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Revolut and Visa have filed legal challenges against the UK’s Payment Systems Regulator, with the companies arguing that the watchdog has overstepped its powers with a proposed cap on international digital transaction fees.
The move adds to pressure on the PSR as the government reviews the country’s regulatory landscape in a bid to cut red tape and boost growth. The regulator attracted ire from industry and politicians over controversial fraud reimbursement measures last year, fuelling speculation that its powers could be reined in.
The PSR proposed a plan in 2023 to cap interchange fees — which are levied by Visa and Mastercard on behalf of banks — on cross-border online payments after it found that they had risen more than fivefold since Brexit.
The cap was designed “to protect UK businesses from overpaying” following complaints about the high fees charged to retailers by Visa and Mastercard, the PSR said at the time.
However, the proposal has sparked furore from European banks and fintechs, which make money from the fees. The Financial Times previously reported that a European banking trade body told the Treasury earlier this year that the cap would make them “lose money on each transaction”, as their cost of operating was now higher than the maximum fees allowed under the cap.
London-based Revolut on Friday said that its European entity had applied for a judicial review of the PSR’s plan. “We disagree with the PSR’s assessment and believe it has acted beyond its statutory powers in imposing these caps. We have therefore requested the court to review, and ultimately overturn the PSR’s decision.”
Visa said: “We respect the PSR’s role as an economic regulator. This narrow legal action is focused only on the PSR’s legal authorisation and process related to price setting to ensure a fair and thorough process, and give clarity to the industry. This is critical to future growth and investment in the UK.”
European banks and fintechs argue that processing payments has become more expensive since the UK left the EU, particularly with the rise of digital wallets such as Apple Pay and Google Pay adding to their costs.
A person familiar with the PSR’s thinking said it believed it had the legal powers as set out in its report, adding that if there were a judicial review, it would be prepared to defend the decision robustly.
