There is "currently no effective competition" to Visa and Mastercard in the UK payments market, leading to businesses paying more than £250 million extra annually to Mastercard and Visa due to fee increases.
A provisional report published today by the Payment Systems Regulator (PSR) has taken views from businesses and other organisations, including the British Retail Consortium.
The interim report suggests "the supply of scheme and processing services is not working well" and that pricing has risen "substantially" over the last five years.
The PSR launched the review into the scheme and processing fees paid by retailers and banks to Mastercard and Visa following "concerns that a substantial proportion of prior increases in these fees to acquirers could not be explained by changes in the volume, value or mix of transactions".
UK businesses have little choice but to pay these increased costs as Mastercard and Visa cards account for 95% of transactions using UK-issued cards, with fees have risen by over 30% in real terms in five years.
As a result, the PSR suggests a number of potential remedies to improve competition, including improving transparency of costs, making it easier for businesses to switch between scheme operator, and a requirement for the large scheme operators to justify any price increases.