Revolut and Visa take on the UK Payment Systems Regulator over proposed caps on interchange fees, arguing that innovation and competition are at stake.

Revolut and Visa Take a Swing at the UK Regulator

When it comes to shaking up the financial sector, Revolut has never been one to shy away from a fight. Now, the digital banking giant has teamed up with Visa to challenge the UK Payment Systems Regulator’s (PSR) plan to cap interchange fees on cross-border payments. Their argument? The proposed cap would stifle competition and hinder fintech innovation—two things Revolut holds dear.

The legal challenge, filed separately by both companies, contends that the PSR’s move is unnecessary and could have unintended consequences for consumers and businesses alike. Given Revolut’s rapid rise and Visa’s global dominance, this isn’t just another regulatory spat—it’s a battle for the future of fintech.

As reported by the Financial times, Revolut released the following statement: “We disagree with the PSR’s assessment and believe it has acted beyond its statutory powers in imposing these caps. We have therefore requested the court to review, and ultimately overturn the PSR’s decision,” says the fintech giant.

In the same article, the FT quotes a statement from Visa saying, “We respect the PSR’s role as an economic regulator. This narrow legal action is focused only on the PSR’s legal authorisation and process related to price setting to ensure a fair and thorough process, and give clarity to the industry. This is critical to future growth and investment in the UK.”

What’s the Big Deal with Interchange Fees?

Interchange fees might not sound exciting, but they’re the lifeblood of many card payment networks. Every time a customer makes a purchase using a credit or debit card, the merchant’s bank (acquirer) pays a small fee to the customer’s bank (issuer). These fees help fund rewards programs, fraud prevention, and overall service improvements.

The UK PSR argues that these fees—especially on cross-border transactions—are too high and unfairly burden businesses. Their proposed cap aims to bring down costs for merchants, who would theoretically pass on the savings to consumers.

When the PSR announced its proposal to cap interchange fees it stated that both Visa and Mastercard raised interchange fees for online transactions between the EU and the U.K. to 1.15% for debit cards and 1.5% for credit cards, the hike was justified as a means to cover fraud prevention costs and the costs of increased competition.

“In this market review we have provisionally found that the fees charged by Mastercard and Visa to U.K. businesses which accept payments from within the EEA are likely too high,” Chris Hemsley, the PSR’s managing director at the time, said in a press release. “In short, at this stage, we do not think this market is working well.”

The PSR’s report on the matter can be found here.

Revolut’s Case: The Cost of “Fairness”

Revolut argues that capping interchange fees could have the opposite effect of what the regulator intends. Lower fees might help merchants in the short term, but they could also force banks and payment providers to scrap rewards programs and introduce new fees elsewhere to compensate. In essence, consumers might end up paying the price.

Visa, on the other hand, is defending its turf. The payments giant warns that the proposed cap could distort the market, making it harder for new players to compete. By limiting revenue from interchange fees, fintech firms like Revolut may struggle to reinvest in innovation and expansion.

Revolut and Visa argue that the PSR’s decision is rushed, not backed by sufficient evidence, and could ultimately hurt the very consumers it claims to protect.

Revolut Targeting South Africa?

While Revolut is busy fighting the UK regulator, it seems to have its eyes on new frontiers. According to recent reports, the fintech firm may be setting up shop in South Africa. If true, this would mark a significant step in Revolut’s global expansion strategy.

Revolut
Tom Morrison, Head of Strategy & Operations, Revolut, South Africa (LinkedIn).

Revolut also hired Tom Morrison as Head of Strategy & Operations in South Africa three months ago.

South Africa, with its growing digital banking ecosystem and increasing demand for fintech solutions, presents a lucrative market. If Revolut does make the move, it would be entering a competitive space dominated by both local banks and emerging digital challengers. According to South African consultancy firm KLA, 42.31% of South Africans use their phones for digital banking and mobile phone penetration rates have reached 92%.

According to KLA, there is a significant move toward mobile payment apps, as explimfied by offerings from FNB and Standard Bank and financial insitutions are increasingly leveraging the blockchain and AI to drive decentralised finance (DeFi) models and enhanced customer service.

So, while Revolut takes on regulators in one market, it’s quietly plotting its next big move in another. The question is: will it be able to fight battles on multiple fronts, or will regulatory pressure at home slow down its global ambitions?

Fees and Fintech

Revolut’s legal challenge against the UK’s interchange fee cap is more than just a financial dispute—it’s a showdown over the future of digital banking. If Revolut and Visa succeed, they could preserve the current revenue model for fintech firms and payment providers. If they fail, the PSR’s ruling could reshape the payments landscape in the UK.

Either way, one thing is clear: Revolut isn’t backing down. Whether it’s regulators or market expansion, the fintech powerhouse is determined to keep pushing boundaries. And if its rumored South Africa move comes to fruition, Revolut’s ambitions could extend far beyond the UK, no matter what the regulators decide.

For more stories of fintech and innovation, visit our dedicated archives.

Source: Finance Magnates