-border online payments, as reported by the FT.
The move marks a considerable escalation in the ongoing tug-of-war between the payments industry and UK regulators seeking to curb the significantly rising costs for merchants.
The PSR’s proposal, finalized late last year, aims to roll back what it describes as exorbitant fee hikes by Visa and Mastercard, but the pushback from these industry participants signals a rather contentious road ahead.
The PSR’s decision reportedly stems from a post-Brexit surge in interchange fees—the charges merchants pay card issuers via their banks for processing transactions.
According to the regulator, Mastercard and Visa increased these fees fivefold between 2021 and 2022, jumping from 0.2% to 1.15% for debit cards and 0.3% to 1.5% for credit cards on purchases made by European shoppers at UK online retailers.
The PSR estimates this shift has saddled businesses with an additional £150-200 million annually—a burden it argues is unjustified given the lack of corresponding service improvements.
With Visa and Mastercard dominating the majority or 95% of UK payment card transactions, the regulator sees the caps as a necessary step to protect merchants and, indirectly, consumers.
Revolut, now one of the fastest-growing fintechs and digital banks, has taken a bold stance, filing for a judicial review to contest the PSR’s authority.
The company stated:
“We disagree with the PSR’s assessment and believe it has acted beyond its statutory powers in imposing these caps.”
Revolut’s argument hinges on the PSR allegedly overstepping its legal remit, a claim that could hinge on technical interpretations of the regulator’s mandate under UK payments law.
Visa, meanwhile, has adopted a narrower critique, focusing on process rather than outright rejection.
“This legal action is focused only on the PSR’s legal authorization and process related to price setting to ensure a fair and thorough process,” Visa told the FT, framing its challenge as a bid for clarity rather than a outright defiance.
The PSR, undeterred, plans to defend its stance “robustly,” according to an insider cited by the FT.
This resolve was underscored earlier this week when the regulator signaled further action against Visa and Mastercard over domestic processing fee increases, suggesting a broader crackdown on card scheme pricing practices.
Yet, the legal challenges expose vulnerabilities in the PSR’s overall approach.
Critics could argue its data collection has been insufficient—earlier reports noted difficulties in obtaining detailed justification from card schemes—potentially weakening its case in court.
Competitors like Mastercard, though not yet reported as joining the legal battle, loom large in this dispute given their shared dominance with Visa.
And other fintechs and payment players, such as PayPal or emerging crypto platforms, may watch closely, as the outcome could potentially reshape cross-border payment economics. But the bottom line is that regulations should protect consumers and make their lives easier.
For now, the battle lines are drawn: Revolut and Visa seek to protect their operational flexibility, while the PSR doubles down on reining in what it sees as unchecked fee inflation.
Ultimately though, the courts will decide this matter, but the ripple effects could redefine the UK’s payments landscape. Ideally, there should be a balance so that the ecosystem can continue to grow in a sustainable manner.