The PSR's Latest Move on Card Fees: What It Actually Means for Your Small Business

The PSR's Latest Move on Card Fees: What It Actually Means for Your Small Business

You accept a card payment for £200. A few days later, £197.20 lands in your account. The £2.80 that vanished? That is not one fee. It is a stack of them, and most small business owners have no idea how they are calculated, who sets them, or whether they are even legal.

The Payment Systems Regulator (PSR) has spent the last two years trying to fix that. And in 2025, its interventions are starting to bite in ways that matter to anyone running a shop, a salon, a photography studio, or a market stall in the UK.

Here is what is happening, why it matters, and what you should actually do about it.

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First, A Quick Reminder of Who the PSR Is

The PSR is the UK's specialist regulator for payment systems. It sits alongside the Financial Conduct Authority (FCA) and the Bank of England in the trio of bodies that govern how money moves in this country. It was created in 2015 specifically to promote competition, innovation, and the interests of people and businesses that use payment systems.

In plain English: the PSR exists to stop card networks, banks, and payment processors from quietly extracting excessive fees from businesses and consumers while nobody is watching.

For most of its early years, the PSR was largely invisible to small business owners. That is changing.

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The Core Problem: Interchange Fees and the Complexity Nobody Explains

Every time a customer taps their Visa or Mastercard at your terminal, a fee flows from your acquiring bank to the cardholder's issuing bank. This is called the interchange fee. On top of that, the card network (Visa or Mastercard) charges its own scheme fee. Your payment processor wraps both of these into what you see on your statement, usually expressed as a blended percentage or, if you are on an interchange-plus contract, listed as separate line items.

Before Brexit, EU caps held consumer debit interchange at 0.2% and consumer credit at 0.3%. These caps still apply to domestic UK transactions under the retained UK law. But here is where it gets complicated.

For cross-border transactions, specifically payments made by European cardholders to UK businesses (including online purchases), Visa and Mastercard dramatically raised their fees after the UK left the EU's regulatory umbrella. Visa raised cross-border interchange to 1.5% for credit and 1.15% for debit. Mastercard matched it. For a UK e-commerce business selling to EU customers, this was a shock. For businesses operating internationally or running online stores, the cost impact was immediate and significant.

The PSR opened a formal review into these cross-border interchange fees in 2022. That review has been ongoing, and the conclusions are now feeding directly into regulatory action.

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What the PSR Has Actually Done Recently

In late 2024 and into 2025, the PSR escalated from consultation to concrete intervention on several fronts.

Scheme and processing fees review. The PSR formally concluded that Visa and Mastercard have market power in UK payment systems and that there is insufficient competitive pressure on the scheme fees they charge acquirers (and, by extension, merchants). The regulator found that between 2017 and 2022, Visa and Mastercard increased scheme and processing fees by 25% and 30% respectively in real terms, with no clear corresponding improvement in the services provided. The PSR's January 2024 interim report on this topic described the market as "not working well for merchants or their customers".

Cross-border interchange. The PSR published its findings confirming that post-Brexit fee increases by both networks were unjustified by cost or value. It has written to both networks requiring detailed justification and has not ruled out imposing a cap. As of mid-2025, this remains under active scrutiny.

Mandatory transparency requirements. The PSR has pushed for acquirers and processors to provide clearer, more granular fee breakdowns to merchants. The principle is simple: you cannot challenge a fee you do not understand. New guidance strongly encourages processors to itemise scheme fees, interchange, and margins separately.

Card-acquiring market remedies. Following its 2021-2023 market review into card acquiring, the PSR introduced mandatory requirements for acquirers to provide clearer pricing and make it easier for merchants to switch providers. A summary box, similar to the financial product summary boxes the FCA requires, was proposed for merchant service agreements.

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What This Means in Practice for a UK Small Business

Let us be honest about one thing: regulatory reviews do not instantly lower your fees. Card networks have legal teams, lobbying budgets, and years of experience managing regulatory timelines. The PSR's findings on scheme fees were published in early 2024, and Visa and Mastercard are still charging those fees today.

But the trajectory matters. Here is what is practically shifting for small businesses right now.

You have more grounds to ask questions. The PSR's transparency push means your processor is under greater pressure to explain your fees in plain terms. If your current provider gives you a blended rate with no breakdown, ask for interchange-plus pricing. If they refuse, that tells you something.

Switching is easier than it was. The PSR's card-acquiring remedies were specifically designed to reduce the friction of leaving a provider. Excessive notice periods, opaque contract terms, and hidden exit fees are all areas the PSR has flagged. If your current terminal contract locks you in for three years with a punishing exit fee, you may have grounds to challenge it.

