The economics of card acceptance are under the most sustained regulatory pressure seen in a generation. A landmark Court of Appeal ruling in January 2026 upheld the Payment Systems Regulator's power to impose a price cap on card scheme fees, and the PSR published its 2026/27 Annual Plan in April confirming enforcement as a live priority. For acquirers, processors, and merchants routing sterling and euro transactions, the implications are immediate. For GCC-based payment businesses with UK or EEA clearing exposure, the structural repricing of scheme economics is not a distant concern but an active input to contract negotiations and margin modelling right now.
How Card Scheme Fees Became a Regulatory Flashpoint
The controversy centres on two categories of charge. Interchange fees are the per-transaction fees paid by acquirers to card issuers, capped in the UK at 0.2% for debit and 0.3% for credit under the retained Interchange Fee Regulation (IFR). Scheme fees are a separate and historically opaque layer of charges levied directly by Visa and Mastercard on acquirers and issuers for network access, authorisation, and data services. Unlike interchange, scheme fees carried no statutory cap, and both networks exploited that gap aggressively between 2017 and 2024.
The PSR's market review, published in final form in November 2023, found that Visa and Mastercard had increased scheme and processing fees by 25% to 30% in real terms over the five years to 2022, generating returns the regulator characterised as inconsistent with a competitive market. The review identified specific fee line items, including cross-border acquiring fees, card-not-present surcharges, and network access fees, as the most egregious. Combined UK scheme fee revenues for the two networks were estimated at approximately £480 million annually, up from roughly £340 million in 2017.
The January 2026 Court of Appeal Ruling
Both Visa and Mastercard challenged the PSR's remedial powers in the Court of Appeal, arguing that scheme fees fell outside the regulator's jurisdiction under the Financial Services (Banking Reform) Act 2013. The Court of Appeal dismissed those arguments in its January 2026 judgment, confirming that the PSR holds broad powers to regulate the terms on which payment system operators provide services to their direct participants. The ruling is significant not only for its outcome but for its reasoning: the Court held that economic harm to downstream merchants was sufficient to ground the PSR's intervention, regardless of whether the direct contractual relationship was between the regulator's supervised entities.
Following the judgment, the PSR moved to a formal remedies consultation in February 2026. The April 2026/27 Annual Plan allocated specific enforcement resource to monitoring compliance with remedies and signalled that binding price controls, rather than negotiated commitments, remain on the table if the networks do not demonstrate material fee reductions by Q3 2026. The FCA has indicated that it will co-ordinate with the PSR on any knock-on effects for consumer credit and card issuer economics under the Consumer Duty framework.
Acquirer Economics: Where the Numbers Fall
For a mid-market UK acquirer processing £2 billion annually in card-not-present volume, scheme fees typically represent 15% to 22% of total acceptance cost, behind interchange but ahead of processing costs. PSR modelling published in the November 2023 review suggested that full remediation of the identified overcharges would reduce acquirer scheme fee burdens by between £90 million and £140 million per year across the market. That aggregate saving flows to acquirers only if contract structures allow pass-through relief to merchants. Most blended pricing agreements, which bundle interchange, scheme fees, and acquirer margin into a single rate, create significant lag between regulatory relief and merchant benefit.
Acquirers operating on interchange-plus-plus pricing models, where interchange and scheme fees are separately disclosed to merchants, are better positioned to transmit reductions transparently. Regulators on both sides of the Channel have signalled that interchange-plus-plus pricing is their preferred long-run market structure. Firms still operating predominantly on blended rates should expect that position to attract scrutiny under the PSR's forthcoming transparency requirements, which are scheduled for consultation in H2 2026.
GCC and MENA Context: Why This Matters Beyond the UK
The direct jurisdictional reach of the PSR is confined to payment systems operating in the UK. However, GCC-based payment businesses face three distinct exposure channels that make this regulatory development directly material to their operations.
First, any GCC acquirer or processor that routes card-not-present transactions through a UK-licensed acquiring entity, or that holds a principal membership of Visa or Mastercard under a UK or EEA registration, is subject to the scheme fee structures the PSR is now policing. Several regional payment groups, including those operating dual licences across the GCC and the UK, will find that their UK entity's cost base changes materially if price controls are imposed.
Second, cross-border card transaction fees between the GCC and the UK represent a material line item for merchants in tourism, luxury retail, and e-commerce. The PSR review specifically examined cross-border acquiring fees applied to transactions where the merchant is in the UK and the card is issued outside the EEA, a category that captures a significant volume of Gulf visitor spend in London and other UK cities. Any reduction in those fees changes the total cost of acceptance for UK merchants serving GCC consumers, with downstream pricing implications for the GCC tour operators and booking platforms that partner with them.
Third, Visa and Mastercard's global fee structures are not purely local constructs. Regulatory pressure in the UK, combined with parallel proceedings in the EU under the revised Payment Services Directive 3 framework, creates commercial pressure on the networks to rationalise their global fee schedules. GCC acquirers negotiating network agreements in 2026 and 2027 are entering those conversations at a moment when the networks' pricing power is visibly constrained. That is a leverage point that should be explicitly factored into commercial negotiations with scheme representatives in Dubai, Riyadh, and Abu Dhabi.
What Payments Firms Should Do Now
The practical response requires action across three workstreams. On contract management, firms should audit every scheme fee line item in current Visa and Mastercard agreements against the PSR's published list of identified overcharges. Agreements with renewal windows in 2026 or early 2027 should be renegotiated with explicit reference to the PSR remedies process. Any clause that insulates scheme fees from regulatory adjustment should be challenged.
On pricing architecture, firms still offering blended merchant pricing should model the transition cost to interchange-plus-plus and build a roadmap to offer disaggregated pricing to their top 20% of merchants by volume before the PSR's transparency consultation closes. This positions the business ahead of compulsion and converts a compliance requirement into a client retention argument.
On regulatory monitoring, the PSR's remedies decision, expected in Q3 2026, and the FCA's Consumer Duty coordination statement expected alongside it, should be tracked as live inputs to annual budgeting and to investor reporting for any PE-backed payments business with a UK or EEA regulated entity in its structure. The window between now and that decision is the right moment to brief boards and investors on the potential P&L impact under both a negotiated outcome and a binding price control scenario.
The direction of travel is unambiguous. Scheme fee opacity, which underwrote significant network profitability for nearly a decade, is being dismantled by regulators with both the legal authority and the institutional appetite to follow through. Payments businesses that treat this as a compliance monitoring exercise rather than a commercial restructuring opportunity will find themselves behind their competitors when the new economics settle.