The Payment Systems Regulator (PSR) has proposed a price cap on cross-border card fees as the authority raises concerns about competition in the market.

The move comes after Mastercard and Visa raised their cross-border interchange fees fivefold from 0.2 per cent to 1.15 per cent for debit cards and 0.3 per cent to 1.5 per cent for credit cards over the course of 2021 and 2022.

On Friday, the regulator published the findings of its market review, revealing that neither payments giant was subject to effective competitive constraints, which allowed the companies to raise their fees to an "unduly high level".

The organisation also found that Mastercard and Visa raised their fees without regard to the potential impacts on or interests of businesses and their customers, with the fee hike costing businesses an extra £150 - £200 million annually.

Additionally, the PSR said that it could not identify any justifications for the increases, with neither Mastercard or Visa able to show that they undertook any specific assessment when deciding to increase their fees.

The organisation says that its recent findings support its initial view, outlined in its interim report in December 2023, that the market is "not working well."

The PSR will launch a consultation exploring whether to introduce a short-term, interim cap on fees, and if so, at what level.

The regulator has put forward a range of options for this, including the levels that were in place before the schemes raised fees, as well as levels that could allow issuers to cover the costs of a transaction.

Subject to the outcome of the consultation, the cap would be set for a limited period while further analysis is conducted to determine an appropriate methodology and level for a longer lasting cap.

"Our findings confirm that, due to a lack of competition, Mastercard and Visa were able to raise cross-border interchange fees to an unduly high level, costing UK businesses hundreds of millions of pounds," said David Geale, PSR managing director. “We have carefully considered the feedback we have received.

"We consider that consulting on a range of options for capping prices is the best way forward to ensure UK businesses get a better deal. We look forward to receiving evidence on these proposals from all interested parties.”

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