European Banks Raise Concerns About UK Regulator's Cap Plan

Introduction

European banks have raised serious concerns about a plan by the UK regulator to cap interchange fees on consumer debit card transactions. The concerns were expressed in a letter to the Treasury in response to a review by the Payment Systems Regulator (PSR) last year, which proposed temporary caps on interchange fees in order to reduce the cost of cross-border payments.

PSR's Proposal

The PSR's proposal would place an initial one-time limited fee cap of 0.2% on consumer debit card transactions within the UK and the European Economic Area (EEA). The cap would apply to both domestic and cross-border transactions.

The PSR estimates that the cap would save UK businesses up to £200 million per year on cross-border payments.

Banks' Concerns

European banks argue that the cap would have a number of negative consequences, including:

• Reduced innovation in the payments sector
• Increased costs for banks, which would be passed on to consumers
• A competitive disadvantage for European banks operating in the UK

The banks also argue that the PSR has underestimated the cost of cross-border payments and that the cap would not be effective in reducing costs.

PSR's Response

The PSR has said that it is considering the banks' concerns and that it will publish its final decision on the cap later this year.

The PSR has also said that it is committed to ensuring that the payments sector is competitive and that consumers are protected from excessive fees.

Conclusion

The debate over the PSR's proposed cap on interchange fees is likely to continue in the coming months.

The outcome of the debate will have a significant impact on the payments sector in the UK and the EEA.

Sources

• Payment Systems Regulator (PSR) speech on payment system reform
• European Payments Council statement on PSR interchange fee consultation