When a shopper in France clicks “pay” on a UK website, the transaction looks simple. A checkout page. A confirmation email. A parcel on the move.
Under the hood, it is an international money transfer disguised as a domestic habit: a four-party card system moving value between a merchant, an acquiring bank, a card network, and an issuing bank — with a quiet toll built in.
That toll is interchange. And, since Brexit, it has become one of the most contentious prices in British payments.
On January 15, 2026, London’s High Court backed the UK Payment Systems Regulator (PSR) in a closely watched case brought by Visa, Mastercard and Revolut. The judge, John Cavanagh, ruled the PSR has the legal power to impose price caps on certain cross-border interchange fees — even though the regulator still hasn’t decided what the cap should be, or when it should start.
In other words: the court did not set a number. It removed a roadblock.
Now comes the harder part — designing a cap that actually lowers costs for British businesses without simply shifting the bill elsewhere.
What changed after Brexit: a fivefold jump, almost overnight
For years, interchange fees inside Europe were constrained by regulation. For consumer cards, the reference caps were 0.2% on debit and 0.3% on credit.
Then the UK left the EU’s regulatory perimeter. From January 2021, the relevant EU cap no longer applied to certain UK-EEA cross-border transactions.
What happened next is the spark for today’s fight:
- Visa raised interchange on certain UK-EEA “card-not-present” (online) transactions to 1.15% (debit) and 1.5% (credit) from October 2021.
- Mastercard followed, raising the same outbound online fees in April 2022.
The PSR describes this as a fivefold increase on those online cross-border transactions.
And crucially, the PSR estimates that in 2022 alone, the higher fees cost UK businesses an additional £150m–£200m.
This is not a niche corner of payments. Mastercard and Visa account for about 99% of UK debit and credit card payments, the PSR has noted in its work.
A quick primer: who pays interchange, and why it matters
Interchange is often described as a “swipe fee”, but that phrase hides the flow of money.
In a typical four-party system, interchange is paid by the acquirer (the merchant’s side) to the issuer (the cardholder’s side). The card network sets the default rate — but interchange revenue usually lands with the issuing bank/fintech, not with Visa or Mastercard directly.
That structure is why this story isn’t just “big networks vs small merchants”. It is also merchant costs vs issuer revenues — and, in this case, UK merchants paying interchange that largely ends up with EEA issuers.
The PSR’s analysis suggests most of the increase did not stay “in the plumbing”. It was passed through. The regulator concluded that about 95% of the outbound fee increases were passed from acquirers to merchants.
If you’re a UK business selling online into Europe, interchange becomes a direct input cost — one that is hard to avoid without turning away card customers.
What the court ruling does (and does not) do
The claimants’ argument was simple in spirit: a price cap is a heavy intervention, so the PSR should not be able to impose one via its general powers.
The court disagreed. Judge Cavanagh ruled the PSR does have the power to impose price caps in this context.
The PSR’s managing director, David Geale, called the ruling confirmation of the regulator’s ability to ensure costs are fair for UK businesses and consumers.
But the ruling leaves the key economic questions untouched:
- What should the cap be — back to pre-Brexit levels, or something higher?
- How quickly can it be implemented?
- Will merchants actually see lower costs, or will savings be absorbed by intermediaries?
- What will issuers do if interchange income falls?
The regulator’s own dilemma: cheap for merchants, sustainable for issuers
In its remedies work, the PSR has openly weighed a trade-off that most consumers never see.
A strict cap closer to the old levels (0.2%/0.3%) is clean and easy to explain. The PSR said it was “minded” to see that level as a good balance at the first stage — partly because it mirrors the pre-Brexit baseline and, in the PSR’s view, UK-EEA online transactions are not materially more costly to facilitate than intra-EEA payments.
But the regulator has also acknowledged the counterargument: smaller issuers may find it harder to cover their net costs at that lower level. One alternative floated for an interim stage was 0.5% (debit) / 0.6% (credit) — a “more cautious” cap that, the PSR suggested, might better allow smaller issuers to cover net costs.
