The UK payments regulator proposes a cap on Mastercard and Visa cross-border fees. On Wednesday, the payments authority in the United Kingdom presented a provisional proposal to limit the cross-border interchange fees that Mastercard (MA.N.) and Visa (V.N.) charge for transactions between the United Kingdom and the European single market exchange.

After publishing the initial results of a market study on interchange fees levied after Brexit, when the bloc’s longtime cap ceased to apply in Britain, the Payment Systems Regulator (PSR) stated that a cap would prevent firms from overpaying. This statement was made after the PSR released the conclusions of the market review.

The PSR has been under increasing pressure from M.P.s in the United Kingdom to consider re-introducing a cap. In response, the watchdog said in the previous year that it would conduct two market evaluations, but the conclusion may take years to be determined.

As Mastercard and Visa are responsible for 99 percent of debit and credit card payments in the U.K., the PSR stated that the examination concentrated on the fees that these two companies impose.

According to the watchdog, both corporations had most likely increased their prices to an “unduly high level,” which increased fees that cost businesses in the United Kingdom an additional 150–200 million pounds ($190–250 million) the previous year.

Christopher Hemsley, managing director of PSR, issued a statement in which he stated, “In a nutshell, at this stage, we do not believe that this market is functioning well.”

According to the plans, the PSR would set an initial time-limited limitation of 0.2% on debit transactions involving the European Economic Area (E.U.) and 0.3% on credit transactions. After additional investigation has been carried out, a permanent limit will be set on the amount.

An official representative for Visa stated that the corporation strongly disagreed with the conclusions of the interim report that the PSR compiled and that the recommended solutions were “not justified.”

“Accepting reliable, secure, and innovative digital payments represents enormous value to U.K. businesses, especially when selling overseas,” according to the representative.

“These interchange rates apply to less than 2% of U.K. card payments—European (EEA) cardholders buying online from a U.K. seller—and reflect the fact that these transactions are more complex and carry a far greater risk of fraud.”

In response to a request for comment, Mastercard did not immediately respond. Up to the end of January, the PSR is accepting input on the suggestions, and the final report is expected to be complete by the beginning of the first quarter of 2024.

Regardless of what the PSR does, according to research that the government commissioned this month, the United Kingdom needs a “digital alternative” to relying on Visa and Mastercard. This statement echoes long-standing desires in the European Union for a “homegrown” alternative to the American pair that has not yet materialized.