Financial Times: MasterCard warned over transaction fees

Bob Sherwood and Jane Croft report on the UK’s Office of Fair Trading’s decision regarding MasterCard’s interchange fees.

The watchdog was annoyed about the fee – 1.1 per cent of any transaction – paid by the retailers’ banks to the card-issuing banks. The OFT said this cost was passed on to retailers and, in turn, to consumers. That drove up prices at stores where cards were used.

There are about £30bn worth of transactions carried out using MasterCard credit or charge cards each year, so shoppers are coughing up about £330m a year for the interchange fee alone.

The OFT said MasterCard had failed to justify the level of its fee. It said the system breached competition rules because it was so widely used and there were no incentives for banks to agree a lower fee.

The full text of the OFT’s decision is available online.

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