The numbers are meaningful:
- A cap at 0.2%/0.3% could reduce outbound UK-EEA interchange paid by UK acquirers and merchants by £150m–£200m per year (PSR estimate).
- A cap at 0.5%/0.6% could reduce it by £100m–£150m per year.
This is why Revolut’s presence in the courtroom matters. Many fintechs are not only buyers of card services — they are also issuers who rely on interchange to fund “free” features: fraud protection, chargeback handling, customer support, rewards, and subsidised FX.
UK Finance, representing banks, put it plainly in its response to the PSR: interchange is an “enabler” that supports innovation and fraud protection — and the sums cited, while large, are still a small part of retailers’ total costs.
You can disagree with that framing and still learn from it: in card economics, costs don’t vanish. They relocate.
Why the PSR hasn’t capped the fees yet — and what happens next
The irony of today’s victory is that it comes after a long pause.
After publishing its final findings, the PSR consulted on a staged remedy. But in October 2025, it decided not to proceed with an interim cap, saying it would be more pragmatic to implement a cap in one step, after it developed a robust methodology and analysis to determine the “appropriate” level.
That methodology work matters because the PSR is trying to do something regulators often promise but rarely execute cleanly: set a price cap that reflects an economically defensible “right” level, not just a politically convenient one.
In MR22/2.8, the PSR consulted on using a version of the merchant indifference test (MIT) — a framework used in some interchange debates to estimate the interchange level at which a merchant is indifferent between accepting a card payment and the next best alternative.
Now that the High Court has upheld the PSR’s authority, the work resumes with fewer legal clouds overhead.
The bigger uncertainty: the PSR itself may not exist (at least not as a standalone body)
There is another twist. The UK government has already said it intends to abolish the PSR and fold its functions into the Financial Conduct Authority (FCA) as part of a broader effort to streamline regulation.
Even the PSR’s own methodology consultation notes this transition, implying the underlying objectives should continue under the FCA’s umbrella.
So the cap could end up being designed by one regulator and implemented by another — a governance detail that sounds bureaucratic, but can matter when you’re bargaining with global networks and large financial institutions.
What to watch as the cap moves from theory to reality
1) Will savings reach merchants — or get stuck in the middle?
The PSR concluded the fee rise was mostly passed through to merchants.
But pass-through works differently in reverse. Many merchants pay a blended “merchant service charge”, not itemised interchange. If interchange falls, the benefit may depend on how competitive the acquiring market is — and how quickly acquirers reprice contracts.
The political promise of “£150m–£200m” savings is only as real as the plumbing that delivers it.
2) Will issuers reprice card products — especially for cross-border usage?
If EEA issuers earn less on EEA cards used at UK merchants, they may respond by:
- trimming rewards
- tightening underwriting on free accounts
- introducing or increasing account fees
That risk is one reason the PSR even floated a higher interim cap (0.5%/0.6%) to reduce unintended consequences for smaller issuers.
3) Will the cost simply shift to other card fees?
Interchange is only one line in the card cost stack. Merchants also face scheme fees and processing costs — areas where regulators have raised fresh concerns in the UK.
This is the classic problem with narrow caps: if you squeeze one balloon, another expands. A credible cap regime may need a broader view of the total fee bundle, not just interchange.A thought to end on: payments are now part of trade policy — even when nobody calls it that
Brexit created a visible border in regulation. Cards found it quickly.
A French customer buying from a British merchant is, economically, a tiny export transaction. The post-Brexit interchange jump effectively made that export a bit more expensive — not by changing VAT or customs, but by changing the toll on the payment rail.
The High Court ruling is a win for regulatory authority. Whether it becomes a win for businesses depends on the next, quieter choices: the cap level, the methodology, and the discipline to stop the fee from reappearing under a different name.
