Revolut and Visa have initiated judicial proceedings against the UK’s Payment Systems Regulator (PSR), asserting that the regulator has exceeded its statutory mandate with a proposed cap on interchange fees for international digital transactions.
Challenge against UK interchange fees cap
This litigation adds to the growing scrutiny of the PSR as policymakers evaluate the country’s financial regulatory framework in an effort to balance oversight with economic growth.
The PSR’s proposal, introduced in 2023, seeks to impose a ceiling on interchange fees – transaction costs levied by Visa and Mastercard on behalf of banks for cross-border online payments.
The regulator’s investigation found that these fees had escalated more than fivefold since the UK’s departure from the European Union, raising concerns that domestic merchants were incurring excessive charges.
According to the PSR, the cap is intended to mitigate excessive costs for UK businesses operating in the increasingly complex digital payments landscape.
Proposed Regulation Sparks Opposition
However, the proposed regulation has sparked significant opposition from European financial institutions and fintech companies, which derive revenue from interchange fees.
Industry stakeholders argue that rising operational costs – exacerbated by the widespread adoption of digital wallets such as Apple Pay and Google Pay – have made cross-border payment processing more expensive.
A European banking trade association previously cautioned the UK Treasury that implementing the cap would result in financial losses on each transaction, given that the cost structures of payment providers now exceed the proposed regulatory limits.
Revolut confirmed on Friday that its European entity had filed for a judicial review to challenge the PSR’s decision.
In its statement, the company asserted: “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 Takes Action
Visa has also taken legal action, emphasising that while it acknowledges the PSR’s role as a regulatory authority, its lawsuit is strictly focused on the procedural and legal basis of the regulator’s fee-setting powers.
“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,” a Visa spokesperson stated.
A source close to the PSR’s position indicated that the regulator remains confident in its legal authority and is fully prepared to defend its decision in court.
As the dispute progresses toward judicial review, the ruling could establish a significant precedent for regulatory oversight in the UK’s post-Brexit payments industry, shaping the financial landscape for years to come.
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