Legal Insights
Are Visa & Mastercard are Making Everything More Expensive?
Are Visa & Mastercard are Making Everything More Expensive?
Every time you tap your card, a fee is paid.
Every time you tap your card, a fee is paid.
Alin George Ilinca
Jul 18, 2025
Every time you tap your Visa or Mastercard, a fraction of your payment quietly disappears as a transaction fee. This is usually unnoticed by customers, but businesses feel the pinch deeply. Together, these two giants dominate 95% of all card payments in the UK.
Recently, they have been accused of charging exorbitant fees and restricting competition. Apparently, these inflated fees have cost UK businesses at least £170 million annually since 2017.
So how did they achieve this level of dominance?
It all started in 1950, when Frank McNamara introduced the world to the Diners Club card after finding himself at a restaurant without his wallet. This invention paved the way for today’s credit cards.
By 1958, American Express and Bank of America entered the market with their own cards. Then, in 1966, Bank of America began licensing its card network to other banks across the United States, eventually rebranding the network as Visa. That same year, under this licensing arrangement, Barclays introduced the UK’s first credit card, known as Barclaycard.
Meanwhile, several US banks formed the Interbank Card Association (ICA) in 1966 to rival Bank of America’s network. Dubbed “Master Charge” at first, it became MasterCard in 1979.
Fast-forward to today, and whenever you make a purchase, your card information swiftly travels through a secure network to your bank, which immediately approves or declines the transaction. Visa or Mastercard then facilitates the transfer of funds between your bank and the merchant’s bank. They take a fee for each transaction.
Together, they control almost 90% of global card transactions (outside of China), creating what is known as a duopoly. In the UK alone, they handle 95% of debit and credit card payments.
But why can’t other players enter the market?
Think of payment networks like a network of motorways. Building one short stretch of a road in the middle of nowhere is not only expensive, but it offers little value unless it connects seamlessly to the rest of the country’s motorways. Similarly, any newcomer to payment processing faces high upfront costs for establishing its own digital ‘routes’ without the guarantee of meaningful traffic. Until those new roads link to a broader network—banks, merchants, customers—no one has a compelling reason to use them.
Yet the real barrier doesn’t end with infrastructure. Visa and Mastercard benefit from the network effect. That is, each new user raises the value of Visa and Mastercard’s systems. More users mean more transactions, which draws in yet more users. This positive feedback loop explains why their dominance grows continually and why alternatives struggle to break in.
Over the years, this dominance has repeatedly led to allegations of unfair competition and excessive fees, resulting in lawsuits, settlements, and regulatory interventions worldwide.
Historically, British consumers had limited practical means to collectively address unfair business practices such as excessive transaction fees. All that changed with the Consumer Rights Act 2015, which made possible “opt-out” collective actions—essentially allowing entire groups of affected consumers to bring a single claim.
In 2016, Walter Merricks CBE relied on these new rules to file a collective action against Mastercard. He argued that Mastercard’s excessive fees from 1992 to 2008 forced merchants to raise prices, indirectly making consumers across the UK pay more.
After several years of legal proceedings, in 2020, the UK Supreme Court allowed the action to proceed. By the end of 2024, Merricks and Mastercard agreed on a settlement of roughly £200 million, which the Competition Appeal Tribunal (CAT) has recently approved.
But the UK isn’t the only place where Visa and Mastercard have faced scrutiny over their operations. Earlier in 2024, the payment giants agreed to a $30 billion settlement with US merchants over claims of excessive transaction fees. However, a US judge later rejected this settlement, deeming it insufficient and stating the companies could afford to pay more. This came after a previous class action settlement for $5.5 billion over similar allegations dating back to 2004. Visa also faced claims of abusing its market dominance to suppress competitors in the debit payments market.
Now, both companies are under scrutiny in the UK. The Payment Systems Regulator (PSR)—the watchdog responsible for ensuring fair, competitive, and secure payment systems—accused Visa and Mastercard of charging exorbitant transaction fees and restricting competition. According to the PSR, these inflated fees have cost UK businesses at least £170 million annually since 2017, despite no corresponding improvements in service quality.
For consumers, the impact is often hidden. Each individual transaction fee might look insignificant, but across millions of purchases, even small markups can push up prices in shops and restaurants—ultimately making us pay more for basic goods and services.
Where we draw the line between efficiency and competition is still an open question, and Visa and Mastercard’s dominance is far from its final chapter. One possible step the PSR may take is imposing a cap on the fees these giants are allowed to charge.
