On 15 January 2026, the High Court in London ruled that the Payment Systems Regulator (PSR) has the legal authority to impose price caps on cross-border interchange fees. The judgment rejected a challenge brought by Visa, Mastercard, and Revolut, removing the most significant legal obstacle to regulatory action on fees that have risen more than fivefold since Brexit.
The Problem
When the UK left the EU, the EU's Interchange Fee Regulation (IFR) ceased to apply to UK-EEA transactions. The IFR had capped consumer debit interchange at 0.20% and consumer credit interchange at 0.30% for cross-border transactions.
Within months of Brexit taking effect, Visa and Mastercard raised their cross-border interchange fees for card-not-present (online) transactions between UK merchants and EEA cardholders:
Consumer debit: 0.20% to 1.15% (a 475% increase) Consumer credit: 0.30% to 1.50% (a 400% increase)
The PSR's market review found these increases cost UK businesses GBP 150-200 million annually, with no identifiable justification. As the PSR stated: "The PSR did not identify any justifications for the increases."
The Legal Challenge
Visa, Mastercard, and Revolut challenged the PSR's statutory authority to impose price caps, arguing the regulator lacked the necessary powers. The High Court disagreed, confirming that the PSR's regulatory mandate under the Financial Services (Banking Reform) Act 2013 encompasses the power to set interchange fee levels as a remedy for competition concerns.
PSR Managing Director David Geale responded: "This enables us to drive forward the work we have been doing to ensure cross-border interchange fees are set at an appropriate level."
The Two-Cap Strategy That Became One
The PSR originally proposed a two-stage approach:
- An interim cap to provide immediate relief while analysis continued
- A permanent cap based on detailed economic methodology
In October 2025, the PSR dropped the interim cap, deciding instead to focus all resources on getting the permanent methodology right. This was partly driven by the legal challenge (since resolved) and partly by the complexity of establishing an appropriate cap level.
The PSR is now consulting on a permanent cap methodology using the merchant indifference test (MIT) - a framework that asks: at what interchange fee level would a merchant be indifferent between accepting a card payment and receiving an alternative payment method (such as a SEPA bank transfer)?
What the Cap Would Cover
The scope is specific: Transaction type: Card-not-present (online/e-commerce) only Direction: EEA-issued cards used at UK merchants (outbound cross-border) Schemes: Visa and Mastercard multilateral interchange fees Card types: Consumer debit and consumer credit
Card-present transactions (in-store) and UK-issued cards used in the EEA are not in scope. The PSR's market review found the competition concerns were concentrated in the card-not-present segment.
The PSR-FCA Merger Complication
The UK Government announced in March 2025 that the PSR would be abolished and its functions merged into the Financial Conduct Authority (FCA). This organisational restructuring adds procedural complexity to the interchange review. The cross-border interchange workstream must now be managed through the transition, with the FCA ultimately responsible for any final cap decision and enforcement.
The merger does not change the substantive analysis or legal authority - the High Court ruling confirmed the powers that will transfer to the FCA. But it adds timeline uncertainty. Staff changes, governance restructuring, and institutional knowledge transfer all create friction.
Who Is Affected
UK merchants selling to EEA customers online: These are the direct beneficiaries of any cap. Currently paying significantly more per transaction than pre-Brexit levels, a cap at or near IFR levels would save the sector GBP 150-200 million annually.
Card schemes: Visa and Mastercard would see reduced interchange revenue on UK-EEA cross-border transactions. They may adjust other fee components (scheme fees, processing fees) to partially offset lost interchange income - a pattern observed in other jurisdictions where interchange caps have been imposed.
Acquiring banks and PSPs: Lower interchange directly reduces the cost base for UK acquirers processing EEA-originating transactions. Whether savings flow to merchants depends on competitive dynamics in the acquiring market.
Revolut and neobanks: Revolut's participation in the legal challenge reflects the complex position of fintechs that both issue cards (earning interchange) and serve merchants (paying interchange). Any cap affects both sides of their business.
Timeline and Next Steps
October 2025: PSR published final market review report and methodology consultation November 2025: Consultation on cap methodology closed January 2026: High Court ruling confirming PSR's powers 2026: PSR (or FCA successor) expected to publish proposed cap level and consult Late 2026 / 2027: Final cap decision and implementation
No firm deadline has been set for the final cap decision. The PSR has indicated it will conduct further consultation before implementing any cap, and the FCA merger may extend the timeline.
Key Takeaway
The legal path to a UK cross-border interchange cap is now clear. The substantive question is no longer whether the regulator can act, but at what level it will set the cap and when. Merchants, acquirers, and schemes operating in the UK-EEA corridor should be modelling scenarios based on a cap somewhere between the current elevated levels (1.15% debit / 1.50% credit) and the pre-Brexit IFR levels (0.20% / 0.30%). The merchant indifference test methodology suggests the final number may land above the old IFR caps but well below current rates.
Sources: PSR - High Court Backs PSR's Powers to Cap Cross-Border Card Fees (January 2026); PSR - Market Review into Cross-Border Interchange Fees; PSR - Consultation on Price Cap Methodology (October 2025); Herbert Smith Freehills - UK-EEA Cross-Border Interchange Fees Analysis.