The UK's High Court has delivered a landmark ruling that strengthens the hand of the Payments Systems Regulator (PSR), affirming its legal authority to impose caps on cross-border card interchange fees for transactions between the European Economic Area (EEA) and the United Kingdom. The decision, handed down by Judge John Cavanagh on January 15, 2026, dismisses a legal challenge brought by payment giants Visa and Mastercard, as well as digital bank Revolut.
The core of the dispute lies in the regulatory vacuum created by Brexit. While the UK was an EU member, interchange fees for consumer card payments were capped at 0.2% for debit and 0.3% for credit cards under EU-wide rules. These caps ceased to apply to UK-EEA transactions after the UK's exit from the EU framework in January 2021. The PSR contends that in the absence of these limits, Visa and Mastercard raised their fees for online purchases where an EEA cardholder buys from a UK merchant, with charges reportedly climbing to as high as 1.15% for debit and 1.5% for credit cards.
The PSR argues that UK merchants, particularly in online settings, have little choice but to accept Visa and Mastercard, giving the networks undue power to raise fees without corresponding service improvements. The regulator's focus is specifically on "outbound e-commerce," where the consumer is in the EEA and the merchant is in the UK. The companies had challenged the PSR's statutory authority to set such price controls, but the court rejected their argument, clearing a major legal obstacle for the regulator.
PSR Managing Director David Geale welcomed the ruling, stating it "confirms our authority to act" and allows work on cross-border fees to proceed. The judgment does not set a specific fee cap but empowers the PSR to move forward with consultations to determine appropriate limit levels and implementation timelines. This process is expected to be contentious, with debates likely over whether caps should mirror former EU levels or be set differently.
The ruling poses a significant challenge to the revenue models of card networks and fintechs. Visa has previously argued that lower interchange fees could reduce funding for fraud prevention and network investment. Revolut's involvement highlights the broader impact on fintechs, many of which rely on interchange revenue to subsidize free accounts and customer rewards programs. The decision comes amid a broader UK government review that may see the PSR folded into the Financial Conduct Authority, though the court's ruling establishes a strong legal precedent for intervention regardless of the regulatory structure.