Still, whether that alone can reshape a market so entrenched remains to be seen. For now, the tug-of-war between convenience, cost, and competition continues.
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Every time you tap your Visa or Mastercard, a fraction of your payment quietly disappears as a transaction fee. This is usually unnoticed by customers, but businesses feel the pinch deeply. Together, these two giants dominate 95% of all card payments in the UK.
Recently, they have been accused of charging exorbitant fees and restricting competition. Apparently, these inflated fees have cost UK businesses at least £170 million annually since 2017.
So how did they achieve this level of dominance?
It all started in 1950, when Frank McNamara introduced the world to the Diners Club card after finding himself at a restaurant without his wallet. This invention paved the way for today’s credit cards.
By 1958, American Express and Bank of America entered the market with their own cards. Then, in 1966, Bank of America began licensing its card network to other banks across the United States, eventually rebranding the network as Visa. That same year, under this licensing arrangement, Barclays introduced the UK’s first credit card, known as Barclaycard.
Meanwhile, several US banks formed the Interbank Card Association (ICA) in 1966 to rival Bank of America’s network. Dubbed “Master Charge” at first, it became MasterCard in 1979.
Fast-forward to today, and whenever you make a purchase, your card information swiftly travels through a secure network to your bank, which immediately approves or declines the transaction. Visa or Mastercard then facilitates the transfer of funds between your bank and the merchant’s bank. They take a fee for each transaction.
Together, they control almost 90% of global card transactions (outside of China), creating what is known as a duopoly. In the UK alone, they handle 95% of debit and credit card payments.
But why can’t other players enter the market?
Think of payment networks like a network of motorways. Building one short stretch of a road in the middle of nowhere is not only expensive, but it offers little value unless it connects seamlessly to the rest of the country’s motorways. Similarly, any newcomer to payment processing faces high upfront costs for establishing its own digital ‘routes’ without the guarantee of meaningful traffic. Until those new roads link to a broader network—banks, merchants, customers—no one has a compelling reason to use them.
Yet the real barrier doesn’t end with infrastructure. Visa and Mastercard benefit from the network effect. That is, each new user raises the value of Visa and Mastercard’s systems. More users mean more transactions, which draws in yet more users. This positive feedback loop explains why their dominance grows continually and why alternatives struggle to break in.
Over the years, this dominance has repeatedly led to allegations of unfair competition and excessive fees, resulting in lawsuits, settlements, and regulatory interventions worldwide.
Historically, British consumers had limited practical means to collectively address unfair business practices such as excessive transaction fees. All that changed with the Consumer Rights Act 2015, which made possible “opt-out” collective actions—essentially allowing entire groups of affected consumers to bring a single claim.
In 2016, Walter Merricks CBE relied on these new rules to file a collective action against Mastercard. He argued that Mastercard’s excessive fees from 1992 to 2008 forced merchants to raise prices, indirectly making consumers across the UK pay more.
After several years of legal proceedings, in 2020, the UK Supreme Court allowed the action to proceed. By the end of 2024, Merricks and Mastercard agreed on a settlement of roughly £200 million, which the Competition Appeal Tribunal (CAT) has recently approved.
But the UK isn’t the only place where Visa and Mastercard have faced scrutiny over their operations. Earlier in 2024, the payment giants agreed to a $30 billion settlement with US merchants over claims of excessive transaction fees. However, a US judge later rejected this settlement, deeming it insufficient and stating the companies could afford to pay more. This came after a previous class action settlement for $5.5 billion over similar allegations dating back to 2004. Visa also faced claims of abusing its market dominance to suppress competitors in the debit payments market.
Now, both companies are under scrutiny in the UK. The Payment Systems Regulator (PSR)—the watchdog responsible for ensuring fair, competitive, and secure payment systems—accused Visa and Mastercard of charging exorbitant transaction fees and restricting competition. According to the PSR, these inflated fees have cost UK businesses at least £170 million annually since 2017, despite no corresponding improvements in service quality.
For consumers, the impact is often hidden. Each individual transaction fee might look insignificant, but across millions of purchases, even small markups can push up prices in shops and restaurants—ultimately making us pay more for basic goods and services.
Where we draw the line between efficiency and competition is still an open question, and Visa and Mastercard’s dominance is far from its final chapter. One possible step the PSR may take is imposing a cap on the fees these giants are allowed to charge.
Still, whether that alone can reshape a market so entrenched remains to be seen. For now, the tug-of-war between convenience, cost, and competition continues.
