(Bloomberg) -- Regulators in the UK are weighing a cap on some of the fees that Visa Inc. and Mastercard Inc. charge local merchants for each card transaction, seeking to rein in charges that have risen fivefold since Brexit.

After a monthslong review, the UK’s Payment Systems Regulator said it’s concerned that the payment giants have no effective competition, especially when it comes to the interchange fees they charge UK merchants when a consumer carrying a card issued by a bank in the European Economic Area makes an online purchase. 

For now, the PSR is proposing to restore those fees to the pre-Brexit levels of 0.3% of a purchase price for credit cards and 0.2% for debit cards. For credit cards, those fees have risen in recent years to as high as 1.5% and the PSR estimated that the increases cost UK businesses as much as £200 million ($250 million) last year. 

The two companies have been under fire from a bevy of regulators and lawmakers around the world for the fees they charge. While it usually amounts to just pennies per purchase, the fees do add up: US merchants spent a record $160.7 billion on swipe fees last year, up 16.7% from 2021, according to the Nilson Report, an industry publication.

“Cards are the most popular way for consumers to pay for goods and services in the UK and the EEA, so it is crucial that the market works well,” the UK agency said in a statement on Wednesday. 

Disputing Findings

Shares of Visa and Mastercard fell slightly in early New York trading. Both companies disputed the regulator’s findings. Though the two companies set the level for the fees, it’s the bank that issues the card that collects most of that revenue. 

“In an extremely competitive payments market, interchange reflects the value provided to consumers and businesses,” Mastercard said in an emailed statement, adding it will “continue to educate” the regulator.

Visa said the proposed remedies aren’t justified, and noted the interchange rates on EEA online card transactions apply to less than 2% of UK card payments and reflect “the fact that these transactions are more complex and carry far greater risk of fraud.”

“Accepting reliable, secure, and innovative digital payments represents enormous value to UK businesses, especially when selling overseas,” Visa said.

For years, transactions in the UK were subject to price caps introduced by the European Union. After the UK withdrew from the European Union in 2020, those restrictions no longer applied. 

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