Understand Your Rights. Solve Your Legal Problems
The High Court of Justice has confirmed that the Payment Systems Regulator (PSR) holds the legal authority to cap cross-border card fees. In a judgment delivered on 15 January 2026, Mr Justice Cavanagh dismissed a coordinated judicial review brought by Visa, Mastercard, and Revolut. The ruling provides the regulator with a "green light" to intervene in fee structures that have surged fivefold since Brexit.
The claimants’ primary legal theory relied on a narrow reading of Section 54 of the Financial Services (Banking Reform) Act 2013 (FSBRA). They argued the PSR’s power to issue "general directions" was limited to technical or operational "plumbing" of payment systems. Under this view, price-setting would be an unauthorized economic intrusion.
Mr Justice Cavanagh rejected this distinction as a "false dichotomy." The court held that pricing is inherently operational. The ruling clarifies that the PSR’s statutory objectives—promoting competition and protecting service users—grant it the flexibility to cap fees directly. This avoids the need for a multi-year Competition and Markets Authority (CMA) investigation.
Mastercard and Revolut advanced a secondary challenge under Section 108 of the FSBRA. They contended the PSR was barred from acting because the fees were already subject to separate payment regulations. The court found this argument "overly broad."
The judgment established that regulatory purpose is the deciding factor. Because the PSR’s "motivating objective" was to address competition failure rather than "access to the system," Section 108 was not engaged. This high-bar ruling prevents firms from using existing regulations as a shield against new, targeted interventions.
The PSR estimates that the jump in "outbound" fees—where EU consumers buy from UK shops—costs British businesses between £150 million and £200 million annually. With the legal "vires" challenge resolved, the regulator is shifting focus to the financial mechanics of the cap.
The Methodology: The PSR is currently finalizing the Merchant Indifference Test (MIT). This formula identifies the price point where a merchant would be indifferent between accepting a card or a bank transfer.
The Stage 2 Cap: Having scrapped an earlier interim plan, the regulator will now move directly to a long-term cap. This will likely bring the current 1.15%–1.5% rates back toward pre-Brexit levels of 0.2%–0.3%.
Issuer Impact: Banks and fintechs like Revolut warn that a "one-size-fits-all" cap may force them to process certain international transactions at a loss.
This ruling cements the PSR’s role as a proactive price regulator. It signals a shift away from the "red tape" reduction seen in other sectors, prioritizing the bottom line of UK merchants over the revenue streams of global payment networks.
