Visa and Mastercard were recently found to be in breach of UK competition rules over their interchange fees – an important outcome in a years-long legal battle. Silvia Iacovcich, senior reporter at Retail Systems, investigates whether the ruling will lead to a more competitive and transparent ecosystem, in turn reshaping the retailer-customer relationship.

At the end of June, the UK Competition Appeal Tribunal ruled that Visa and Mastercard's multilateral interchange fees violate European competition rules.

While there is still a second UK judgement on whether the alleged overcharging is being transferred to consumers via merchants expected later this year, and both payments giants are currently seeking permission to appeal the Tribunal’s decision, the move marks a significant victory for thousands of merchants who feel they have been locked into unreasonable fees.

The assumption is that a lowering of fees would benefit both consumers and merchants, with the latter usually spreading processing fees across their products, meaning even cash customers can indirectly pay for them. A reduction, therefore, surely represents a step towards fairer pricing?

However, some experts argue that the ruling represents only the tip of the iceberg. Henry Orunkoya, founder of European payment platform Wollette, believes the problem goes much deeper.

“The ruling reveals that the entire payment structure needs fundamental reform,” he says. “The system remains dominated by two giants, Mastercard and Visa, making meaningful change difficult.”

These two giant companies process indeed more than $3 trillion worth of transactions per year, and about 40 per cent of their revenues come from transaction-related commissions. But interchange fees are only one part of the jigsaw puzzle.

The need for an infrastructure overhaul

“The payment system fee issue is far more complex,” explains Orunkoya.

“Merchants face a host of other fees, including service charge or chargeback fees, with these structures strongly benefitting giant payment schemes while deterring innovation.”

This creates barriers for competitors trying to enter the market and challenge the likes of Mastercard or Visa.

“Once a market is captured by these large players, it becomes very challenging to create meaningful change,” he adds.

Benjamin Avraham, founder and chief executive of FinTech Okoora, agrees that the deeper problem lies not just in prices, but in the underlying infrastructure.

“Excessive fees are a symptom,” he explains. “The real disease is dependency on outdated, closed-loop payment systems that offer no control, transparency, and protection against risk.”

With the expansion of global commerce, some argue that retailers not only need fair fees but an infrastructure they can own and trust.

“The future of merchant-customer loyalty will be determined not by who charges 10 basis points less, but rather by who gives customers the confidence that what they see is what they pay, with no hidden costs or surprises,” Avraham explains.

If the past decade was about FinTechs optimising card rails, the next decade will be about retailers embedding their own, Okoora’s founder says.

A question of trust

The payment industry has always been complex, with multiple entrenched fee structures.

“Visa and MasterCard intentionally maintain this complexity, knowing that merchants bear the burden of high transaction fees and consumers remain largely unaware of the underlying fee structures,” Orunkoya explains.

Andreea Daly, founder of payment platform Money Squirrel, agrees. Using Stripe as an example, Daly criticises its complex and opaque pricing structure, suggesting that payment processing platforms often make their prices intentionally complicated.

“Despite Stripe being a common integration platform for many products, I find their fee structure unnecessarily convoluted and difficult to understand,” she points out.

According to Daly, sometimes complexity can be intentional: a deliberate choice by payment platforms to obscure their prices.

Because of this, she believes that payment processing should become simpler, suggesting that the ruling’s positive outcome means that merchants could increasingly look for alternative solutions that offer more transparent and straightforward pricing.

“As more alternatives emerge, merchants will likely seek out payment platforms with more straightforward and understandable fee structures,” she says.

Will the ruling accelerate the adoption of alternatives?

Although experts agree that the ruling will accelerate merchant adoption of alternative payment systems, they also believe that this will remain a challenge.

Money Squirrel’s Daly points out that although innovative financial technologies are working to reduce costs by eliminating layers of intermediation in banking transactions, the real challenge lies in their effective implementation.

“If you don’t have strong brand awareness, it’s hard to get consumers to try something new,” she says. “Especially in the UK, where people still prefer traditional financial services, which slows down the adoption of innovative solutions like Open Banking and Open Finance.”

Robin Anderson, head of product management at FinTech Tribe Payments, agrees that the ruling could lead to more adoption of alternatives. However, he says that this will mainly depend on the user experience at the point of sale, consumer awareness, and familiarity with existing payment methods.

