The Payment Systems Regulator (PSR) has said its review into Mastercard and Visa has found that the companies hiked their processing fees by at least 25 per cent between 2017 and 2023.

The regulator also claimed that both firms are failing to provide easy-to-understand fee information, which has led to costs for acquirers and merchants, including small retailers.

It said that retailers then have little choice but to either pass these increased costs onto consumers or incur the costs themselves, impacting their ability to invest.

As a result of its findings, the PSR has announced plans to soon begin consulting on “potential remedies” to address the issues it has found.

The UK watchdog's managing director David Geale said that the probe revealed that there is a lack of competition in the market, as well as evidence that Mastercard and Visa may have been able to charge UK businesses "millions of pounds more than they would in a properly competitive market".

"The confusing information Mastercard and Visa make available to acquirers and merchants contributes to poorer market outcomes through raising their costs of dealing with this overly complex information," he said. “We will shortly consult on potential remedies to address the issues we have identified in our final report before we take any corrective action."

The PSR said that while fees have risen substantially in the recent years, there is "no clear evidence" that they are set on the basis of detailed cost analysis, competition or innovation.

It went on to say that while it has not been able to reach a firm view on the level of the schemes’ profits, the regulator found evidence in Mastercard and Visa’s UK profits that is consistent with a finding that their margins are higher than would be expected in a well-functioning market.

“Visa’s fees reflect the immense value that we provide to financial institutions, merchants and consumers," said a Visa spokesperson. "This includes extremely high levels of security and fraud prevention, near-perfect operational resilience and reliability, and a wide range of consumer protections and high-quality products and services that serve consumer and merchant needs.

"Through our investments, the UK has been a global pioneer in payments technology.”

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