Companies argued that the fees allow them to invest in improving the security of payments around the world. Image Credit: Shutterstock

A UK watchdog has decided to forgo setting price caps on certain Visa Inc. and Mastercard Inc.'s fees even after it found that the two do not face effective competition when dealing with merchants.

The Payment Systems Regulator is instead considering requiring the two giants to offer a more detailed report on their UK financials, according to a report Tuesday. It's also weighing requiring Visa and Mastercard to be more transparent about their pricing decisions.

"It would be challenging, based on the evidence we currently have, to design a price cap that was consistent with our statutory objectives," the regulator said in its report. "The issues we have encountered gathering suitable data from the card schemes mean that it is not an appropriate response, at the present time, to the harm we have identified."

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The move is a rare reprieve for the two companies, which 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 $172 billion on swipe fees last year, up 7.5 per cent from 2022, according to the Nilson Report, an industry publication.

Visa and Mastercard have defended their fees, arguing that they allow them to invest in improving the security of payments around the world. Visa, for instance, has said it prevented $40 billion worth of fraud globally last year.

"Visa's fees reflect the immense value that we provide to financial institutions, merchants and consumers," Visa said in a statement Tuesday.

The PSR's latest guidance on forgoing a price cap applies to Visa and Mastercard's scheme and processing fees. The watchdog noted that it may consider implementing such a limit in the future if it receives improved information about the two companies' practices.

Mastercard said it disagreed with the regulator's findings that it does not face effective competition.

"We will continue to work transparently with the PSR and demonstrate the significant value Mastercard and electronic payments bring to the UK economy," Mastercard said in a statement.