Card giants Visa and Mastercard have justified their increase on cross-border payments due to a greater risk of fraud and the costs involved from banks in prevention solutions. 

The Treasury Committee published the duo’s responses to a letter from MP Mel Stride, Chair of the Treasury Committee, in which they highlighted a key reason for the rise in fees where due to heightened risks of fraud. 

In a response statement, President of Mastercard UK and Ireland, Kelly Devine, stated: “​​Card issuer costs have changed in the 15 years since the interchange rates for cross border transactions were fixed; and the transaction mix has also changed significantly in this time with more Card Not Present (CNP) online transactions where fraud costs are higher than for domestic transactions.

“Even prior to the COVID19 pandemic, merchants’ use of card payments had been increasing for a number of years because of the value proposition, including expansion in sales reach (i.e. online); a reduction in fraud compared to other forms of payment; and the guarantee of payment.”

The dispute stems from Visa and Mastercard increasing cross-border interchange fees on purchases made by UK consumers to European businesses, by European consumers to UK businesses. 

Fees increased from 0.2% to 1.15% for debit cards, and 0.3% to 1.5% for credit card transactions. The European Union Interchange Fee Regulation does not apply cross-border fees, and caps interchange fees in the aftermath of the UK’s exit from the EU. 

“Visa does not earn revenue from interchange. Interchange ensures that there is a value transfer between the financial institutions who provide services to both consumers and merchants,” said a Visa spokesperson. 

“Interchange supports their ability to issue and manage cards and digital credentials. It enables those players to fortify security against bad actors trying to steal information or commit fraud; and it supports innovation, including the development of new products and services.”

Initial insights from The Payments Systems Regulator (PSR) found no “evidence that shows that there have been significant changes in costs” that would justify an increase in fees. 

The PSR also expressed concerns last July on the rise of fees, indicating that this could demonstrate the market “not working well” and “could result in higher prices paid by UK merchants and consumers”. 

Commenting on the reponses, MP Stride stated: “All businesses, particularly small and medium sized firms, are facing costs on many fronts, and the increase in cross-border card fees will only add to these pressures. 

“It is vital that these businesses have every opportunity to succeed and are not burdened with disproportionate additional costs at this time.”