Online businesses selling to EU customers should watch cross-border interchange closely. If this is you and you are on a blended rate, there is a real chance you are cross-subsidising international card acceptance without knowing it. Request a full breakdown of your online transaction fees by card type and geography.

Surcharging is still banned for most businesses. Some business owners have asked whether they can pass card fees directly to customers. Under the UK Payment Services Regulations 2017, surcharging on consumer cards is prohibited. You cannot add a fee to a customer paying by Visa or Mastercard debit or credit. (Business cards are different, but that is a separate topic.)

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The Bigger Picture: Why This Matters Now

The UK processes around 21 billion card transactions annually, according to UK Finance's 2024 Payment Markets Summary. Cards account for over 80% of retail payments by volume. The money flowing through interchange and scheme fees represents billions of pounds per year extracted from the UK merchant base, much of it from small and medium businesses with no negotiating power whatsoever.

A sole trader running a florist in Manchester pays the same interchange rate as a retailer processing ten million pounds a year. The difference is that the large retailer negotiated a custom scheme fee arrangement directly with Visa. The florist takes whatever the processor offers.

That asymmetry is what the PSR is trying to correct. The regulator's long-term goal is a payments market where fees are proportionate, transparent, and subject to genuine competition. Whether it fully succeeds is an open question. But the direction of travel is clear.

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Practical Takeaways for Small Business Owners

1. Request your full fee breakdown in writing. Ask your processor to itemise interchange, scheme fees, and their own margin separately. If they cannot or will not, consider that a red flag.

2. Check your contract's exit terms now. Do not wait until you find a better deal to discover you are locked in for 18 months. Know your terms today.

3. If you sell online, check your cross-border transaction fees. Request a breakdown by card type and issuing country. EU-issued cards hitting your UK merchant account are likely costing you significantly more than domestic cards.

4. Do not assume your current provider is competitive. The card-acquiring market in the UK has historically relied on merchant inertia. The PSR's reforms are specifically designed to reduce that inertia. Use them.

5. Watch the PSR's website. The regulator publishes its decisions, consultations, and market reviews at psr.org.uk. If you are serious about your payment costs, bookmark it. The cross-border interchange decision, when it comes, will matter.

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A Note on What to Expect Next

The PSR has signalled that if Visa and Mastercard do not provide satisfactory justification for their scheme and processing fee increases, it will consider imposing price controls. That would be a significant intervention, the first of its kind in the UK card market. It would not happen overnight, and both networks would almost certainly challenge it legally. But the conversation has moved from "should we regulate this" to "how do we regulate this". For small business owners, that shift is meaningful.

The fees you pay to accept cards are not fixed facts of life. They are the product of market structures, regulatory decisions, and your own choices as a merchant. Understanding them is the first step to paying less of them.

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Klipy helps UK small businesses track their payment costs, reconcile transactions, and understand what they are actually paying. No jargon, no hidden charges.

Sources

1. PSR Interim Report: Card-acquiring market review (January 2024) - psr.org.uk/media/publications/card-acquiring-market-review-interim-report
2. PSR Scheme and Processing Fees Review findings (2024) - psr.org.uk
3. UK Finance Payment Markets Summary 2024 - ukfinance.org.uk/data-and-research/data/payment-markets
4. PSR Cross-border interchange fees review (2022-ongoing) - psr.org.uk/our-work/cross-border-interchange-fees
5. Mastercard and Visa post-Brexit cross-border fee increases (reported by multiple sources including The Paypers and PYMNTS.com, 2021-2022)
6. UK Payment Services Regulations 2017 - legislation.gov.uk/uksi/2017/752/contents
7. BIS CPMI Red Book Statistical Update - bis.org/cpmi/publ/d97.htm
8. McKinsey Global Payments Report 2024 - mckinsey.com/industries/financial-services/our-insights/the-2024-mckinsey-global-payments-report

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Disclaimer

The views and information shared in this post are for educational and informational purposes only and do not constitute financial, legal, or professional advice. While every effort is made to ensure accuracy, Klipy UK Limited accepts no liability for decisions made based on this content. Payment processing rates, regulations, and product features referenced are subject to change. Klipy UK is an authorised seller of Teya payment solutions. Where third-party sources are cited, links are provided for reference; Klipy UK does not endorse or guarantee the accuracy of external content. For personalised guidance on your business payment needs, please contact us directly at editor@klipy.uk.