“Consumers are very familiar with traditional credit and debit card payments, having used them for 60-65 years, they understand concepts like refunds, disputes, and chargebacks,” he explains. “For alternative payment methods to succeed, they need to provide a similarly clear and easy-to-understand experience that builds consumer trust and awareness.”

Open Banking, once hailed as a breakthrough, also faces similar scrutiny due to what is regarded by some as slow adoption.

“Open Banking is a good concept, but it’s poorly executed in practice,” Wollette’s Orunkoya explains. “Banks traditionally do not work well together, and their decisions are driven by self-interest and protecting their bottom line.

“Sixteen banks are currently competing rather than collaborating.”

Will savings be passed on to consumers?

As interchange fees fall, a question emerges: will consumers benefit from the change?

Kat Marangos, vice president of strategic accounts at real-time payment gateway Volt.io, believes that merchants will face increasing pressure to offer transparency and fair pricing through alternative payment options, loyalty programmes or sustainability initiatives.

“With regulators scrutinising fees, merchants will be expected to show how they’re passing on the benefits,” she says.

However, MoneySquirrel’s Daly remains sceptical.

“Even if new payment systems reduce transaction costs, businesses – especially SMEs – might be more inclined to keep these savings as increased profit margins rather than lowering prices for consumers,” she says.

Given the current economic climate, in which many companies feel financially squeezed, merchants may prioritise their financial survival and potential profits over immediate consumer benefits.

Anderson from Tribe Payments agrees.

“In highly competitive, price-sensitive sectors like online electronics, fuel, and general retail, savings will likely be immediately passed on through price wars,” he says.

However, in other sectors, retailers may be more likely to reinvest savings in a better product offering, improve customer loyalty programmes, and boost the user experience to improve annual profitability.

The expert suggests that for many retailers, these savings will not immediately translate into lower consumer prices.

On the contrary, some retailers may use the money strategically to improve their business or to achieve better financial performance.

“Another option is that savvy retailers will likely use the savings from reduced interchange fees as a financial buffer to hedge them against potential future cost increases and maintain their price competitiveness when faced with supply chain inefficiencies or new upward price pressures,” he adds.

Such an approach will allow them to absorb potential future cost increases without having to raise prices, while maintaining their competitiveness in the market, Anderson explains.

The consumer-merchant relationship: will it improve?

Experts remain sceptical on whether there is a possibility that the ruling could influence or improve relations between retailers and consumers.

“While the change is meaningful, it won’t be seen,” Orunkoya points out.

The impact of the ruling on prices will be limited, as the reductions in fees are in practice very small, between 0.02 per cent and 0.03 per cent. For this reason, price reductions will only affect high-value transactions and expensive items, such as purchased flights which may suffer a price drop.

“However, low-cost items such as bread or biscuits won’t see meaningful price changes,” Orunkoya explains.

Orunkoya notes that requiring merchants to publish their transaction charges could drive change in these relationships."

If retailers were required to publish their transaction charges, it would have an impact, but I don’t think this will happen soon,” he says.

However, Anderson warns that excessive transparency could backfire and cautions against overloading consumers with complex tariff information.

“If a checkout presents multiple payment options with a detailed explanation of fees, it could actually discourage customers and lead to payment abandonment,” he explains, referencing the failed rollout of Dynamic Currency Conversion (DCC) a decade ago.

“Consumers generally don't care about the technical details of payment economics, they will only care if there’s a clear, material benefit to them," he explains.

“For example, if a payment method offers a one per cent discount, that might attract their attention.”

Transparency alone may not solve the problem. Consumers need to be educated about how payment systems work and how Mastercard and Visa fees indirectly affect prices, Orunkoya explains.

“Without this understanding, meaningful change is unlikely,” he points out.

The bottom line

While the ruling against Mastercard and Visa marks a step towards what merchants would consider fairer fees, the road ahead is not straightforward.

The two companies continue to dominate the world’s payment infrastructure, making meaningful change challenging. Experts agree that what is needed is a major shake-up, with a focus on alternative payment methods that offer more transparent and straightforward pricing.

The Tribunal’s decision may be a good starting point for creating a payments environment that embraces innovation and competition, with the onus on regulators, start-ups, and merchants to drive a new market.

Following the ruling, all eyes look towards whether Mastercard and Visa will appeal, as well as the upcoming pass-on judgement.

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