📩 Don’t miss the next article, event, or opportunity — sign up to Equal Opportunity and get everything straight to your inbox.
Every time you tap your Visa or Mastercard, a fraction of your payment quietly disappears as a transaction fee. This is usually unnoticed by customers, but businesses feel the pinch deeply. Together, these two giants dominate 95% of all card payments in the UK.
Recently, they have been accused of charging exorbitant fees and restricting competition. Apparently, these inflated fees have cost UK businesses at least £170 million annually since 2017.
So how did they achieve this level of dominance?
It all started in 1950, when Frank McNamara introduced the world to the Diners Club card after finding himself at a restaurant without his wallet. This invention paved the way for today’s credit cards.
By 1958, American Express and Bank of America entered the market with their own cards. Then, in 1966, Bank of America began licensing its card network to other banks across the United States, eventually rebranding the network as Visa. That same year, under this licensing arrangement, Barclays introduced the UK’s first credit card, known as Barclaycard.
Meanwhile, several US banks formed the Interbank Card Association (ICA) in 1966 to rival Bank of America’s network. Dubbed “Master Charge” at first, it became MasterCard in 1979.
Fast-forward to today, and whenever you make a purchase, your card information swiftly travels through a secure network to your bank, which immediately approves or declines the transaction. Visa or Mastercard then facilitates the transfer of funds between your bank and the merchant’s bank. They take a fee for each transaction.
Together, they control almost 90% of global card transactions (outside of China), creating what is known as a duopoly. In the UK alone, they handle 95% of debit and credit card payments.
But why can’t other players enter the market?
Think of payment networks like a network of motorways. Building one short stretch of a road in the middle of nowhere is not only expensive, but it offers little value unless it connects seamlessly to the rest of the country’s motorways. Similarly, any newcomer to payment processing faces high upfront costs for establishing its own digital ‘routes’ without the guarantee of meaningful traffic. Until those new roads link to a broader network—banks, merchants, customers—no one has a compelling reason to use them.
Yet the real barrier doesn’t end with infrastructure. Visa and Mastercard benefit from the network effect. That is, each new user raises the value of Visa and Mastercard’s systems. More users mean more transactions, which draws in yet more users. This positive feedback loop explains why their dominance grows continually and why alternatives struggle to break in.
Over the years, this dominance has repeatedly led to allegations of unfair competition and excessive fees, resulting in lawsuits, settlements, and regulatory interventions worldwide.
Historically, British consumers had limited practical means to collectively address unfair business practices such as excessive transaction fees. All that changed with the Consumer Rights Act 2015, which made possible “opt-out” collective actions—essentially allowing entire groups of affected consumers to bring a single claim.
In 2016, Walter Merricks CBE relied on these new rules to file a collective action against Mastercard. He argued that Mastercard’s excessive fees from 1992 to 2008 forced merchants to raise prices, indirectly making consumers across the UK pay more.
After several years of legal proceedings, in 2020, the UK Supreme Court allowed the action to proceed. By the end of 2024, Merricks and Mastercard agreed on a settlement of roughly £200 million, which the Competition Appeal Tribunal (CAT) has recently approved.
But the UK isn’t the only place where Visa and Mastercard have faced scrutiny over their operations. Earlier in 2024, the payment giants agreed to a $30 billion settlement with US merchants over claims of excessive transaction fees. However, a US judge later rejected this settlement, deeming it insufficient and stating the companies could afford to pay more. This came after a previous class action settlement for $5.5 billion over similar allegations dating back to 2004. Visa also faced claims of abusing its market dominance to suppress competitors in the debit payments market.
Now, both companies are under scrutiny in the UK. The Payment Systems Regulator (PSR)—the watchdog responsible for ensuring fair, competitive, and secure payment systems—accused Visa and Mastercard of charging exorbitant transaction fees and restricting competition. According to the PSR, these inflated fees have cost UK businesses at least £170 million annually since 2017, despite no corresponding improvements in service quality.
For consumers, the impact is often hidden. Each individual transaction fee might look insignificant, but across millions of purchases, even small markups can push up prices in shops and restaurants—ultimately making us pay more for basic goods and services.
Where we draw the line between efficiency and competition is still an open question, and Visa and Mastercard’s dominance is far from its final chapter. One possible step the PSR may take is imposing a cap on the fees these giants are allowed to charge.
Still, whether that alone can reshape a market so entrenched remains to be seen. For now, the tug-of-war between convenience, cost, and competition continues.
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